chapter 6: Strengthening A Company’s Competitive Position

In chapter 6  namely: STRENGTHENING A COMPANY’S COMPETITIVE POSITION: STRATEGIC MOVES, TIMING, AND SCOPE OF OPERATIONS

If someone wants to open a company, that company must have a powerful strategy to compete with the existing company. The can use:

•         Offensive and Defensive Competitive Actions
•   Competitive Dynamics and the Timing of Strategic Moves
•   Scope of Operations along the Industry’s Value Chain

OFFENSIVE AND DEFENSIVE COMPETITIVE ACTIONS

Defensive Marketing Strategies

Because of ongoing rivalry, established firms need to engage in defensive strategies to fend off the various challengers. The primary purpose of defensive strategy is to make a possible attack unattractive and discourage potential challengers from attacking another firm.

Incumbents try to shape the challenger’s expectations about the industry’s profitability and convince them that the return on their investment will be so low that it does not warrant making an investment in that industry. Defensive strategies work better when they take place before the challenger makes an investment in the industry, or if they enter the industry before exit barriers are raised, making it difficult for the challenger to leave the industry.

For this reason, an incumbent needs to take timely action to discourage a challenger from making any substantial commitment, because once the commitment is made, it is more difficult to dissuade the challenger from following through with the attack especially if exit barriers are high. If an attack has already begun, a defending firm may attempt to lower its intensity and potential for harm, by directing the attack to areas where the firm is less vulnerable, or in areas which are less desirable to the attacker.

Offensive Marketing Strategies

Firms engage in offensive marketing strategies to improve their own competitive position by taking market share away from rivals. Offensive strategies include direct and indirect attacks or moving into new markets to avoid incumbent competitors. If a firm possesses superior resources a direct attack may be called for. However, if a firm faces superior rivals, indirect attacks are more appropriate than direct, frontal attacks. Direct attacks invite retaliatory responses especially if they pose a serious threat to the defending firm.

 Indirect attacks are less likely to elicit a competitive response because that are difficult to detect, especially if they are targeted towards non-core segments or products. An extreme form of an indirect attack is to avoid competitors and undertake activities that are far removed from those of rivals.

Firms may choose from a multitude of different strategies to accomplish their offensive objectives. Like defensive strategies, offensive marketing strategies take many forms from flanking attacks or bypassing the competition to all-out frontal attacks intended to defeat the competition with all available means at the attacker’s disposal.

Blue-Ocean Strategy

Where the industry has not yet taken shape, with no rivals and wide-open long- term growth and profit potential for a firm that can create demand for new types of products.

The example of blue ocean strategy :

The Body Shop also created a “Blue Ocean” – and in the fiercely competitive cosmetics industry. The Body Shop ignored most glamorous aspects of the industry. Instead The Body Shop designed its image around functionality, reduced prices and modest packaging. Increased value was given to natural ingredients, a healthy lifestyle and ethical concerns.

          As a result The Body Shop’s products spoke to a totally new group of customers and achieved a high degree of cost savings (generally approx. 85% of costs in the cosmetics industry arise from packaging and advertising).

STRATEGIC MOVES

  §  When pioneering helps build a firm’s reputation and creates strong brand loyalty.

  §  When a first mover’s customers will thereafter face significant switching costs.

  §  When property rights protections thwart rapid imitation of the initial move.

  §  When an early lead enables movement down the learning curve ahead of rivals. 

  §  When a first mover can set the technical standard for the industry.

DEFINING THE SCOPE OF THE FIRM’S OPERATIONS

  ü  Range of its activities performed internally

  ü  Breadth of its product and service offerings

  ü  Extent of its geographic market presence and its mix of businesses

  ü  Size of its competitive footprint on its market or industry

Horizontal Scope

• The range of product and service segments that a firm serves within its focal market.

Vertical Scope

• The extent to which a firm’s internal activities encompass one, some, many, or all of the activities that make up an industry’s entire value chain system, ranging from raw-material production to final sales and service activities.

Backward Integration

• Involves entry into activities previously performed by suppliers or other enterprises positioned along earlier stages of the industry value chain system.

Forward Integration

• Involves entry into value chain system activities closer to the end user.

Strategic Alliance

• A formal agreement between two or more separate companies in which they agree to work cooperatively toward some common objective.Joint Venture

Joint Venture

• A partnership involving the establishment of an independent corporate entity that the partners own and control jointly, sharing in its revenues and expenses.

this is what i have learnt in this chapter...insyaallah i will improve it more.....JJJ