Competitive Strategy

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 Outline
 Introduction
 Sustainable competitive advantage (SCA)
 Sources of SCA
 Strategies for
 Market Leaders
 Challengers
 Followers, and
 Nichers
 Introduction
 Having a competitive advantage is necessary
for a firm to compete in the market
 But what is more important is whether the
competitive advantage is sustainable
 A firm must identify its position relative to the
competition in the market
 By knowing if it is a leader, challenger,
follower or nicher, it can adopt appropriate
strategies to compete
 Sustainable Competitive
Advantage
 A good strategist seeks not only to “win the
hill, but hold on to it.” Subash Jain
 Sustaining competitive advantage requires
erecting barriers against the competition
 Aakers suggested looking at the following:
 How you compete
 Basis of competition
 Where you compete
 Whom you are competing against
 Examples of SCA
 For many years, Singapore Airlines were riding on
its SCA of having the best in-flight service
 As more airlines improved their service and
narrowed the gap, SIA sought other competitive
advantages among which are
 The most modern fleet
 Outstanding Service on the Ground
 A super entertainment system in its cabins
 Comfort in its First Class cabins at an unparallel level
 Discuss whether the later initiatives had been
sustainable
 Who is Sun Tzu ?
 Sun Tzu was a Chinese general, military
strategist, writer and philosopher who lived
in the Eastern Zhou period of ancient
China.
Sun Tzu’s defensive strategy

“Do not assume the enemy will not come

but be prepared for his coming…
Do not presume he will not attack,
but instead make your own position
unassailable.”
Sun Tzu’s Offensive Strategies
 Overt-offensive strategy
 To knock out a business rival so as to take over
his company
 To knock out a competing product so as to
take over its market share
 Covert-offensive strategy
 Keep as low a profile as possible while making
offensive moves
Strategies for Market Leaders
Market Leader’s objectives:
 Expand the total market by
 Finding new users
Market Penetration Strategy
New Market Segment Strategy
Geographical Expansion Strategy
Strategies for Market Leaders
 Creating new uses
• For e.g. Tuc biscuits (Mujhey Tuc Tuc kai saath
chahiye)
 Encouraging more usage
• Identifying additional opportunities to use the
brand in the same basic way
• For e.g. during Eid season the use of sweets
increases so Dairy milk promotes its products
Strategies for Market Leaders
 Protect its current market share by
 Proactive Marketing
oResponsive Marketing
• Finds a need and fills it
oAnticipative Marketing
• Looks ahead to needs consumers may have in near
future
oCreative Marketing
• Discovers solutions customers did not ask for but
to which they enthusiastically respond
Characteristics of Proactive Firms
 Are ready to take risks and make mistakes
 Have a vision of the future and of investing
in it
 Have the capabilities to innovate
 Are flexible and non-bureaucratic
 Have many managers who think proactively
 Strategies for Market Leaders
 A market leader should generally adopt a defense
strategy
 Six commonly used defense strategies
 Position Defense
 Mobile Defense
 Flanking Defense
 Contraction Defense
 Pre-emptive Defense
 Counter-Offensive Defense
 Which strategy to use?
Depends on your answer to the following:
 Is it worth fighting?
 Are you strong enough to fight?
 How strong is your defense?
 Do you have any choice but to fight?
 Defense Strategy (cont’d)
Position Defense
 Least successful of the defense strategies
 The position defense is the
simplest defensive strategy. It simply
involves trying to hold your
current position in the market. To do this,
you simply continue to invest in your
current markets and attempt to build your
brand name and customer loyalty.
 E.g. Harley Davidson, Apple,
 Defense Strategy (cont’d)
 Mobile Defense
 It is a kind of defense strategy chosen by
a firm to prevent competition from the
competitors. It requires constantly
changing position and business such that it
becomes difficult for competitors to
compete. It involves Market Broadening
and Market Diversification
 Defense Strategy (cont’d)
Mobile Defense
 Market broadening
• Shifts the company’s focus from the current
product to the underlying generic need.
• for. E.g Petroleum companies are seeking to
recast themselves as energy companies
• Market Diversification
• Shifts company focus to unrelated industries
• For e.g. Dalda Food company to start
manufacturing of shoes
 Defense Strategy (cont’d)
 Flanking Defense
A competitive marketing strategy in which
the market leader attempts to identify and
strengthen its own weak points, commonly
geographic areas or market segments in
which it is under-performing, before a smaller
rival can mount an attack against it.
 Defense Strategy (cont’d)
Flanking Defense:
 Secondary markets (flanks) are the weaker
areas and prone to being attacked
 Pay attention to the flanks
 E.g. Dollar launched General Permanent
marker in order to compete with other
cheap markers available in market
 Defense Strategy (cont’d)
Contraction Defense
 Withdraw from the most vulnerable
segments and redirect resources to those
that are more defendable
 By planned contraction or strategic
withdrawal
 e.g. India’s TATA Group sold its soaps and
detergents business units to Unilever in
1993
 Defense Strategy (cont’d)
 Preemptive defense. A more aggressive
maneuver is to attack before enemy starts
its offense.
 For e.g. Microsoft may announce plans for
a new product, smaller products may
choose to concentrate efforts in other
directions to avoid head to head
competition.
 Defense Strategy (cont’d)
Pre-emptive Defense
 Detect potential attacks and attack the
enemies first
 Let it be known how it will retaliate
 Product or brand proliferation is a form of
pre-emptive defense e.g. Seiko has over
2,000 models
 Defense Strategy (cont’d)
Counter-Offensive Defense
 Responding to competitors’ head-on attack
by identifying the attacker’s weakness and
then launch a counter attack
 Toyota vs Mercedes
Market Challenger Strategies
The market challengers’ strategic objective is
to gain market share and to become the
leader eventually
How?
 By attacking the market leader
 By attacking other firms of the same size
 By attacking smaller firms
 Increasing Market Share
 Possibility of attracting legal actions for
violating the competition act or antitrust
law
 Economic Cost
 Pursuing Wrong Marketing Activities
 Effect of increased market on actual and
perceived quality
Market Challenger Strategies
(cont’d)
Types of Attack Strategies
 Frontal attack
 Flank attack
 Encirclement attack
 Bypass attack
 Guerrilla attack
 Frontal Attack
 Frontal attack is one of the marketing
strategies inspired by war tactics. Frontal
attack involves a head on attack on the
competitor by matching the competitor in
all aspects – product, price, place
promotion.
 E.g. McDonald’s offering Coffee competing
directly with Starbucks, Dunkin Donuts &
other leading brands
 Flank attack
 It is a marketing strategy employed by
firm to capture the market which is not
well served by established
players. Flank attack targets
competitor's weak spots.
 Ideal for challenger who does not have
sufficient resources
 E.g. Canon launched small photocopiers
for people who could not afford Xerox
large ones. Japanese cars, Bykea
 Encirclement attack
 The encirclement attack means,
attacking the market leader or a
competitor from all the fronts
simultaneously, it is the combination of
both the frontal and the flank attack.
Here, the market challenger launches
several offensive campaigns i.e.
surrounds the competitor with a varied
brand and forcing the competitor to
defend himself from all the sides
 Encirclement Attack
 The two strategies that can be used under
the encirclement attack are Product and
Market Encirclement. In product
encirclement, 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.
 Encirclement Attack
 In the case of market encirclement, the
firm may introduce the product for such a
market segment, which left untapped by
the competitor and thus enjoys the huge
market share.
 Encirclement Attack
 An example is Seiko’s attack on the watch
market. For several years, Seiko has been
gaining distribution in every big watch
outlet and overwhelming competitors with
its variety of constantly changing models.
In most markets Seiko offers about 400
models, but its marketing strength is
backed by the 2,300 models it makes and
sells worldwide
 Bypass attack
 By passing the enemy altogether to
attack easier markets offers three lines
of approaches:
 Diversifying into unrelated products
 Diversifying into new geographical
markets
 Leapfrogging into new technologies
 e.g. Pepsi used a bypass attack against
Coke by rolling out Aquafina bottles.
 By Pass Attack
 Most local products available in outskirts
are also an example of geographical
markets
 Google leapfrogged yahoo to become the
best search engine
 WhatsApp developed better social
communication tool as compared to others
 Guerrilla attack
 By launching small, intermittent hit-and-
run attacks to harass and destabilize the
leader
 Usually use to precede a stronger attack
 e.g. airlines use short promotions to
attack the national carriers especially
when passenger loads in certain routes
are low
 Maulvi ghee
 Which Attack Strategy should a
Challenger Choose?

Use a combination of several strategies

to improve market share over time
 Market-Follower Strategies
 Theodore Levitt in his article, “Innovative
Imitation” argued that a product imitation
strategy might be just as profitable as a
product innovation strategy
e.g. Product innovation--Sony
Product-imitation--Panasonic
Market-Follower Strategies (cont’d)
 Each follower tries to bring distinctive
advantages to its target market--location,
services, financing
 Four broad follower strategies:
 Counterfeiter (which is illegal)
 Cloner Copies the leader's products as it is as well as
name, packaging with slight variations. For e.g.
Sooper biscuits have no. of cloners
Market-Follower Strategies (cont’d)
 Imitator Copies somethings from the leader but
differentiates on packaging, advertising, pricing or
location. E.g. Pakistan placements.com is imitation of
rozee.pk.
 Adapter Take leaders products and adapts or improves
them. The adapters may choose to sell to different
markets but often it grows into a future challenger.e.g.
many Japanese firms are excellent adapters initially
before developing into challengers and eventually
leaders
 Market-Nicher Strategies
 Smaller firms can avoid larger firms by
targeting smaller markets or niches that
are of little or no interest to the larger
firms
e.g. Logitech--mice
Porsche cars
Cultural Dresses
Market-Nicher Characteristics
 Return on investment exceeds that in large
markets
 Nicher achieves higher margins whereas
mass marketers achieve higher volumes
Market-Nicher Strategies (cont’d)
 Nichers must create niches, expand the
niches and protect them
 e.g. Nike constantly created new niches--
cycling, walking, hiking, cheerleading, etc
 What is the major risk faced by nichers?
 Market niche may be attacked by larger firms
once they notice the niches are successful
 Niche Specialist Roles
End User Specialist e.g. Value Added
Reseller customizes in hardware and
software and earns price premium
Vertical Level specialist e.g. A firm specializes in
some vertical level of the production distribution
chain. Like providing pulp food to food companies
Customer size specialist e.g. Like concentrating on
small or large customers
Specific customer specialist e.g. producing goods
for specific customers like Sialkot Footballs
Geographic specialist providing goods to
consumers in a particular location e.g. local
companies not exporting
Product or product line specialist: The firm
carries only one product line. E.g. Thal
engineering making automobile related
products Thermal systems, Engine
components
Product feature specialist The firm specializes in
certain type of products or product features.
Job shop specialist The firm customizes its
products for individual customers. E.g. Software
Service specialist A firm providing specific service
not available from other firms. E.g. Zarai Taraqiati
bank giving loans for agriculture purpose
Channel specialist The firms specializes in serving
only one channel of distribution. Eg. Firms
providing goods in LMT only
 Multiple Niching
“[A] firm should `stick to its niching’ but not
necessarily to its niche. That is why
multiple niching is preferable to single
niching. By developing strength in two or
more niches the company increases its
chances for survival.”
Philip Kotler