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COMPETETIVE STRATEGIES

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COMPETETIVE STRATEGIES Powered By Docstoc
					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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posted:7/28/2012
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