Business Policy and Strategic Management: Module - IV Vivek Singh Tomar

AMITY BUSINESS SCHOOL
Business Policy and Strategic

Management
Module IV
Vivek Singh Tomar
Any competitive advantage

currently held will eventually
be eroded by the actions of
competent, resourceful
competitors!
Moves calculated to yield a competitive advantage
Size of
C. Ad.
Build
Up
Benefit
Period
Time
Erosion
Offensive Vs Defensive Moves

Competitive strategies: strategic moves multinationals
use to defeat competitors
- Offensive competitive strategies: direct attacks to
capture market share (Nearly always result in
successful achievement of competitive advantage )
- Defensive competitive strategies: attempts to
discourage offensive strategies (Can protect
competitive advantage, but RARELY are the basis for
achieving competitive advantage )
- Counter-parry: fending off a competitors attack in one
country by attacking in another country
Examples of Offensive Strategies

Direct attacks: price cutting, adding new
features, or going after poorly served markets
End-run offensives: seeking unoccupied markets
Preemptive competitive strategies: being first to
obtain particular advantageous position
Acquisitions: buying out a competitor
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
ATTACKING COMPETITOR STRENGTHS

Appeal
Gain market share by out-matching strengths of
weaker rivals
Whittle away at a rivals competitive advantage
Challenging strong competitors with a lower
price is foolhardy unless aggressor has a
COST ADVANTAGE or advantage of
GREATER FINANCIAL STRENGTH!
ATTACKING COMPETITOR STRENGTHS

Possible Offensive Options
Offer equally good product at a lower price

Develop low-cost edge, then use it to under-price rivals
Leapfrog into next-generation technologies
Add appealing new features
Run comparison ads
Construct new plant capacity in rivals market strongholds
Offer a wider product line
Develop better customer service capabilities
ATTACKING COMPETITOR Weaknesses

Basic Approach
Concentrate ones competitive strengths &
resources directly against rivals weaknesses
Weaknesses to Attack
Concentrate on geographic regions where rival has weak
market share
Go after buyer segments rival is neglecting
Go after more performance-conscious customers of
rivals who lag behind challenger
Attack rivals with weaker advertising & brand recognition
COMPETITIVE STRATEGY PRINCIPLE

Challenging rivals where they are most
vulnerable is more likely to succeed than
challenging them where they are
strongest, ESPECIALLY when challenger
possesses competitive advantage in
areas where rivals are weak!
LAUNCHING OFFENSIVES ON MANY FRONTS

Objective
Launch several major initiatives to
Throw rival off-balance,
Splinter its attention in many directions, and
Force it to use substantial resources to defend its position
Appeal
A challenger with superior resources can overpower
a weaker rival by outspending it across-the-board
long enough to buy its way into the market
END-RUN OFFENSIVES
Objective
DODGE head-to-head confrontations that
escalate competitive intensity and RISK
cutthroat competition -- Attempt to
MANEUVER AROUND competition
Appeal
Gain first-mover advantage in a new arena
Force competitors into playing catch up
Change rules of competition in aggressors favor
END-RUN OFFENSIVES: APPROACHES

Move aggressively into new geographic markets
where rivals have no market presence
Introduce products with different attributes &
features to better meet buyer needs
Introduce next-generation technologies &
leapfrog rivals
Come up with more support services for
customers
GUERRILLA OFFENSES
Approach
Use principles of surprise & hit-and-run
to attack in locations & at times where
conditions are most favorable to
initiator
Appeal
Well-suited to small challengers with
limited resources
GUERRILLA OFFENSES: OPTIONS

Focus on narrow target weakly defended by
rivals
Challenge rivals where they are overextended &
when they are encountering problems
Make random scattered raids on leaders with
tactics such as
Occasional low-balling on price
Intense bursts of promotional activity
Legal actions charging antitrust violations, patent
infringements, & unfair advertising
PREEMPTIVE STRIKES
Approach
Involves moving first to secure an
advantageous position that rivals are
foreclosed or discouraged from
duplicating!
PREEMPTIVE STRIKES: OPTIONS

Expand capacity ahead of demand in hopes of
discouraging rivals from following suit
Tie up best or cheapest sources of essential raw
materials
Move to secure best geographic locations
Obtain business of prestigious customers
Build an image in buyers minds that is unique & hard to
copy
Secure exclusive or dominant access to best distributors
Acquire desirable, but struggling, competitor
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
Sell direct to end-users
are improved when offensive
is tied to what firm does best:
Key skill
Strong functional competence
Offensive marketing Strategies
Fundamental Principles (Offence)

There are four fundamental principles involved:
1)
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.
2)
Find a weakness in the targets 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.
3)
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.
4)
Launch the attack quickly. The element of surprise is worth more
than a thousand tanks.
Types of Offensive Strategies

Frontal Attack
This is a direct head-on assault. It usually involves
marshaling all your resources including a substantial
financial commitment.
All parts of your company must be geared up for the
assault from marketing to production.
It usually involves intensive advertising assaults and
often entails developing a new product that is able to
attack the target competitors line where it is strong.
It often involves an attempt to liberate a sizable portion
of the targets customer base.
In actuality, frontal attacks are rare.

There are two reasons for this.
Firstly, they are expensive. Many valuable resources will be used
and lost in the assault.
Secondly, frontal attacks are often unsuccessful. If defenders are
able to re-deploy their resources in time, the attackers strategic
advantage is lost. You will be confronting strength rather than
weakness.
Also, there are many examples (in both business and warfare) of a
dedicated defender being able to hold-off a larger attacker. The
strategy is suitable when
the market is relatively homogeneous

brand equity is low
customer loyalty is low
products are poorly differentiated
the target competitor has relatively limited resources
the attacker has relatively strong resources
Envelopment Strategy (also called encirclement strategy)

This is a much broader but subtle offensive strategy.
It involves encircling the target competitor.
This can be done in two ways.
You could introduce a range of products that are similar to the target
product. Each product will liberate some market share from the
target competitors product, leaving it weakened, demoralized, and
in a state of siege. If it is done stealthily, a full scale confrontation
can be avoided.
Alternatively, the encirclement can be based on market niches
rather than products. The attacker expands the market niches that
surround and encroach on the target competitors market. This
encroachment liberates market share from the target. The
envelopment strategy is suitable when:
the market is loosely segmented
some segments are relatively free of well endowed competitors
the attacker has strong product development resources
the attacker has enough resources to operate in multiple segments
simultaneously
the attacker has a decentralized organizational structure
Pepsodent, launched in 1993, was the first toothpaste with a unique

anti-bacterial agent to address the consumer need of checking
germs even hours after brushing.
Pepsodent packs included a Germ Indicator in February-May 2002,
which allowed consumers to see the efficacy in fighting germs for
themselves. As a follow-up, in October 2002, Pepsodent offered
Dental Insurance to all its consumers to demonstrate the confidence
the company has in the technical superiority of the product.
Pepsodent connects directly with kids and their parents. Pepsodent
has always worked in the direction of an overall awareness of dental
health. The relaunch campaign in October 2003 widened the context
to "sweet and sticky" food and leveraged the truth that children do
not rinse their mouths every time they eat, demonstrating that this
makes their teeth vulnerable to germ attack.
Pepsodent's most recent campaign aims at educating consumers
on the need for germ protection through the night.
Pepsodent also includes a range of toothbrushes
Colgate has developed a powerful Branding Strategy which has

significantly helped the Brand in acquiring substantial amount of
share in the oral care market of India. In order to strengthen its' Brand
Identity, Colgate is still restructuring its Branding Strategy.
Colgate Branding Strategy was strong enough to position the
company as a major brand in the oral care market of India.
The Brand Colgate emerged as a market leader as it bagged
considerable amount of market share in all the segments of oral care
market like toothpaste segment, tooth powder segment and
toothbrush segment.
Colgate has succeeded in establishing its Brand Image and gaining
substantial market share in spite of facing tough competition from the
brands like Hindusthan Liver, Babool and Anchor.
Still the Brand Colgate is continuously updating and improving its'
branding strategy in order to strengthen its' Brand Name and Brand
Identity.
The future Branding Strategy of Colgate may comprise the following

steps and actions:
For maintaining the Brand Equity in the market, every company
requires a system of continuous growth and upgradation . So, in order
to develop new products, Colgate may give emphasis on Research
and Development Projects.
The Brand Strategy of Colgate also aims at reaching to the rich and
consuming customers of rural India by introducing some Ayurvedic
Oral Care Products.
In order to strengthen its' Brand Image in the urban market of India,
Colgate may launch some oral care products specifically targeting the
urban youth and the urban rich class.
Colgate Branding Strategy aims at introducing some special oral care
products which will focus on functional benefits. The Brand can
launch specific oral care products for different age groups.
The Branding Strategy of Colgate also plans to customize its
packaging techniques, based on price points. This, in a way will
establish a new pricing strategy.
Colgate Branding Strategy has a objective strengthening its' business
promotion network. The company is undertaking advertising
strategies and campaigning programs with the objective of reaching
to the customers of India across income classes
Pepsodent Toothpaste Product Line
Colgate Toothpaste Product Line
Pepsodent Complete + Gum Care

Complete 12
Pepsodent Herbal
Pepsodent Milk Teeth Orange
Pepsodent Milk Teeth Strawberry
Pepsodent Sensitive
Pepsodent Whitening
Colgate Dental Cream

Colgate Total 12
Colgate Sensitive
Colgate Max Fresh
Colgate Kids ToothPaste
Colgate Fresh Energy Gel
Colgate Herbal
Colgate Cibaca Family Protection
Colgate Advanced Whitening
Colgate Active Salt
Leapfrog strategy
This strategy involves bypassing the enemys forces
altogether.
In the business arena, this involves either developing
new technologies, or creating new business models.
This is a revolutionary strategy that re-writes the rules of
the game.
The introduction of compact disc technology bypassed
the established magnetic tape based defenders. The
attackers won the war without a single costly battle.
This strategy is very effective when it can be realized.
Flanking attack
This strategy is designed to pressure the
flank of the enemy line so the flank turns
inward.
You make gains while the enemy line is in
chaos. In doing so, you avoid a head-on
confrontation with the main force
Defensive Strategies
Objectives
Lessen risk of being attacked
Blunt impact of any attack that occurs
Influence challengers to aim attacks at other
rivals
Strengthen firms present position
Help sustain any competitive advantage held
DEFENSIVE STRATEGIES: APPROACHES
Approach #1
Block avenues challengers can take in
mounting offensive attacks
Approach #2
Make it clear any challenge will be met
with strong counterattack
DEFENSIVE STRATEGIES: APPROACH #1

Broaden product line to fill gaps rivals may go after
Keep prices low on models that match rivals
Sign exclusive agreements with distributors
Offer free training to buyers personnel
Give better credit terms to buyers
Reduce delivery times for spare parts
Increase warranty coverages
Patent alternative technologies
Sign exclusive contracts with best suppliers
Protect proprietary know-how
DEFENSIVE STRATEGIES: APPROACH #2

Publicly announce managements strong commitment to
maintain present market share
Publicly announce plans to construct new production
capacity to meet forecasted demand
Give out advance information about new products,
technological breakthroughs, & other moves
Publicly commit firm to policy of matching prices & terms
offered by rivals
Maintain war chest of cash reserves
Make occasional counter-responses to rivals moves
Defensive Marketing Strategies

Fundamental principles (Defence)
There are five fundamental principles involved:
1) Always counter an attack with equal or greater force.
2) Defend every important market.
3) Be forever vigilant in scanning for potential attackers.
Assess the strength of the competitor. Consider the
amount of support that the attacker might muster from
allies.
4) The best defense is to attack yourself. Attack your weak
spots and rebuild yourself anew.
5) Defensive strategies should be the exclusive domain of
the market leader.
Types of Defensive Strategies

Position defense
This involves the defense of a fortified position.
This tends to be a weak defense because you become a
sitting duck. It can lead to a siege situation in which time
is on the side of the attacker, that is, as time goes by the
defender gets weaker, while the attacker gets stronger.
In a business context, this involves setting up fortifications
such as barriers to market entry around a product, brand,
product line, market, or market segment. This could include
increasing brand equity, customer satisfaction, customer
loyalty, or repeat purchase rate. It could also include
exclusive distribution contracts, patent protection, market
monopoly, or government protected monopoly status. It is
best used in homogeneous markets where the defender
has dominant market position and potential attackers have
very limited resources.
Mobile defense
This involves constantly shifting resources and

developing new strategies and tactics.
A mobile defense is intended to create a moving target

that is hard to successfully attack, while simultaneously,
equipping the defender with a flexible response
mechanism should an attack occur.
In business this would entail introducing new products,

introducing replacement products, modifying existing
products, changing market segments, changing target
markets, repositioning products, or changing promotional
focus. This defense requires a very flexible organization
with strong marketing, entrepreneurial, product
development, and marketing research skills.
Flank position - This involves the redeployment of your resources to deter a flanking
attack. You protect against potential loss of
market share in a segment, by strengthening
your competitive position in this segment with
new products and other tactics. (see flanking
marketing warfare strategies)
Counter offensive - This involves countering an
attack with an offense of your own. If you are
attacked, retaliate with an attack on the
aggressors weakest point.
Counter-parry
Popular strategy for multinationals
Respond to attack by attacking competitor
in another country
Ex.: KodakWhen Fuji attacked Kodak in the
U.S., Kodak retaliated by attacking Fuji in
Japan.
Goodyear also attacked Michelin in Europe as
response to attack in U.S.
Strategies for
Using the Internet
Strategic Challenge What use of the Internet should a company
make in staking out its position in the marketplace?
Five Approaches
Use company web site solely to disseminate product information
Use company web site as a minor distribution
channel for accessing customers and generating sales
Use company web site as one of several important
distribution channels for accessing customers
Use company web site as primary distribution
channel for accessing buyers and making sales
Use company web site as the exclusive channel
for accessing buyers and conducting sales transactions
Using the Internet to

Disseminate Product Information
Approach Website used to provide product information of
manufacturers or wholesalers
Relies on click-throughs to websites of
dealers for sales transactions
Informs end-users of location of retail stores
Issues Pursuing online sales may

Signal weak strategic commitment to dealers
Signal willingness to cannibalize dealers sales
Prompt dealers to aggressively market rivals brands
Avoids channel conflict with dealers Important where strong

support of dealer networks is essential
Using the Internet as a

Minor Distribution Channel
Approach Use online sales to
Achieve incremental sales
Gain online sales experience
Conduct marketing research
Learn more about buyer tastes and preferences
Test reactions to new products
Create added market buzz about products
Unlikely to provoke much outcry from dealers
Brick-and-Click Strategies: An
Appealing Middle Ground Approach
Approach
Sell directly to consumers and
Use traditional wholesale/retail channels
Reasons to pursue a brick-and-click strategy

Manufacturers profit margin from online sales is bigger than that
from sales through traditional channels
Encouraging buyers to visit a firms website educates them to
the ease and convenience of purchasing online
Selling directly to end users allows a manufacturer to make
greater use of build-to-order manufacturing and assembly
Strategies for
Online Enterprises
Approach Use Internet as the exclusive
channel for all buyer-seller contact and transactions
Success depends on a firms ability
to incorporate following features
Capability to deliver unique value to buyers
Deliberate efforts to engineer a value chain that enables differentiation,
lower costs, or better value for the money
Innovative, fresh, and entertaining website
Clear focus on a limited number of competencies and a relatively
specialized number of value chain activities
Innovative marketing techniques
Minimal reliance on ancillary revenues
VERTICAL INTEGRATION STRATEGIES

Vertical integration extends a firms competitive
scope within same industry
BACKWARD into sources of supply
FORWARD toward end-users of final product
Moves to vertically integrate can aim at

becoming
FULLY INTEGRATED
PARTIALLY INTEGRATED
A vertical integration strategy has appeal ONLY if it significantly
strengthens a firms competitive position!
APPEAL OF BACKWARD INTEGRATION

Generates cost savings only if volume needed is
big enough to capture efficiencies of suppliers
Cost savings potential is strongest when
Suppliers have sizable profit margins
Item being supplied is a major cost component
Necessary technical skills are easily mastered
A differentiation-based competitive advantage

arises when firm ends up with a better quality
part
Spares firm uncertainty of depending on
suppliers of crucial raw materials
APPEAL OF FORWARD INTEGRATION

Advantageous for firm to set up its own
wholesale-retail distribution network if
Undependable distribution channels undermine
steady production operations
Integration into distribution & retailing may be

cheaper than going through independent
distributors
May help achieve greater product differentiation,
allowing escape from price-oriented competition
For manufacturer, may provide better access to
ultimate consumer
STRATEGIC DISADVANTAGES OF VERTICAL

INTEGRATION
Boosts capital requirements
Results in fixed sources of supply & less flexibility in
accommodating buyer demands for product variety
Extends firms scope of activity, locking it deeper into
industry
Poses problems of balancing capacity at each stage of
value chain
Requires radically different skills & capabilities
Can reduce firms manufacturing flexibility, lengthening
design time & ability to introduce new products
UNBUNDLING & OUTSOURCING STRATEGIES
Involves withdrawing from certain stages in

value chain system and relying on outside
vendors to perform needed activities and
services
ADVANTAGES OF OUTSOURCING STRATEGIES

Activity can be performed better or more cheaply by
outside specialists
Activity is not crucial to achieving competitive advantage
Reduces firms risk exposure to changing technology
and/or changing buyer preferences
Streamlines firm operations in ways to
Cut cycle time
Speed decision-making
Reduce coordination costs
Allows firm to concentrate on its core business
PROS & CONS OF VERTICAL INTEGRATION

Use of a vertical integration strategy depends on
If it can enhance performance of strategy-critical
activities to EITHER
Lower costs OR
Increase differentiation
Impact on
Investment costs
Flexibility & response times
Administrative overhead of coordination
If a competitive advantage can be created
FIRST-MOVER ADVANTAGES
WHEN to make a strategic move is often as
crucial as WHAT move to make
First-mover advantages arise WHEN
Pioneering helps build firms image & reputation
Early commitments to raw material suppliers, new
technologies, & distribution channels can produce
cost advantage
Loyalty of first time buyers is high
Moving first can be a preemptive strike
FIRST-MOVER DISADVANTAGES
Arise WHEN
Costs of pioneering are sizable & loyalty of
first time buyers is weak
Rapid technological change allows
followers to leapfrog pioneers
Skills & know-how of pioneers are easily
imitated by late movers
It is easy for latecomers to crack market
Timing of Strategic Moves

Advantages / disadvantages of First Mover
+ if pioneering helps build brand image
+ if early contracts with suppliers etc advantageous
+ first time customer loyalty
+ makes imitation harder
- expense
- rapid change may lead to obsoletion
- weak customer loyalty
- easily imitated

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AMITY BUSINESS SCHOOL