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Lt5 CompetitiveStrategy
Lt5 CompetitiveStrategy
2
Outline
M Introduction
M Sustainable competitive advantage (SCA)
M Sources of SCA
M Strategies for
M Market Leaders
M Challengers
M Followers, and
M Nichers
In
n
M 3aving a competitive advantage is necessary
for a firm to compete in the market
M But what is more important is whether the
competitive advantage is sustainable
M A firm must identify its position relative to the
competition in the market
M By knowing if it is a leader, challenger,
follower or nicher, it can adopt appropriate
strategies to compete
austainable Competitive
Advantage
M A good strategist seeks not only to Ơwin the
hill, but hold on to it.ơ Subash Jain
M Sustaining competitive advantage requires
erecting barriers against the competition
M Aakers suggested looking at the following:
M 3ow you compete
M Basis of competition
M Where you compete
M Whom you are competing against
amples of aCA
M For many years, Singapore Airlines were riding on
its SCA of having the best in-
in-flight service
M As more airlines improved their service and
narrowed the gap, SIA sought other competitive
advantages among which are
M The most modern fleet
M Outstanding Service on the Ground
M A super entertainment system in its cabins
M Comfort in its First Class cabins at an unparallel level
M Discuss whether the later initiatives had been
sustainable
aun Tze¶s defensive strategy
a n assue
assume e ene
enemy will n ce
bu be pepaed
prepared f c
pee e w
a
b e e p
b
e.ơ
aun Tze¶s Offensive atrategies
M Overt
Overt--offensive strategy
M To knock out a business rival so as to take over
his company
M To knock out a competing product so as to
take over its market share
M Covert
Covert--offensive strategy
M Keep as low a profile as possible while making
offensive moves
atrategies for Market Leaders
Market Leaderƞs objectives:
M Expand the total market by
M Finding new users
M Creating new uses, and
M Encouraging more usage
M Protect its current market share by
M Adopting defense strategies (see following slides)
M Increase its market share
M Note the relationship between market share and
profitability
ë ic strategy to use?
Depends on your answer to the following:
M Is it worth fighting?
M Are you strong enough to fight?
M 3ow strong is your defense?
M Do you have any choice but to fight?
^efense atrategy
M A market leader should generally adopt a defense
strategy
M Six commonly used defense strategies
M Position Defense
M Mobile Defense
M Flanking Defense
M Contraction Defense
M Pre
Pre--emptive Defense
M Counter
Counter--Offensive Defense
^efense atrategy (cont¶d)
Position Defense
M Least successful of the defense strategies
M ƠA company attempting a fortress defense
will find itself retreating from line after line
of fortification into shrinking product
markets.ơ Saunders (1987)
M e.g. Mercedes was using a position defense
strategy until Toyota launched a frontal
attack with its Lexus.
^efense atrategy (cont¶d)
Mobile Defense
M By market broadening and diversification
M For marketing broadening, there is a need to
M Redefine the business (principle of objective), and
M Focus efforts on the competition (the principle of
mass)
M e.g. Legend 3oldings, the top China PC maker
Legend has announced a joint venture with AOL
to broaden its business to provide Internet
services in the mainland
^efense atrategy (cont¶d)
Flanking Defense:
M Secondary markets (flanks) are the weaker
areas and prone to being attacked
M Pay attention to the flanks
M e.g. San Miguel introduced a flanking brand
in the Philippines, Gold Eagle, as a defense
against APBƞs Beerhausen
^efense atrategy (cont¶d)
Contraction Defense
M Withdraw from the most vulnerable
segments and redirect resources to those
that are more defendable
M By planned contraction or strategic
withdrawal
M e.g. Indiaƞs TATA Group sold its soaps and
detergents business units to Unilever in
1993
^efense atrategy (cont¶d)
Pre--emptive Defense
Pre
M Detect potential attacks and attack the
enemies first
M Let it be known how it will retaliate
M Product or brand proliferation is a form of
pre--emptive defense e.g. Seiko has over
pre
2,000 models
^efense atrategy (cont¶d)
Counter--Offensive Defense
Counter
M Responding to competitorsƞ head-
head-on attack
by identifying the attackerƞs weakness and
then launch a counter attack
M e.g. Toyota launched the Lexus to respond
to Mercedes attack
Market C allenger atrategies
The market challengersƞ strategic objective is
to gain market share and to become the
leader eventually
3ow?
M By attacking the market leader
M By attacking other firms of the same size
M By attacking smaller firms
Market C allenger atrategies
(cont¶d)
Types of Attack Strategies
M Frontal attack
M Flank attack
M Encirclement attack
M Bypass attack
M Guerrilla attack
Orontal Attack
M Seldom work unless
M The challenger has sufficient fire-
fire-power (a 3:1
advantage) and staying power, and
M The challenger has clear distinctive
advantage(s)
M e.g. Japanese and Korean firms launched
frontal attacks in various ASPAC countries
through quality, price and low cost
Olank attack
M Attack the enemy at its weak points or
blind spots i.e. its flanks
M Ideal for challenger who does not have
sufficient resources
M e.g. In the 1990s, Yaohan attacked
Mitsukoshi and Seibuƞs flanks by
opening numerous stores in overseas
markets
ncirclement attack
M Attack the enemy at many fronts at the
same time
M Ideal for challenger having superior
resources
M e.g. Seiko attacked on fashion, features,
user preferences and anything that
might interest the consumer
Jypass attack
M By diversifying into unrelated products
or markets neglected by the leader
M Could overtake the leader by using new
technologies
M e.g. Pepsi use a bypass attack strategy
against Coke in China by locating its
bottling plants in the interior provinces
Guerrilla attack
M By launching small, intermittent hit-
hit-and-
and-
run attacks to harass and destabilize the
leader
M Usually use to precede a stronger attack
M e.g. airlines use short promotions to
attack the national carriers especially
when passenger loads in certain routes
are low
ë ic Attack atrategy s ould a
C allenger C oose?