JUDO IN ACTION

FACING THE COMPETITION
GROUP 8 PGDM SECTION B

SUBMITTED BY: ANKIT GUPTA ANURAG BADONI 070 071

ANURAG KAMANDULA 085 PALLAVI SRIVASTAVA 093

VIJEESH RAJAGOPALAN 118

INTRODUCTION

Competition: Competition in economics is a term that encompasses the notion of individuals and firms striving for a greater share of a market to sell or buy goods and services. Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favourable terms." It was described by Adam Smith in The Wealth of Nations (1776) and later economists as allocating productive resources to their most highly-valued uses and encouraging efficiency. Later microeconomic theory distinguished between perfect competition and imperfect competition, concluding that with the no system of resource allocation is more efficient than perfect competition. Competition, according to the theory, causes commercial firms to develop new products, services and technologies, which would give consumers greater selection and better products. The greater selection typically causes lower prices for the products, compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly). Competitive Advantage ± A competitive advantage is an advantage over competitors gained by offering consumers greater value either by means of lower prices or by providing greater benefits and service that justifies higher prices.

Differentiation advantage occurs when a firm delivers greater services for the same price of its competitors.A focused approach requires the firm to concentrate on a narrow.According to Michael Porter. who are looking for a local difference. Differentiation . the three methods for creating a sustainable competitive advantage are through: 1. Cost leadership . exclusive competitive segment (market niche). HOWS EXISTING MARKET PLAYERS GAIN COMPETETIVE ADVANTAGE OVER NEW PLAYERS ENTERING THE MARKET Erecting Barriers to Entry y y y y y y y y y y y Economies of scale Proprietary product / service differences Proprietary technologies / processes Synergistic strategic alliances with owners complementary competences Brand identity Switching costs Capital requirements Access to distribution / marketing / selling channels Government policies / regulations Expected retaliation Absolute cost advantages o Proprietary low-cost product design / processes o Preferential access to necessary inputs o Proprietary learning curve of . There are cost focus seekers. They are collectively known as positional advantages because they denote the firm's position in its industry as a leader in either superior services or cost 3. Many forms of competitive advantage cannot be sustained indefinitely because the promise of economic rents invites competitors to duplicate the competitive advantage held by any one firm. who aim to obtain a local cost advantage over competition and differentiation focuser. hoping to achieve a local rather than industry wide competitive advantage. Focus (economics) .Cost advantage occurs when a firm delivers the same services as its competitors but at a lower cost 2.

no other person or company can profit from the idea. Once a product is patented. strategic alliances and intellectual property protection. Patents. This makes the existing firms more competitive in the market and gives them a structural advantage over potential rival firms.Inventors can use their barrier to entry as a competitive advantage. Building market leadership and developing consumer loyalty by establishing branded products can make successful entry into the market by new firms much more expensi e. . The most prominent barriers to entry are market share. Three kinds of intellectual property rights exist and can be used in different combinations: copyright. Both incumbent firms and new entrants may use various intellectual rights protection methods to protect their inventions under the law and thus erect a formidable barrier to entry against their competitors. They are designed to block potential entrants from entering a market profitably. competition. R& spending goes on developing new products and allows also firms to improve their production processes and reduce unit costs.Sust i l t t st successful enterprise. therefore receiving payment for innovation. Heavy spending on research and development can act deterrent to potential entrants to an industry.They may function as barriers to entry when they prevent some lower cost producers from entering the market by negotiating long-term contracts with buyers. offer a 20-year barrier to entry for any new product disclosed to the public. and trademarks. Incumbent firms may also adopt predatory pricing policies by lowering prices to a level that would force any new entrants to operate at a loss. Barriers to entry have the effect of making a market less contestable. patents. for example. They seek to protect the monopoly power of existing (incumbent firms in an industry and therefore maintain supernormal profits in the long run. Effective strategic alliances will save time and resources by allowing you and your partners to focus on your core competencies and provide you with the competitive advantage crucial to the success of your company. requires t e const nt erection of barriers to entry to keep your competitors at bay.

. 6thedition The roots of judo strategy lie in "judo economics. thus enabling a weak or light individual to overcome a physically superior opponent. Moreover. Avoid Tit-for-Tat. By contrast. the incumbent will find it more profitable to accommodate your entry by sticking to his original price and selling to the remaining nine." --Columbia Encyclopaedia. First. and Push When Pulled 3. Balance: Grip Your Opponent. It¶s quite another to convince them that you mean what you say.e. You don¶t want to skulk around the sidelines. Leverage: Leverage Your Opponent¶s Assets. Partners. It believes that companies can win against larger or stronger competitors by mastering three core principles: movement.HOWS CAN NEW MARKET PLAYERS GAIN COMPETETIVE ADVANTAGE OVER EXISTING PLAYERS PRINCIPLES OF JUDO STRATEGY 1.. the logic works like this: Assume that the incumbent supplies ten customers with widgets for $50. and Follow Through Fast 2. It¶s one thing to say that you won¶t threaten bigger competitors. Consequently. it is very difficult to implement. If you offer to supply the entire market at $40. JUDO ECONOMICS & JUDO STRATEGY The basic model makes a few important assumptions: the incumbent faces a single challenger. price discrimination is impossible)." a term coined by economists Judith Gelman and Steven Salop to describe a simple strategy for entering a market dominated by a large opponent. The idea behind judo economics²turning your opponent¶s size into a disadvantage²has a lot of intuitive appeal. Based on these assumptions. you want to get out there and win. and Competitors "[Judo] depends for success upon the skill of using an opponent¶s own weight and strength against him. judo strategy picks up where judo economics leaves off. judo economics looks far less promising once the assumptions behind the original model are relaxed. but only at the cost of staying small. But judo economics has important limitations as well. Judo strategy provides a set of tools that allow you to do more than just survive in the face of daunting competition. Judo economics may allow you to survive. Define the Competitive Space. they show you how to thrive and grow. But the greatest weakness of judo economics is that it sets its sights too low. and the incumbent must charge all customers the same price (i. the challenger has no cost advantage. Movement: Don¶t Invite Attack. this is not enough. For most managers and companies. the incumbent will be forced to match your price or lose all of its sales. if you only have enough capacity to sell to one customer.

8. you can throw him off-balance and confront him with a painful choice: whether to abandon his initial strategy or to watch it fail. 7. By following-through fast. Judo strategy is an approach to competition that emphasises skill. the last thing you want is to get into a war of attrition. 3. Leverage your opponent¶s assets: a company¶s greatest assets can often become its greatest liabilities. you may succeed in preempting competition: securing victory. 2. Avoid tit-for-tat: As a judo strategist. services or technology into your attack. 6. you can find the leverage you need to win. as tit-for-tat often becomes. you can conserve your resources and regroup in better position for the confrontations ahead. firms can combine and implement these techniques: 1. Every champion has areas where he is weak. Define the competitive space: Here you seize the initiative by defining a competitive space where u can take the lead. 9. rather than size or strength. Push when pulled: Use your opponent¶s force or momentum to your advantage. Follow-through fast: Next you need to strengthen your position through continuous attack. it could be easier and more natural to allow your competitor¶s competitors to wear him down. Study your opponents carefully and figure out the moves you can match without getting dragged out of your depth. 10. Below we discuss 10 techniques that companies have put to work. By incorporating your competitor¶s products. 4. Leverage your opponent¶s competitors: compared to the earlier two. . Set old allies at odds by creating situations where their interests are no longer aligned. Leverage your opponent¶s partner: You can turn a rival¶s partners into false friends by exploiting the differences among them. Partnership. Practice Ukemi: Ukemi is the technique of falling safely with minimal loss of advantage in order to return more effectively to fight. build coalitions with his competitors or you can serve as a distributor for his competitors. Take advantage of these weak points to define a game you can win. you can postpone this day of reckoning and make most of your early lead.balance and leverage. Depending on the nature of their competition. You can add value on top of his competitor¶s products. 5. Anything which represents a significant investment can become barrier to change and exploiting these. The ³puppy dog ploy´: Here the challengers keep a low profile and avoid head-tohead battles when they are too weak to win. Grip your opponent: By gripping on opponent early. and craft counter attacks that play to your strength. JV or equity deals are some of the ways. By beating a strategic. Soon your competitors will see through the puppy dog ploy and seek to bring the advantage of superior size and strength into play.

and Colgate-Palmolive. Taylor did not want Softsoap to be a repeat of that experience. for his discovery that a small amount of conventional soap could be mixed with large amounts of hart shorn to create soap with a consistency of molasses. Despite the pictures of cuddly bears and smiling children in its advertising. the handsoap industry is a highly competitive. History of liquid soap: William Shepphard of New York. Taylor had seen the destructive power of such imitation before when he had introduced fruit shampoos. very worried. Softsoap Softsoap is the trade name of Colgate-Palmolive's liquid hand soap and body wash. Softsoap was launched nationally with the expected success. big-money market dominated by giants such as Armour-Dial. reaching first-year sales of between $35 and $40 million. participants will fight to hold on to every customer they have and successful products are almost always imitated. but could generally not be found in homes. Test marketing had shown that the demand for the product would be high and would grow rapidly. Entry of Minnetonka Corporation in liquid soap business: Sometimes later.Now we take four different cases where small competitors exploit the size and incumbency of a larger firm to find opportunities to make inroads against large firms without effective retaliation. It launched its $1. The product was a success. The prospect of such booming success had Minnetonka founder Robert Taylor very.561 for his "Improved Liquid Soap" on August 22. was granted patent number 49.49 liquid soap with a $7 million national advertising campaign. . Because the size of the market is relatively stable. Colgate-Palmolive purchased the liquid soap business from Minnetonka Corporation. New York. Procter Gamble. Armed with an aggressive $7 million advertising campaign (which was really quite large for this particular market). the Minnetonka Corporation began to offer Crème Soap on Tap in attractive ceramic dispensers through boutique distributors. In 1987. 1865. Although this was great news for the company. They created the Softsoap brand name and designed a package that included a distinctive custom pump bottle with a cap that obviated the need for a secondary carton to enclose the product. Taylor's excitement was controlled by his earlier fears and the knowledge that Minnetonka now had the attention of the major brands. Clairol had quickly countered with its own branded line that knocked Minnetonka's off the shelves. and the corporation followed up in 1980 with a similar product designed for mass retail sale. His invention became common in public areas.

any did remain (which was not likely). Liquid soap has a lower PH level than bar soaps and therefore are milder to the skin. which is likely to brew inflexibility or rigidity ± structure-wise or culture-wise inertia ± that hinders a firm¶s ability to respond to environmental changes. Many consumers find liquid soap more convenient to use since there is no messy bar to deal with. even when it does notice the need to change. The package made it very easy to spot on store shelves when nearly all other soaps were in bar form. there was little chance he could beat them in a price war. What made liquid soap so convenient was the way in which it was delivered ± the pump. Realising that there were only two pump manufacturers capable of serving the demand. which was dominated by few large players like Armour Dial. liquid soap became a sloppy. Initial reaction of major competitors: The big soap manufacturers decided to conduct private trials of liquid soap products rather than go ahead with public launches. Taylor risked everything and bought up both manufacturers' total annual production ± 100 million pumps! .Competitive Advantage enjoyed by Softsoap when it entered the market in 1980 y Product differentiation: Minnetonka Corporation has launched for the first time liquid soap in a pump operated plastic bottle which was different from the existing bar soap. for example. It came in recyclable pump bottle. he would have to settle for whatever tiny sliver of the market remained. But he also knew that if he did not fight their entry. in fact. 2. As the larger corporations began their own test marketing. Lever Brothers. Without the pump. Taylor knew that he would need more time to build brand loyalty so he chose to fight in a rather clever way. and Colgate Palmolive. if. If Softsoap was to have any chance of long-term success. It was more sanitary and hygienic to use. Possible reasons for not fighting back aggressively initially: 1. In fact. unmanageable mess. 2. 4. P G. Taylor considered his situation. P G. 3. Certain advantages of liquid soap over the bar soap were: 1. He knew that once the financially stronger companies entered. The US bar soap industry in 1977 had experienced little growth for innovation for years. was marketing its liquid soap product under the name of ³Rejoice´. they decided to market product under different names than that of their flagship bar soap products. Major soap brands in the market were unsure of consumer¶s enthusiasm for liquid soap from pump gun dispenser. This was a way to crack the mass market for bar soap.

.e. It used aggressive pricing. In the business arena. Yardley launched its second liquid soap product and spent $5 million on its launch. the Softsoap brand was firmly in place and remained the market leader. Armour-Dial failed to successfully launch its µLiqua 4¶ liquid soap but re-entered the market in 1987 with Liquid Dial which overtook Softsoap as the market leader. entered late. Therefore. Generally. and more developed distribution network. If an entrant introduces an innovation that looks sustaining through the eyes of well-resourced competitors. It would not have been able to compete against major players who enjoyed the economies of large scale production and could have spent more money on aggressive advertising and promotion. Minnetonka was purchased by Colgate-Palmolive for $61 million in 1987. selling customer relationship management (CRM) software that improves a business¶s abilities to manage sales programs. once the entrant proves a market exists.But Taylor's gamble paid off. buying the pump manufacturers' full supply) to commit to fighting the entry of the larger corporations. Indeed. In 1983. P G launched a liquid soap product under the Ivory brand name. The major competitors introduced products offering similar features and they had the advantage of economies of large scale production. better R D. advertising. the incumbent can marshal its resources to fight back. Tom Siebel left Oracle in 1993 to found his eponymous company. Software giant SAP initially missed the CRM market. The move kept the major brands out of the market long enough to allow Softsoap to build the brand loyalty it desperately needed. Siebel has already begun to feel the arrow¶s sting: its stock dropped by 94% between 2000 and 2003 and has been flat ever since Entrants need to be careful not to assume that initial disinterest automatically means an incumbent is disruptable. In 1981. couponing to capture 30% market share. Although Minnetonka could have threatened to enter a price war with any entrant. overtook Siebel Systems and become the leader. Hence we can see that though Minnetonka estimated this segment to grow to a $400 million market and that it would be able to retain half the market share despite competition. this plays out again and again. Siebel Systems. trade promotion. the segment has grown to $200 million market. By 1987. aggressive advertising and promotion. Had the major incumbents imitated the product immediately. incumbents are motivated to fight rather than flee when sizable up-front expenditures need to be amortized over a large number of users and the marginal cost of serving an additional customer is low. When competition finally arrived. the larger corporations would have ignored the threat since it would not have been credible. it failed to do so. it had to adopt another strategy (i. Softsoap would not have had the competitive advantage of product differentiation. .

industry boundaries are defined and accepted. Hence. 3 Swedes died after its consumption. Aggressive advertising was done. Here companies try to outperform their rivals to grab a greater share of product or service demand. Targeted ³in crowd´ places. retail outlets and then filling stations instead of targeting high end restaurants/bars and hotels.RED BULL. Blue oceans. and herbal supplements which may interact to provide a stimulant effect over and above that obtained from caffeine alone. the term red ocean is used. the rules of the game are waiting to be set. They connected with colourful ³deejays´. Competitive Strategy adopted: The puppy dog ploy. Certain RB drinks topped the popularity charts. There were perceptual barriers too regarding dietary information and rumours about use of controversial ingredients. and the competitive rules of the game are known. vitamins. Blue Ocean is an analogy to describe the wider. Special adventure sporting events were held. In the red oceans. photogenic women and plenty of red bull. Even inside the retail stores. It introduced the Taurus awards (promoted by Arnold Schwarzenegger) for best stunt people in the film industry. helped to raise the sales to 200 Million cans. In blue oceans. No enthusiasm was shown by restaurants and bars and there were strict government regulations. Objections were raised by French government and hence it waited for the right opportunity. two after mixing it with vodka and one after over consumption. prospects for profits and growth are reduced. gyms. As the market space gets crowded. Free distribution of samples sports.gives you wings!!!!!! Energy drinks are soft drinks advertised as providing energy to improve physical activity of the drinker. It got huge TV attention and hosted most of the events with deejays. deeper potential of market space that is not yet explored.´ This is done by herding customers to exciting events that get high media coverage.Initially sold in alcohol free discos which cater to a lot of youngsters. In blue oceans. There is ample opportunity for growth that is both profitable and rapid. Red Ocean Vs Blue Ocean Red Oceans are all the industries in existence today²the known market space. these increase the mental alertness and physical performance by the addition of caffeine. Red Bull was introduced by Dietrich Mateschitz and is derived from an energy drink from Thailand called Krating Daeng. Bringing the customer base closer: ³We don¶t bring the product to the consumer. Products become commodities or niche. Consumer education teams to nullify the rumours. It has high input costs. we bring consumers to the product. It invited athletes to Red Bull sporting events. appetizers. demand is created rather than fought over. denote all the industries not in existence today²the unknown market space. They used logo carrying vans. ³Buzz Marketing´ is the word. It also associated with famous bars and pubs. In US. . Barriers to entry/Initial Challenges There was an absence of a defined market for such functional drinks. which created lot of fuss in the media. office buildings and beaches. The student marketing buzz ± in 2000. the sleek shining silver blue cans were strategically placed on the shelves to give the first on lookers a sense of curiosity. and cutthroat competition turns the ocean bloody. Rather than providing food energy (as measured in calories). in contrast. promo vans were sent to colleges. untainted by competition. hence is sold at premium prices. They had a unique and focused distribution strategy.

. the sweet. also up 10% on 2007. In over 100 countries worldwide. in 2008 it launched its Red Bull cola. hence it was their weak link. Cola giants introduced their variants of energy drinks. Buoyed by a solid base of early adopters and an army of trend-conscious followers.000 cases sold in convenience stores and supermarkets. Red Bull defined their competitive space. a category Red Bull has owned with a commanding 65% share last year. For 2009. Current scenario: The market for sports/energy drinks has been buoyant despite the effects of the recession ± and in 2008 it accounted for a combined £941 million. Market shares of Coke and Pepsi goes down in the soft drink market.S. as it still largely lives in bars and dance clubs where it is frequently mixed with vodka as a buzz-building cocktail. those channels only account for 30-40% of the brand's sales. especially the big soft drink players were coming up with their energy drinks. it was a matter of identifying this weak spot and then attack instead of going after their bastion. it has 70-90% market share.9 million from 658. Bedford Hills. But this all did not happen in one night¶s time. per consultancy Beverage Marketing Corp.Y. Red Bull controlling 2/3rd of the whole market alone in US. the market achieved some 484 million litres. Red Bull sales in the U. It did not try to come up with any cola variant to counter attack Coke or Pepsi. $42 million in 1998 and $12 million in 1997. Avoiding tit for tat.. Sales of energy drinks. the sports and energy market pales in comparison to its main competitors. During the first five months of this year. However. In volume terms. That figure is all the more remarkable as it has virtually doubled in each of the past five years: $75 million in 1999. For Red Bull. There¶s was a well planned strategy. up 10% on 2007. Red Bull kept its focus on its core product. the market is estimated to reach 525 million litres for a value of just over £1 billion.Stiff Competition Soft Drink market was dominated by carbonated cola giants. New York.9 billion. which was a small part of huge $50 Billion soft drink market.at the time when the competitors. Energy drinks market is doubling every year. N. In terms of value. a beautiful mix of judo strategies which when fused proved fruitful to Red Bull. with bottled water at £1. This market never got sufficient attention from the established soft drinks players. took off shortly after 1998 and have continued to soar.Energy drink segment. hit $130 million in wholesale dollars in 2000. the brand pulled in $29. Red Bull served the market at double the price of its competitors but gave more efficiency with its high caffeine content. Growth of Red bull is huge in comparison to dull growth in overall soft drink market. For example. Mintel estimates soft drinks to be worth £6 billion in 2008. per Beverage Digest. However. neon yellow beverage is just now hitting the mainstream. It was backed by huge financial support for advertising and promotion.

4 3.Drink Red Bull Monster Rockstar Full Throttle Sobe No Fear Amp Share of Energy Drink Market (based on dollar sales) 42.9 5.9 Tab Energy Monster XXL Private Label Rip It Sobe Lean BooKoo Sobe Superman Von Dutch 2.9 0. .5 0.4 11. Here are the 15 biggest sellers for the year ended 31 December 2006).6 Sobe Adrenaline Rush 2.8 0.4 6.7 0.3 0.4 0.6 14.4 (Bevnet have published this annual review of the energy drink industry.9 0.

sparking intense price wars as the major oil companies battled it out with the supermarkets and small retailers got caught in the cross-fire. The promotion had caused chaos and outrage in the industry. Esso Esso. but fighting the supermarkets might inadvertently cause a price war within the group of integrated oil companies. Esso commenced trials of its "Price Watch" scheme in the north east of England and Scotland in autumn 1995. Whilst accurate figures are hard to obtain because of the confidentiality surrounding the disclosure of site volumes. In January 1996. being the largest player in the market with 21% market share. These savings soon resulted in hypermarkets increasing their market share quite significantly. The Pricewatch program was estimated to have costed Esso 200 million pounds in profit in 1996 alone. This triggered the UK petrol price war. Esso did claim that it was able.Each group had their own distinctive market niche. where they undertook to match hypermarket prices within three miles of their sites. This was followed up with a significant television and radio advertising campaign. it was estimated that hypermarkets approximately had 25% share of the UK retail petroleum market by 1995. Supermarkets Expansion Planning policies in the 1980's were favourable to out of town development and these policies. however. either to continue the way it has of been or to slash down its prices which would eventually even start a price war among the oil companies. the basic criteria being that Esso would match the lowest price within a three mile radius. Esso went nationwide on "Price Watch" with a public undertaking to check prices daily and be amongst the very lowest in the country.UK Price wars Introduction In the 1980¶s three types of companies owned retail gasoline stations in the United Kingdom: Vertically integrated oil companies. For a number of years in the late 1980's and the early 1990's savings of between 2p and 4p per litre could be achieved by filling up at a hypermarket service station. supermarkets and independent retailers . In the UK. Esso knew that by fighting it could prevent its market share from falling below 18%. As the stores became more sophisticated. together with high profits in the food retailing industry lead to a massive expansion of hypermarkets throughout the Country. and at the end of 1995 there were 776 hypermarket sites. so did the petrol forecourts and the majority of these later developments were placed so as to have a high degree of prominence to the main road. In such a scenario there were only two options left with Esso.In the meanwhile the largest player in the market Esso¶s share had dropped from 21% to 16%. to recapture about 1 million customers. Esso believes it has achieved what it set out to do ± establish a long-term shift in pricing policy. at the end of 1990 there were 434 hypermarket sites with petrol facilities. Esso brought its long-running Pricewatch campaign to an end by March 2004. By the early 1990¶s supermarkets lowered their gasoline prices which resulted in their market share rising from 6% in 1991 to 20% in 1995. It was extended to all of its 2100 filling stations in January. Eight years later. In August 1995 Esso responded by launching a program (that was dubbed as Pricewatch) in the northeast England and in Scotland. which will continue despite the removal of the Pricewatch banners . had to decide whether to accommodate the expansion of the supermarkets or to fight them. The Hypermarket operators also introduced substantial discounting against conventional oil company prices.

Unable to withstand the price competition. big players were expected to keep the margins stable by an implicit understanding . It was a commitment to the customer about competitive pump price. but have yet to be revealed. what was much harder to swallow was the fate of independent operators caught in the crossfire as the industry giants fought it out. They shuddered at the thought that this could be rolled out as a national scheme. Other promotions will follow. We intend to maintain our reputation and continue to do that. They knew for sure that none of the oil companies would be considering them as a serious competitor in the initial years as in a business with low margins. of hypermarket sites with petrol facilities had doubled and the market share rose from 6% to 25% eating away the market share of the integrated oil companies.from its forecourts. We have therefore put good plans in place to respond to the challenge. and was the sign of a company desperate to buy back market share. independents started closing at a rate of 1000 per year. . Esso Petroleum¶s marketing manager. Pricewatch or Doomwatch ran the headlines as flabbergasted retailers in those areas struggled for air in their shock at the situation.´ When Pricewatch was launched it was a very different retail environment. One Esso licensee said the Pricewatch scheme had been tremendous for bringing in business and he claimed fuel sales were up by as much as 35 per cent. BP and Total responded with marketing and price-cutting strategies. Pricewatch was a promotion ± it was a brand. Shell announced an overnight price cut of 4p/l. While Esso was admired in some quarters for its stand against the supermarkets. and that has grown to around 26-27 per cent and we foresee that continuing to grow.Even after 8 years when the Pricewatch was scraped by Esso. but prices in the trial areas began to plummet to less than 49ppl. We now believe it¶s time to move on to something new. Once the image was built. The situation could only end in tears. Normal prices were around 54ppl. and it was introduced as a reaction to market forces at the time. Supermarkets Expectation and were they justified Supermarkets knew that if they had to increase their market share they could do it only by attracting new customers which they did by lowering the petrol price. The roll-out of Pricewatch came as a body blow to many retailers around the country although a straw poll of Esso retailers at the time showed they were grateful to the oil giant for its support. Gordon Munro. the supermarkets remain the main challenge in the market. in the next 5 years the no. as in 1995. However. Research shows that while motorists expect competitive pump prices. we also believe the customer is looking for more than a competitive pump price. said: ³In 1985 the supermarkets had less than five per cent market share. We have spent a lot of time and effort doing a full strategic review of the UK market and have come up with assessment of our customer demands. supermarkets held on to their share.Slowly and steadily Consumers were made to believe that petrol at hypermarkets cost less than anywhere else. Reaction to Pricewatch by competitors In October 1995 Shell announced its intention to undercut or match Esso in its "Price Watch" areas. However. They need 2ppl margin just to break even. By the time the Integrated oil companies responded and got into a price war they were stable enough not to let their market share erode . We know that the customer expects competitive prices wherever he goes ± and at Esso we believe we have built up a reputation over the years as a company that will give the customer a competitive pump price. they don¶t really know what Pricewatch means.

by up to 1p. Sainsbury's.300 company owned . Supermarket chain Asda has sparked a pump-price war when it slashed its fuel prices to 99. was more cautious on announcing a price reduction . BP reviews pump prices at all its company owned sites on a daily basis and is committed to passing on competitive prices to the customers. whose cheapest price today was 100. cutting prices at its 1.predicting a further 2p a litre cut within days and up to 5p a litre within month.with more cuts expected to follow.9p. provided oil prices stayed low.200 sites .The Present Situation Fresh petrol price war looms as supermarkets cut cost at the pumps. The AA said that other supermarkets and oil giants would be forced to follow .at about a quarter of its sites. BP followed suit.9p per litre . It has pledged to drop its petrol and diesel prices to below £1 a litre .representing a cut of up to 3p a litre . Morrisons is the latest supermarket chain to follow Asda.

History of FreeServe Freeserve was a UK based Internet Service Provider. Further revenue was obtained from advertisements on Freeserve's homepage. At its zenith. Freeserve offered consumers unlimited internet access. Along with Compuserve. information. entertainment. it has franchised its services to companies in several nations around the world or set up international versions of its services. AOL had around 8. which initially contained news content. and 5 MB of Web page capacity. its British subsidiary.C. had become the biggest player in Britain¶s Internet Service Providers market.¶s from Dixon¶s store. buddy lists. an unlimited number of e-mail addresses. AOL Europe which was a joint venture between America Online and German media group Bertelsmann. It was founded in 1983 as Quantum Computer Services. In the mid 1990¶s AOL decide to venture into the international scene. 00. and parental control ± all of these at $30 per month. along with search features and other content from Lycos and retailing from shopping channel Scoot. Freeserve also launched its own home page. also called "AOL´ that allowed millions of customers around the world to access the world's largest "walled garden" online community and eventually reach out to the internet as a whole.000 subscribers. and instead to collect a proportion of the standard telephone line charges.AOL History of AOL America Online LLC (AOL) is an American global internet and media company operated by Times Warner. Europe and especially the British market was a largely untapped market and provided huge opportunities for AOL to exploit. most of whom accessed the AOL service through the AOL software suite. shopping. e-mail services. It was initially set up with the idea of providing free internet access to customers buying new P. AOL¶s offering¶s included offering interactive news. AOL's membership was over 30 million members worldwide. founded in 1998 in a project between Dixon Group plc and Leeds-based hosting provider Planet Online. electronic chat abilities. AOL is best known for its online software suite. which was set as the default page in the customers' web browsers upon installing the Freeserve connection software. By the fall of 1998. . Freeserve was one of the first of the UK's ISPs to dispense with the usual monthly subscription fee for Internet access.

Difference between USA and UK internet users In contrast to the United States. most European users spent only a fraction of the time online that U. Business model of AOL vs Freeserve Membership fees represented well over two-thirds of AOL¶s revenue as it only collected $4 to $5 per user in advertising and e-commerce revenues. which terminated telephone connections.S. U. 00. to transfer a portion of Energis¶s revenue back to Freeserve on account of the increase in traffic expected from Freeserve¶s customer dialling up to the internet. Freeserve on the other hand. Freeserve made an agreement with a firm called Energis. callers paid a flat monthly rate for local calls.000 subscribers. AOL. Hence. so users paid only $21. Thus. ISP market share with the launch of Freeserve y y y y By the fall of 1998.K. the longer someone stayed online. exploited British Telecom regulations that required a company that originated a call to share a portion of the revenue with the company that terminated the call. users did.95 for unlimited Internet access via AOL.S. a sum that would not even cover the $5 to $9 AOL spent in direct network costs per users each month. which means phone calls were billed on a per-minute basis. along with its subsidiary compuserve had around 8. the more expensive the phone bill. local phone service in the United Kingdom was metered. By mid 1999 Freeserve had around 1. . Freeserve had 1 million customers and 8000 new subscribers were signing up each day.3 subscribers. Freeserve also charged its customers for providing technical support. By January 1999. Freeserve was launched in September 1998. Change in U.

AOL responded by cutting its British monthly fee from $ 27 to $16.In September. It also tried to highlight the fact that AOL provided more value added features. In September 2000. AOL launched a free ISP service. 00. By February 2000. Netscape Online was targeted at younger Internet users who are technically adept and did not require much support. as uneconomical. to compete head-to-head with Freeserve at the lower end of the market. AOL U. Over the same period. Which consumers of AOL are readily switching to Freeserve? y y Low volume internet users who found AOL¶s scheme of paying fixed monthly cost.000 users signed up for Netscape Online. While Freeserve grew by around 3. They designed Netscape Online in such way that the rate of switching from AOL to Netscape Online was very low. In June 1999. It attacked Freeserve¶s definition of ³free´ saying that it masked the high charges that Freeserve users used to pay for telephone technical support. Consumers who used internet mainly for surfing purposes and did not use the value added services offered by AOL.25. . added 2. which was included as part of AOL¶s membership fee.AOL s response to Freeserve AOL publicly ridiculed the competition offered by AOL. AOL began offering unlimited online access via a toll-free number for a fixed monthly fee. 70. 00.000 accounts.000 subscribers.K. irrespective of their internet usage. It was very careful not to affect the user base of its paid services. 4. Netscape Online.

so that they can reduce their membership cost even more. . They should give their users more flexibility in choosing the services they require They should try and restructure their revenue generation model so that they can make more money from advertisements and servicing online shopping.How can AOL retain these consumers? y y y y Improve its services even further and capture subscribers who value quality and value added services. AOL could challenge free ISP¶s by partnering with global backbone providers like UUNet.

be it a strong market position protected by entry barriers or a unique resource position shielded from imitation by isolating mechanisms. could turn into entry and mobility barriers that deter later rivals. at least they should not compete with strong incumbent leaders directly. irrelevant. In a business where smaller firms do not have much latitude to change the game using substitute products or adopting new ways of manufacturing and marketing. Such a position. Selective commitment decisions help a firm avoid premature frontal battle with strong rivals. 2000. De Beers had manipulated the supply of the diamond industry for a century or so. the Schumpeterian perspective advocates its teaching as to innovate and create new games instead of fighting an uphill battle against strong incumbent players who set the current industry standard and the rules of the game. new products. afford the firm the luxury of ³to win without fighting´. reputation should matter in the leaders¶ business markets. The challengers strive to win without fighting by careful plotting or innovating. That is. with innovation and creative construction as its key constructs (Christensen. It provides some cushions for the leaders to take a breath as well as a higher margin for error. will. or insignificant. incumbent leaders would win automatically due to their stronger positions. Irreversible commitment. Consider the luxurious goods .CONCLUSION ³To defeat the rivals¶ forces without engaging in fighting is the supreme among all strategies´. Instead of fighting with the entrenched incumbents. it is possible for market leaders to assume a certain position. while it lasts. For instance. Foster and Kaplan. And creating new games through innovation or selective commitment should help challenger firms win without fighting. Leaders are entrenched incumbent firms that possess strong market power. once made. Finally. they dislocate them. Finally. It emphasizes the firm¶s internal capability in creating new technology. Challengers are firms aspiring to create their own dominance in their business markets. The incumbent leaders strive to win without fighting by virtue of their endowment or position. It is a strategy of ³to win without fighting´ precisely because the innovating firms refuse to play the existing game. This ensures that the incumbent leaders win over rivals in customer good will. Playing industry leaders¶ games is often competitive suicide. observed by Sun Tzu in his masterpiece on strategy The Art of War. 2001). Opportunities for product market innovation are limited. or new ways of organization. The perspective is that firms should not compete when they do not have competitive advantage. There are basically no substitutable products in this business and no major rivals. The Schumpeterian perspective is the challenger¶s perspective because it centres on creating advantages anew and destroying the old equilibrium. instead of sustaining an existing order. making their games obsolete. To win without fighting and to win by fighting The Schumpeterian perspective focuses on a firm¶s innovation in its rent seeking process.

to win by fighting or to win without fighting? As strategy is the art of matching firm competence with changing opportunities. Third. the Honda entry into the US motorcycle industry (Ghemawat. the Icarus paradox (Miller. In situations where sustainable advantage is possible. even when it does notice the need to change. are not expected to be sharp at competitive rivalry. First. The above discussion naturally leads to the following question: which is more superior. ³To win without fighting´ may brew complacency due to lack of rivalry. K-Mart was complacent about its dominance in the urban areas in the 1970s and did not treat the Wal-Mart aggression seriously.dealers like Cartier or Tiffany¶s. 1994). winning without fighting is likely to brew inflexibility or rigidity ± structure-wise or culture-wise inertia ± that hinders a firm¶s ability to respond to environmental changes. . then fighting. Dominant firms¶ tendency to turn complacent and rigid has been well documented (Miller. In hypercompetitive environments with nowhere to run and nowhere to hide. When K-Mart had to fight a much stronger and more efficient Wal-Mart in the 1980s and 1990s. the willingness to fight. As such. Second. to win without fighting could be a desirable strategy. and the speed of change in the environment. who would experience much difficulty later in putting their acts together when facing the then much more formidable Honda. the stage of competition. it is possible that a winning firm ignores the advent of new rounds of Schumpeterian competition and suffers from a blind spot in its competitor analysis. the appropriate choice of strategy style depends on the competitive context. The danger and the side effect of the ³to win without fighting´ mentality are at least three-fold. firms with superior resource endowments or market positions. it simply lacked what it takes to succeed in head-to-head rivalry. they automatically think of these respectable and trusted names. a firm has to re-create competitive advantage on a daily basis. shielded from competitive rivalry. for every firm in the capitalist economy is eventually subject to the Schumpeterian shock. 1991) was largely ignored by the major incumbents initially. Similarly. small and unknown firms do not even show up in the map. They run the danger of competitive elimination in the long run. When consumers think of luxury. and the skills and tactics in fighting become critical. with the once and for all mentality. For instance. They have consistently and consciously focused on effectively positioning themselves in the customer¶s mind as the industry leaders. 1994). e. a firm is likely to be plagued by complacency and arrogance. ³to win by fighting´ could disintegrate a firm due to lack of cushion to accommodate competitive blunders.g.