Presented by

CHAPTER 6
idier
STRENGTHENING
A COMPANYS
COMPETITIVE
POSITION
CHAPTER ROADMAP

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 MAXIMIZING THE POWER OF A
STRATEGY

Making choices that complement

a competitive approach and
maximize the power of strategy

Offensive and Competitive Scope of

Defensive Dynamics and the Operations along
Competitive Timing of Strategic the Industrys
Actions Moves Value Chain
 OFFENSIVE AND DEFENSIVE
COMPETITIVE ACTIONS
Defensive Strategies
Offensive Strategies
Strategies

Used to build new or Used to protect

stronger market position competitive advantage
and/or create competitive (rarely used to create
advantage advantage)
GOING ON THE OFFENSIVE STRATEGIC
OPTIONS TO IMPROVE A FIRMS
MARKET POSITION
Strategic Offensive Principles:
Relentlessly build competitive advantage and
then convert it into sustainable advantage.
Create and deploy resources in ways that cause
rivals to struggle to defend themselves.
Employ the element of surprise as opposed to
doing what rivals expect and are prepared for.
Display a strong bias for swift, decisive, and
overwhelming actions to overpower rivals
 CHOOSING WHICH RIVALS TO
ATTACK

Best Targets for

Offensive Attacks

Runner-up firms
Struggling Small local
Market leaders with weaknesses
enterprises on and regional
that are in areas where
the verge of firms with limited
vulnerable the challenger
going under capabilities
is strong
 BLUE OCEAN STRATEGY
A SPECIAL KIND OF OFFENSIVE

Involves a firm seeking sizable and durable competitive

advantage by abandoning its existing markets and, then,
inventing a new industry or distinctive market segment in
which that firm has exclusive access to new demand.
By reinventing the circus, Cirque du Soleil annually
attracts an audience of millions of people who typically do
not attend circus events.
 DEFENSIVE STRATEGIES
PROTECTING MARKET POSITION AND
COMPETITIVE ADVANTAGE
Purposes of Defensive
Strategies

Weaken the impact Influence challengers

Lower the firms risk
of an attack to aim their efforts
of being attacked
that does occur at other rivals

Good defensive strategies help protect competitive advantage but

rarely are the basis for creating it.
 SIGNALING CHALLENGERS THAT
RETALIATION IS LIKELY
Publicly announce managements strong
commitment to maintain the firms present
market share
Publicly commit firm to policy of
matching rivals terms or prices
Maintain war chest of cash reserves
Make occasional counter response
to moves of weaker rivals
 TIMING A FIRMS OFFENSIVE
AND DEFENSIVE STRATEGIC
MOVES
Timings Importance:
Knowing when to make a strategic move is as
crucial as knowing what move to make.
Moving first is no guarantee of success or
competitive advantage.
The risks of moving first to stake out a
monopoly position must be carefully
weighted.
 STRENGTHENING A COMPANYS
MARKET POSITION VIA ITS
SCOPE OF OPERATIONS

Defining the Scope of

the Firms Operations

Extent of its
Size of its
Range of its geographic
Breadth of its competitive
activities market
product and footprint on
performed presence and
service offerings its market
internally mix of
or industry
businesses
 HORIZONTAL MERGER AND
ACQUISITION STRATEGIES
Merger
Is the combining of two or more firms into a
single corporate entity that often takes on a
new name.
Acquisition
Is a combination in which one firm, the
acquirer, purchases and absorbs the operations
of another firm, the acquired.
 VERTICAL INTEGRATION
STRATEGIES
Vertically Integrated Firm
Is one that participates in multiple segments or
stages of an industrys overall value chain.
Vertical Integration Strategy
Can expand the firms range of activities
backward into its sources of supply and/or
forward toward end users of its products.
 TYPES OF VERTICAL
INTEGRATION STRATEGIES

Full Partial Tapered

Integration Integration Integration
 BACKWARDS INTEGRATION TOWARDS
SUPPLIERS
Achieve the same scale economies
as outside suppliers
Match or beat suppliers production efficiency
with no drop in quality

INTEGRATING FORWARD TO ENHANCE

COMPETITIVENESS
Gain better access to end users
Improve market visibility
Include the purchasing experience
as a differentiating feature
 When should we go for forward / backward
integration ?
Backward Vertical Integration Forward Vertical Integration
Lower distribution costs
When suppliers have large
profit margins Gain a cost advantage over
Where the item being rivals
supplied is a major cost Produce higher margins
component
Allow for lower prices
Where the requisite charged to end users
technological skills are
easily mastered or acquired Competing directly against
distribution allies can create
When powerful suppliers channel conflict and signal a
are inclined to raise prices weak commitment to
at every opportunity dealers.
DISADVANTAGES OF A VERTICAL
INTEGRATION STRATEGY
Boosts capital investment in the industry
Increases business risk if industry growth and
profits sour
May slow technological advances if the vertically
integrated company is saddled with older
technology
Poses all types of capacity-matching problems
May require radically different skills and
business capabilities
 OUTSOURCING
Outsourcing an activity is a
consideration when:
It can be done cheaply by
The Big Risk of Outsourcing:
outside specialists.
Farming out the wrong types of
It is not crucial to achieve a activities
sustainable competitive
Hollowing out strategically
advantage important capabilities
ultimately damages a firms
Improves organizational competitiveness and long-term
flexibility and speeds time to success in the marketplace
market.
It reduces a firms risk exposure
to changing technology and/or
buyer preferences.
It allows a firm to concentrate
on its core business.
 STRATEGIC ALLIANCES AND
PARTNERSHIPS

Strategic Alliance
Is a formal agreement between two or more
separate firms in which they agree to work
cooperatively toward common objectives.
Joint Venture
Is a type of strategic alliance in which the
partners set up an independent corporate
entity that they own and control jointly,
sharing in its revenues and expenses.
CAPTURING THE BENEFITS OF
STRATEGIC ALLIANCES

Being sensitive
to cultural
differences Recognizing that
Picking a good the alliance must
partner benefit both sides

Strategic
Alliance Factors

Ensuring both Adjusting the

parties keep their agreement over
commitments time to fit new
Structuring the circumstances
decision-making
process for swift
actions
 THE DRAWBACKS OF STRATEGIC
ALLIANCES AND PARTNERSHIPS
Culture
clash and integration problems due to different
management styles and business practices.
Anticipated gains do not materialize due to an overly
optimistic view of the synergies or a poor fit of partners
resources and capabilities.
Risk of becoming dependent on partner firms for
essential expertise and capabilities.
Protection of proprietary technologies, knowledge bases,
or trade secrets from partners who are rivals.
 PRINCIPLE ADVANTAGES OF
STRATEGIC ALLIANCES

They lower investment costs and risks for each

partner by facilitating resource pooling and risk
sharing.
They are more flexible organizational forms and
allow for a more adaptive response to changing
conditions.
They are more rapidly deployeda critical factor
when speed is of the essence.
THANK YOU
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