Moves calculated to yield a competitive advantage Size of C. Ad. Build Benefit Up Period Erosion Time OFFENSIVE STRATEGY • Offensive competitive strategies: direct attacks to capture market share. FUNDAMENTAL PRINCIPLES There are four fundamental principles involved: • Assess the strength of the target competitor. Consider the amount of support that the target might muster from allies. Choose only one target at a time. • Find a weakness in the target’s position. Attack at this point. Consider how long it will take for the target to realign their resources so as to reinforce this weak spot. • Launch the attack on as narrow a front as possible. Whereas a defender must defend all their borders, an attacker has the advantage of being able to concentrate their forces at one place. • Launch the attack quickly. The element of surprise is worth more than a thousand tanks. TYPES OF STRATEGIC OFFENSIVE 1. Match / exceed competitive strengths 2. Capitalise on Weaknesses 3. Simultaneous initiatives on many fronts 4. End-run offensives 5. Guerilla offensives 6. Preemptive strikes CHOOSING WHOM TO ATTACK? •Market leaders •Runner-up firms •Struggling rivals on verge of going under •Small local/regional firms with limited capabilities OFFENSIVE STRATEGY & COMPETITIVE ADVANTAGE • Competitive advantage areas offering strongest basis for a STRATEGIC OFFENSIVE • Develop lower-cost product design • Make changes in production operations that lower costs or enhance differentiation • Develop product features that deliver superior performance or lower users’ costs • Give more responsive customer service • Escalate marketing effort • Pioneer new distribution channel Chances for strategic success are • Sell direct to end-users improved when offensive is tied to what firm does best: Key skill Strong functional competence TYPES OF OFFENSIVE STRATEGIES • Frontal attack • Envelopment Strategy • Leapfrog strategy • Flanking attack RETRENCHMENT STRATEGY • It is followed when an organization aims at contraction of its activities. • Retrenchment strategies are a response to decline in industries and markets. • First set of factors leading to a decline: (external factors) – New dominant technologies – Demand saturation • Eg: mahindra and mahindra tractor business – Changing customer needs and preferences • Eg:typewriter – Emergence of substitute products • Second set of factors: (internal factors) – Continual resistance to externally imposed change – Poor quality of functional management – High costs – Ineffective sales and marketing – Ineffective top management Divestiture Strategy • Divestment is used by businesses when they downsize the scope of their business activities. • Divestment usually involves eliminating a portion of a business. • Firms may elect to sell, close a strategic business unit, major operating division, or product line. This move often is the final decision to eliminate unprofitable, or unmanageable operations. • Reasons to Divest • MARKET SHARE TOO SMALL. • AVAILABILITY OF BETTER ALTERNATIVES. • NEED FOR INCREASED INVESTMENT. • LACK OF STRATEGIC FIT. Approach to Divestiture Strategy • Typically includes three phases: • Corporate strategy assessment • Divestiture preparation • Divestiture execution • CORPORATE STRATEGY ASSESSMENT • Frame growth aspirations • Decide where to invest and where to divest • Assess whether you can separate the business to be divested, and draw up a separation plan • Evaluate divestiture options • DIVESTITURE PREPARATION • Build the exit story (a compelling rationale for buyers) • Create the road map to full potential (how the business will realize its full value) • Design in detail the separation • Set financial targets • Harvesting • DIVESTITURE EXECUTION • Value business to be divested and set price • Screen buyers based on the business's value to them • Conduct suitable buyer approach LIQUIDATION STRATEGY • Selling a company to an interested buyer is the method most commonly associated with getting out of a business. • It is the direct conversion of assets to cash by selling them to a user/consumer. REASON • Business is at least solvent or near-solvent • Any unit is not performing well Liquidating Your Business There are generally three categories of business that will liquidate assets: • Businesses with assets used indirectly in the production of income:- This generally includes the furniture, fixtures and equipment (FFE) of a service business, such as insurance agencies, attorney's offices, etc. • Businesses with assets used as tools in the direct production of income :- This would include restaurants, manufacturing and construction companies. • Businesses whose assets directly produce income:- These are retail storefront businesses and, for our discussion, are independently owned and operated. Independent stores, apparel and shoe stores, sporting goods stores and furniture stores are in this category. • Liquidating retail inventory is challenging. The entire or majority of the owner's lifetime savings may be tied up in the inventory, and converting this inventory to cash is critical to the owner's financial future. liquidation sales they conduct may come in several cloaks: • Quitting Business Sale, • Total Liquidation, • Going Out of Business Sale, • Retirement Sale, TECHNIQUE • The sale must be as short as possible to limit overhead expenses. • The sale must be conducted during the proper time of the year. • Markdowns must be calculated for each class or department in your store. An easy but effective price markdowns method is a must. Determining the initial markdowns and the timing and amount of later markdowns is critical. • A promotion program must be developed that will support the actual sale and closing of the store. A detailed "A to Z" business plan must be developed for the sale DEFENSIVE STRATEGY OBJECTIVES Organizations use defensive technique to: - To fortify or strengthen the company market position. - Weaken the impact of any attack that come from competitor. - Divert the challenger to others(HUL case of soap). - To protect the profitability. Types of defensive technique. • Blocking the challengers • Signaling the likelihood of retaliation BLOCKING THE CHALLENGERS • By use of alternate technology defender/market leader can reduce the threat of rival’s better technology. • Closing the gaps in product line leaves little space for challengers (blocking avenue). • Lengthening the warranty coverage. • Using pricing as tool to outsmart rivals. • Challenging the quality of rival’s product. • By offering the volume discount to dealers and distributors. SIGNALING THE RETALIATION • Signaling challengers about strong retaliation can lead no attack at all or divert challengers to less threatening options. It can be achieved by:- • Publicly announce about company plan to maintain market share. • Publicly committing about change in price(reducing) which could lead challengers to rethink about competing in that segment.
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