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FYBSc - FINANCE - A - GROUP 10 - POM - COMPETITIVE STRATEGIES PDF
FYBSc - FINANCE - A - GROUP 10 - POM - COMPETITIVE STRATEGIES PDF
MARKETING
FYBSc. FINANCE - A
GROUP 10
GROUP MEMBERS:
Radhika Sarawagi A046
Raima Kukreja A047
Rishikesh Parwani A049
Rohit Mutha A050
CONTRIBUTION TO THE DOCUMENT
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COMPETITIVE STRATEGIES
INTRODUCTION TO COMPETITIVE STRATEGIES
After identifying and analysing the types of competitors, the company must now design
competitive strategies that best position itself against the competitor’s offerings. No one strategy
fits everyone. Each company must determine what makes the most sense, given its position in
the industry and its objectives, opportunities and resources it enholds.
Companies can either follow Michael Porter’s competitive positioning strategies (Overall cost
leadership, Cost Focus, Differentiation and Differentiation Focus) or the Value Disciples
(Operational excellence, Product Leadership, Customer Intimacy) to compete and deliver
superior customer value respectively.
Businesses maintain their position in the marketplace by making competitive mows to attack
competitors or defend themselves against competitive threats. These moves change with the role
that firms play in the target market - that of as a leader (40%), challenger (30%), follower (20%),
or nicher (10%).
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MARKET LEADER
A market leader is a company with the largest market share in an industry that can often use its
dominance to affect the competitive landscape and direction the market takes. A market leader
typically enjoys the largest market share or the largest percentage of total sales in a given market.
It may surpass its competitors according to other metrics, too, including brand loyalty, perceived
value, distribution coverage, image, price, promotional spending, and profit. Strategies like
expanding the market share, protecting the market share and expanding the total market can be
used.
MARKET CHALLENGER
A market challenger is a firm which is just below the market leader with a good presence. The
basic aim of the market challenger is to expand its market share and become the industry leader
by introducing a new variety of products or by improving customer service etc. Companies with
low market share usually try to adopt this strategy to increase their market share.
FUNDAMENTAL PRINCIPLES
● Find a weakness in the competitor’s strength and attack at that point so that there are very
few opportunities of defence.
● Choose only one target at a time in order to completely focus all resources and energy in
one market and be able to tackle any defense attempts by the competitor.
● Launch the attack quickly and then consolidate. This will ensure that the competitor
would be left in surprise and would not have time to strategize before losing its market
share to the challenger.
As said, the most important aim of the challenger is to gain the market share however the
challenger must decide on whom to attack in the market
● Attack the market leader - This approach potentially has high payoff due to the high risk
attached, and it may be successful if the leader is not serving the market well.
● Attack small local and regional firms - This approach is used in order to drive these firms
out of the market competition.
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● Attack firms of its own size - Firms of the same size that are unsuccessful and
underfinanced. These firms may have maturity products and may not be satisfying the
current customers needs.
ATTACKS
There are two types of attack strategies used challengers; General (Board) and Specific
Strategies.
GENERAL ATTACK
Defining clear strategic objectives and competitors, we can imagine an opponent who occupies a
certain market territory. We distinguish among five attack strategies on these territories:
● Frontal Attack
The Frontal Attack is the marketing strategy adopted by the challenger firm and is intended to
have a head on attack on the competitor by matching him in all the aspects Viz, product, price,
place, promotion.
It is assumed that in order to have an effective frontal attack the challenger must have three times
more Firepower than the opponent. The price and the quality of a product, sales effort,
advertising effort, and service effort are some of the fire powers that a challenger must be
efficient in, to win over the opponent. The market challenger can even cut the price of the
product, provided he/she convinces the customers that the quality is not compromised and is as
good as the high priced products.
The frontal attack strategy is suitable for a challenger only when the market is relatively
homogenous, and a competitor has fewer resources to retaliate. Also, the brand equity is low, and
the products are poorly differentiated. Therefore, the loyalty of customers towards the products is
also low.
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Types of Frontal Attacks:
● Pure Attack: The challenger matches with all the aspects of the competitor Viz, product,
price, place, promotion.
● Limited Frontal Attack: The challenger attacks on the specific customer segments.
● Price-based Frontal Attack: The challenger matches with all the attributes of a
competitor’s product.
● Research and Development Attack: The challenger invests a huge amount in the research
activities to match with the competitors’ innovations.
The challenger must carefully scrutinize all the strengths and weaknesses of a competitor and
attack on that element of an opponent for which he will not be able to defend himself or attack
back. HUL, P&G, ITC are some big players in FMCG that launch the frontal attack on each
other.
Applications:
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● Amul’s Frontal Attack: A mul introduced Amul Kool and Amul Masti Dahi at a lower
price but with the same level of quality as that of its competitors in the market. This gave
Amul an edge over its competitors.
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● Flank Attack
Rather than focusing on Front Attack strategy, challengers can choose a side attack strategy,
known as Flanking Attack.
In a flank attack strategy challengers focus on competitors less-secured spots i.e concentrating its
strengths on the competitor’s weakness. The competitors often concentrate their major amount of
resources on their strongest offerings and this thus creates a gap or leaves an opportunity in the
market for other competitive firms. Therefore, challengers in this strategy generally tend to
attack firms of its own size or small and regional firms in scope finding weakness.
● Secrecy: The attacker does not confront competitors in open and the attack is
more successful when done in uncontested areas.
● Surprise element: The attacker must gain market presence stealthily without
giving any hint to the competitor or before the realization of the competitor.
● Differentiated product: The attacker does not require to have a completely new
product for the attack but it should be differentiated enough that it fulfills the
latent needs of the target market and provides a superior value to the customers.
● Less costly and risky: In comparison to the strategies, flank attack is less costly
and happens without much of a fight between the challenger and the competitor as
competitors often let go a marginal segment of their capture rather than getting
into a costly battle.
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This strategy is generally used by the companies who lack resources in comparison to the
competitor but may have a significant advantage in a particular area. This advantage can then be
used against the poorly served sections by the challenger.
● Geographical: It occurs when a firm attacks different areas within the world or country
where competitors are nonexistent or are underperforming. For example, Coca -Cola is
often seen using this strategy to enter new locations and markets.
● Segmental: It occurs when the challengers target markets that are not being served by the
market leader or it tries to cater to the needs that have been ignored. It thus attempts to
develop these markets into strong segments and capture the market share. For example,
Absolut v. Smirnoff – Absolut went into the Vodka market pricing themselves almost
more than half their rivals Smirnoff and flanked the competition in the premium vodka
space.
Application:
Flanking strategy has been used by several companies to enter into the market and gain market
share by establishing themselves in the market. Some of the real-life applications of flanking
strategy is:
● Japanese car makers like Honda, Suzuki, Nissan etc did not try to compete with
American car makers by producing large, fancy, gas-guzzling contraptions. Instead they
recognized an unserved consumer segment that wanted small, fuel-efficient cars and thus
they grabbed this opportunity and became much success.
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Figure 1.8 Flanking attack in Mobile phone industry
● In the Mobile Phone industry, Micro max launched low-cost phones with features
matching the specifications of leading premium smartphone manufacturers like Apple. It
gained instant acceptance and recognition by the consumers, thereby strongly capturing a
segment of the market.
● TV Industry L.G’s color TV “Sampoorna” is one of the best examples of flank strategy.
LG introduced this product for the rural people and outshined the other colored TV
players who had a less focus on these areas
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● Encirclement Attack
The Encirclement Attack is a war strategy adopted by the challenger firm intended to attack the
competitor on all the major fronts. Under this strategy, the challenging firm attacks the market
leader on the basis of strengths as well as weaknesses and does not leave any stone unturned to
overthrow the competition. It is assumed that only those firms that are 10 times stronger or
powerful than the opponent firm can launch the encirclement attack. The attacking firm must be
adequate in its resources, and then only it will be able to launch a grand offensive on several
fronts.
● Product Enrichment: The challenger firm may introduce different types of products with
varied features and quality and may price these differently on the basis of their utility
● Market Encirclement: Here, the firm may introduce the product for such a market
segment, which is left untapped by the competitor and thus enjoys the huge market share.
The current E-commerce scenario is the best example of the encirclement attack where the
E-commerce companies are ready to go negative in their margins to beat a competitor on
turnover basis. They want to come on top and gain maximum customers by hook or crook.
Example: Flipkart and Amazon.
The fashion Industry is another example, where companies frequently launch the different
variants of products priced differently, in order to have a huge sales turnover and supersede the
competitors.
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Figure 1.11 Encirclement Attack by Ecommerce.
● Bypass Attack
The Bypass Attack is the most indirect marketing strategy adopted by the challenging firm with a
view to surpassing the competitor by attacking its easier markets. The purpose of this strategy is
to broaden the firm’s resources by capturing the market share of the competing firm.
Any of the above approaches can be followed, provided the firm is well equipped with the
resources and is more powerful than the competing firm.
This type of strategy is found in a firm which has the brains to innovate. And when it innovates,
it bypasses the complete competition and creates a segment of its own. Off course, other
competitors soon follow but the attack is very useful in the long term to create brand reputation
and gain customers. What did the iPod do to the Sony walkman? It simply passed by.
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Figure 1.13 Bypass Attack by Apple
The war between the Coke and Pepsi is another example of this approach. Pepsi used the bypass
attack against Coke by launching the Aquafina, mineral water brand, very much before the
coke’s Dasani Brand.
Figure 1.14 Bypass Attack between Coke and Pepsi
● Guerilla Attack
This is another one of the challenger strategies employed by firms. It is the intermittent attacks
imposed by the challenger to demoralize their competitor(s) by adopting both, the conventional
and unconventional means of attack. In a guerrilla attack, the market challenger makes
occasional attacks on the larger competitor.For this, different tactics are used each time in order
to confuse the market leader and prevent effective retaliation. The constant switching of tactics
prevents the market leader from organising a retaliatory attack.
Guerrilla warfare is the marketing strategy adopted by the challenger firm intended to launch the
intermittent attacks with an intention to harass or demoralize the competitor. This strategy is
more a preparation for the war than an actual war.
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Figure 1.15 Guerilla Attack
This strategy can be expensive, but however, is less than the frontal, flank and encirclement
attack.
● Make use of publicity, get the media to talk about your firm. Publicity is more
powerful than the advertising because, in the latter media form, it is well known that
the message is very well under the control of a firm but however, in a case of publicity
the information flows freely without any control.
● Freebies, i.e. giving away the products in the form of free samples to the customers.
This is done to spread the name of the company and to make the customer try the
product at least once.
● Hard as well as cash, the company offers its products against the hard money, i.e.
credit cards or debit cards along with the cash money. This gives the customer
flexibility to make the payment in any form.
Generally, the companies used both the conventional and unconventional means to attack the
opponent but provided it does not cross the lines of legality or morality. Severe price cuts,
intense promotional blitzes, occasional legal action, are some of the ways to supersede the
counterpart.
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Application
● Pepsi and Coca-Cola followed this strategy aggressively with the intention to harass each
other.When Coca-cola was the official partner of the cricket world cup, Pepsi
counter-attacked it by using the punch line, “ Nothing official about it” The link to
Pepsi’s 1996 ad: https://youtu.be/riwOAtmMhZY
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SPECIFIC ATTACK
The general attack strategies are very broad in nature therefore these strategies consist of many
specific attack strategies. Some of them are:
● Price-Discount Strategy
It consists of the challenger offering a comparable product at a lower price. Success of this
strategy will only if,
a. The challenger can convince that products and services are comparable to that of leaders
b. Buyers must be price-sensitive therefore have an inelastic demand and feel comfortable
to buy, and
c. Market leader must not cut its price in spite of the challenger's attack.
Example: Indian E Commerce players like Amazon, Flipkar, and Snapdeal heavily adopt this
strategy by offering deep price cuts for certain days and occasions in a year. For instance -
Flipkart’s ‘Big Billion Days’ sale, Amazon’s ‘Today’s Deals’ etc. Each firm’s offering does not
make the competitors offering or strategic plan on prices to change.
● Prestige-good Strategy
A challenger can launch a high quality product and charge a premium price than the market
leader. This strategy succeeds if a specific group of buyers are ready to pay a high price for
superior quality-prestigious products.
Example: Ola introduced a new category car called “Ola Lux” to provide luxury cards such as
Jaguar, Mercedes, Audi, BMW and etc. This type of attack strategy was not used by any of the
taxi service companies and therefore they were able to sustain and charge higher prices in the
market for the same.
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● Product-proliferation Strategy
It consists of attacking the market leader by offering a greater number of product varieties to
give buyers more choice.
Example: Patanjali Ayurved has launched more than 400 FMCG products in the last 3 - 4 years.
They have diversified their portfolio to such an extent that they are catering to all the product
varieties.
● Distribution-innovation Strategy
The challenger attacks the leader by developing new ways or channels of distribution. A
challenger can apply door-to-door selling, online selling, direct selling, opening stores at
convenient places, etc., instead of the traditional way of distribution.
Example: In September 2015, French car maker Renault launched an app to allow customers to
book the Kwid, its new hatchback car. The app was downloaded more than 200, 000 in three
weeks after launch and helped Renault to reach a wider set of buyers.
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● Intensive Advertising Promotion
It consists of challengers attacking the market leader by increasing promotion and advertising
expenditures.
For example: Parle Agro, the challenger, spent Rs. 100 crore on marketing campaigns to rebrand
Frooti in 2015 and keep its position intact against the competitors like Maaza and Slice.
It consists of the challenger achieving lower manufacturing cost through effective and efficient
purchasing, lower cost of labour and more technology upgraded capital by the means of
economies of scale.
Example: SpaceX gained success in a short span of time for its contribution to NASA by
producing very low cost Rockets against the market leaders.
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To sum it up, as the diagram below says:
● Flanking: entering niche or geographical area where players are weak or not present
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MARKET FOLLOWER
Followers' companies do not want to challenge the leaders in any way. As they know that the
leaders won’t take the challenge easily and would take immediate actions to defuse the attack
strategy. Also the leaders generally have more sustaining power in the all out battle for
customers.Thus runner-up firms prefer to follow the market leader rather than challenge.
A follower may gain many advantages like a market leader often bears the huge expenses of
research and development, innovation of new products, creative distribution channels and
forming new segments or discovering new markets. In all, the market follower can learn from the
market leader’s experience. It can copy or improve on the leader’s products and programs,
usually with much less investment.
However, the point to be noted is that one must be aware that followership is not always a
rewarding path to pursue. Market followers will always react strongly in case of any loss and
thus must know how to hold current customers and win a fair share of new customers. They
must keep manufacturing costs low and offer better quality products with satisfactory services.
At the same time, they must enter new markets as and when there are opportunities.
TYPES OF FOLLOWERS
● Cloner or Emulator: In this strategy the donor clones (emulates) the leader’s products,
distribution, advertising and other aspects. The product and packaging may be identical
that of the leader, but brand name is slightly different, such as “Colgete” or “Colege”
instead of “Colgate” and “Coka-Cola” instead of “Coca-cola.” This strategy is widely
practiced in computer business also. The cloned products are openly sold in the market
due to different brand names. Example: timejobs.com is a clone of naukri.com but it does
provide some unique products of its own.
● Imitator: On the other hand some set of followers prefer to imitate/copy some aspects
from the leader, but maintain differentiation in terms of packaging, advertising, sales
promotion, distribution, pricing, services, and so forth. Customers can easily distinguish
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between the two. Quite obviously, such products are sold at low prices. Imitation is easily
possible in the jewelry market.
● Adaptor: Some followers prefer to adapt the leader’s products and improve them rather
than copying. They make necessary improvements in the original products and develop
little different products. The follower (adaptor) may then choose to sell the products in
different markets (country or area) to avoid any direct confrontation with the leader.
Many Japanese companies have practiced this strategy and developed superior products.
Example: The electronic industry, especially the mobile phones and laptops (Dell, Sony
Vaio). Another example is that the Renault Kwid is an adapted product from the Maruti
Alto 800. Before the features that we can compare for both of them.
STRATEGIES
● Follow Closely: The follower follows the market leader in as many markets as possible
but never blocks the leader so as to avoid any conflicts.
● Follow selectively: The follower being unable to follow in all aspects because of its small
firm size and thus follows only specific aspects.
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Example: Mango Sip. It is the 4 largest selling packaged
mango fruit juice after Maaza, Slice and Frooti. It followed
the leaders at a distance yet closely.
MARKET NICHERS
A niche is the small firm serving only small specific groups of customers called as the niches.
Niches are fairly small and normally attract a few competing firms (nichers). The firm’s
marketing efforts to serve the niches successfully is called nichemanship. Marketers can identify
niches by dividing a segment into sub-segments or by dividing a group with a distinctive set of
traits.
Nichers understand their niches’ needs so well and minutely that their customers are willing to
pay a premium price. They design special products with distinctive features, qualities, uses, and
value using specialized employees for special groups of limited customers.
Nichers can gain comparatively high returns. They can achieve high margin while large
companies can achieve high volume. Smaller firms normally avoid competing with larger firms
by targeting small markets in which large firms have a little or no interest. Companies with low
market shares can be highly profitable through effective niching. Nichers have to perform three
main tasks – creating niches, expanding niches, and protecting niches.
STRATEGIES
Specialization is the basic idea to serve niches. Nichers can apply specialization in various
aspects, some of which are explained below. They can practice one or more of following
marketing strategies:
● End-use Specialist
In this strategy the firm prefers to serve one-type of end-use customers, for example, a legal
advisory firm can handle only criminal cases, or a fashion designer can work only for a few film
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stars or specific occasions like Manish Malhotra, or Johnson and Johnson which specializes in
infant care.
Figure 1.25 Johnson and Johnson products in the infant care segment.
Firms specialize at some level of the production-distribution cycle. For example, producing only
raw-materials for specific companies, only warehousing services, or it may concentrate only on
retailing. It can serve only a part of the total process.
Example: Country homes’ niche is as an intermediary between owners of country cottages and
people who want to hire them for holidays.
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● Customer Size Specialist
The firm can sell products only to a specific small, medium, or large size customer. For example,
a firm can supply one or two components only to large companies. Many nichers gain by
targeting and serving small-size customers that are neglected by larger firms.
The real life application is the company FUJI. It had its initial success in the photocopying
market by targeting small firms neglecting Xerox
The firm supplies its products only to a distinct and specific group of buyers. There are many
firms like this in the motor industry. Other examples include, designing a special two-wheeler for
handicapped people or serving special foods to people who are suffering from certain diseases
like diabetes. So the firms basically focus on specific needs for specific buyers.
Example: Nobel hygiene’s adult diaper brand friends, which makes adult diapers and has
captured that niche.
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● Geographic Specialist
The firm serves customers of only specific regions or areas of the world, for example, serving the
needs of people living in hilly areas, or areas with a particular weather condition, etc.
Example: King’s beer which was initially only available in Goa. Mango sip, a fruit based
beverage which is primarily distributed in North-East India.
Figure 1.29 The infamous King’s beer of Goa and the mango drink of the North-East.
The firm specializes in producing a certain product, product-line or product feature like a brand
that deals with only formal accessories, like ties, socks, pins, ties etc.
Figure 1.30 Ray-Ban deals primarily in sunglasses and spectacles i.e. eyewear and Rolls Royce only deals in
high-end luxury cars.
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● Quality-price specialist
The firm operates at the low or high-end of the market. Example: HP specializes in high quality,
high price of the hand-calculator market, Tring International sells very cheap CD’s.
Figure 1.31 Tring International operates at the low-end of the market whereas HP operates in the high-end
of the market.
● Service specialists
The firm offers one or more services not available from other firms.
Example: NASA’s ability to recover and repair satellites; The Machan Resort in Lonavala which
offers unique tree houses, rising 30-45 feet above the forest.
Some other strategies include channel specialist, job specialist, event specialist, etc.
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