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Competitive Strategies Position


Competitive Strategies Position

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									Competitive Strategy
 Asia-Pacific Marketing Federation
  Certified Professional Marketer
     Marketing Institute of Singapore
 Introduction
 Sustainable competitive advantage (SCA)
 Sources of SCA
 Strategies for
   Market Leaders
   Challengers
   Followers, and
   Nichers
 Having a competitive advantage is necessary
  for a firm to compete in the market
 But what is more important is whether the
  competitive advantage is sustainable
 A firm must identify its position relative to the
  competition in the market
 By knowing if it is a leader, challenger,
  follower or nicher, it can adopt appropriate
  strategies to compete
    Sustainable Competitive
 A good strategist seeks not only to “win the
  hill, but hold on to it.”        Subash Jain
 Sustaining competitive advantage requires
  erecting barriers against the competition
 Aakers suggested looking at the following:
   How you compete
   Basis of competition
   Where you compete
   Whom you are competing against
          Examples of SCA
 For many years, Singapore Airlines were riding on
  its SCA of having the best in-flight service
 As more airlines improved their service and
  narrowed the gap, SIA sought other competitive
  advantages among which are
   The most modern fleet
   Outstanding Service on the Ground
   A super entertainment system in its cabins
   Comfort in its First Class cabins at an unparallel level
 Discuss whether the later initiatives had been
Sun Tze’s defensive strategy

“Do not assume the enemy will not come
 but be prepared for his coming…
 Do not presume he will not attack,
 but instead make your own position
Sun Tze’s Offensive Strategies
 Overt-offensive strategy
   To knock out a business rival so as to take over
    his company
   To knock out a competing product so as to
    take over its market share
 Covert-offensive strategy
   Keep as low a profile as possible while making
    offensive moves
Strategies for Market Leaders
Market Leader’s objectives:
 Expand the total market by
   Finding new users
   Creating new uses, and
   Encouraging more usage
 Protect its current market share by
   Adopting defense strategies (see following slides)
 Increase its market share
   Note the relationship between market share and
   Which strategy to use?
Depends on your answer to the following:
 Is it worth fighting?
 Are you strong enough to fight?
 How strong is your defense?
 Do you have any choice but to fight?
         Defense Strategy
 A market leader should generally adopt a defense
 Six commonly used defense strategies
   Position Defense
   Mobile Defense
   Flanking Defense
   Contraction Defense
   Pre-emptive Defense
   Counter-Offensive Defense
  Defense Strategy (cont’d)
Position Defense
 Least successful of the defense strategies
 “A company attempting a fortress defense
  will find itself retreating from line after line
  of fortification into shrinking product
  markets.” Saunders (1987)
 e.g. Mercedes was using a position defense
  strategy until Toyota launched a frontal
  attack with its Lexus.
  Defense Strategy (cont’d)
Mobile Defense
 By market broadening and diversification
 For marketing broadening, there is a need to
   Redefine the business (principle of objective), and
   Focus efforts on the competition (the principle of
 e.g. Legend Holdings, the top China PC maker
  Legend has announced a joint venture with AOL
  to broaden its business to provide Internet
  services in the mainland
  Defense Strategy (cont’d)
Flanking Defense:
 Secondary markets (flanks) are the weaker
  areas and prone to being attacked
 Pay attention to the flanks
 e.g. San Miguel introduced a flanking brand
  in the Philippines, Gold Eagle, as a defense
  against APB’s Beerhausen
  Defense Strategy (cont’d)
Contraction Defense
 Withdraw from the most vulnerable
  segments and redirect resources to those
  that are more defendable
 By planned contraction or strategic
 e.g. India’s TATA Group sold its soaps and
  detergents business units to Unilever in
  Defense Strategy (cont’d)
Pre-emptive Defense
 Detect potential attacks and attack the
  enemies first
 Let it be known how it will retaliate
 Product or brand proliferation is a form of
  pre-emptive defense e.g. Seiko has over
  2,000 models
  Defense Strategy (cont’d)
Counter-Offensive Defense
 Responding to competitors’ head-on attack
  by identifying the attacker’s weakness and
  then launch a counter attack
 e.g. Toyota launched the Lexus to respond
  to Mercedes attack
Market Challenger Strategies
The market challengers’ strategic objective is
  to gain market share and to become the
  leader eventually
 By attacking the market leader
 By attacking other firms of the same size
 By attacking smaller firms
Market Challenger Strategies
Types of Attack Strategies
 Frontal attack
 Flank attack
 Encirclement attack
 Bypass attack
 Guerrilla attack
           Frontal Attack
 Seldom work unless
   The challenger has sufficient fire-power (a 3:1
    advantage) and staying power, and
   The challenger has clear distinctive
 e.g. Japanese and Korean firms launched
 frontal attacks in various ASPAC countries
 through quality, price and low cost
          Flank attack
 Attack the enemy at its weak points or
  blind spots i.e. its flanks
 Ideal for challenger who does not have
  sufficient resources
 e.g. In the 1990s, Yaohan attacked
  Mitsukoshi and Seibu’s flanks by
  opening numerous stores in overseas
    Encirclement attack
 Attack the enemy at many fronts at the
  same time
 Ideal for challenger having superior
 e.g. Seiko attacked on fashion, features,
  user preferences and anything that
  might interest the consumer
         Bypass attack
 By diversifying into unrelated products
  or markets neglected by the leader
 Could overtake the leader by using new
 e.g. Pepsi use a bypass attack strategy
  against Coke in China by locating its
  bottling plants in the interior provinces
        Guerrilla attack
 By launching small, intermittent hit-and-
  run attacks to harass and destabilize the
 Usually use to precede a stronger attack
 e.g. airlines use short promotions to
  attack the national carriers especially
  when passenger loads in certain routes
  are low
 Which Attack Strategy should a
     Challenger Choose?

Use a combination of several strategies
 to improve market share over time
  Market-Follower Strategies
 Theodore Levitt in his article, “Innovative
 Imitation” argued that a product imitation
 strategy might be just as profitable as a
 product innovation strategy
 e.g.    Product innovation--Sony
Market-Follower Strategies (cont’d)
  Each follower tries to bring distinctive
    advantages to its target market--location,
    services, financing
   Four broad follower strategies:
     Counterfeiter (which is illegal)
     Cloner e.g. the IBM PC clones
     Imitator e.g. car manufacturers imitate the style of
      one another
     Adapter e.g. many Japanese firms are excellent
      adapters initially before developing into challengers
      and eventually leaders
  Market-Nicher Strategies
 Smaller firms can avoid larger firms by
 targeting smaller markets or niches that
 are of little or no interest to the larger
 e.g. Logitech--mice
      Microbrewers--special beers
Market-Nicher Strategies (cont’d)
 Nichers must create niches, expand the
 niches and protect them
   e.g. Nike constantly created new niches--
    cycling, walking, hiking, cheerleading, etc
 What is the major risk faced by nichers?
   Market niche may be attacked by larger firms
    once they notice the niches are successful
          Multiple Niching
“[A] firm should `stick to its niching’ but not
  necessarily to its niche. That is why
  multiple niching is preferable to single
  niching. By developing strength in two or
  more niches the company increases its
  chances for survival.”
                                     Philip Kotler
       Example of Nicher:
      Challenger Superstore
 Challenger Superstore is a discount retailer
  of computers and accessories
 It opened its first overseas store in
  Bangkok at a cost of 90 million baht (S$3.7
 In October 2000, it closed its Bangkok
  store “after failing to pay rent amounting to
  about 6 million baht”
Discussion: Why do you think Challenger
  failed in Thailand?

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