Amity Business School

Name of Institution

Amity Business School

MBA (M&S) Class of 2011
Semester III
Strategic Management

Vivek Singh Tomar

vstomar@amity.edu
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Industry Scenarios
• An industry scenario is a useful mechanism to
understand the strategic implications of uncertainty.
• A scenario is an internally consistent view of what the
future might turn out to be.
• Allow a firm to move away from dangerous single-point
forecast of the future in instances where the future
cannot be predicted.
• Can help encourage managers to make their implicit
assumptions about the future explicit and to think beyond
the confines of existing conventional wisdom.

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Industry Scenarios (Cont…)

• The firm can then make well informed
choices about how to take the
competitive uncertainties it faces into
account.
• The process involves determining the
major uncertainties and the key causal
factors that will drive them.
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• Uncertainties are placed in one of three

categories: constant, predetermined,
and uncertain.
• The uncertain ones are the critical ones.
They can be listed under the same five
key competitive factors : entry barriers,
buyers, rivalry, substitutes and
suppliers.
Example: Industry Scenario Pharmaceutical Industry

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Industry Scenarios (Cont…)

• A major purpose of industry scenarios is

to ensure an internal consistency in the
firm's view of the future.
• Having developed and analyzed the set of
scenarios, the net task is to formulate
competitive strategy

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COMPETITIVE STRATEGIES

The objective of competitive strategy is to

knock the socks of rival companies by
doing a significant better job of providing
what buyers are looking for

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V-C Framework
Value

Buyer’s Surplus
The Firm’s
Economic
Contribution
Price

Firm’s Profit

Cost
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Strategy and Competitive Advantage

• Competitive advantage exists when a firm’s strategy

gives it an edge in
– Attracting customers and
– Defending against competitive forces
Key to Gaining a Competitive Advantage
• Convince customers firm’s product / service offers
superior value
– A good product at a low price
– A superior product worth paying more for
– A best-value product
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What Is
“Competitive Strategy”?
• Deals exclusively with a company’s
business plans to compete successfully
– Specific efforts to please customers

– Offensive and defensive moves

to counter maneuvers of rivals

– Responses to prevailing market conditions

– Initiatives to strengthen its market position

• Narrower in scope than business strategy

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Any competitive advantage

currently held will eventually
be eroded by the actions of
competent, resourceful
competitors!

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Moves calculated to yield a competitive advantage

Size of
C. Ad.

Build Benefit
Up Period Erosion

Time 11
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Offensive Vs Defensive Moves

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

• Direct attacks: price cutting, adding new

features, or going after poorly served markets
• End-run offensives: seeking unoccupied markets
• Preemptive competitive strategies: being first to
obtain particular advantageous position
• Acquisitions: buying out a competitor

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Types of Strategic Offensive

1. Match / exceed competitive strengths

2. Capitalise on Weaknesses
3. Simultaneous initiatives on many fronts
4. End-run offensives
5. Guerilla offensives
6. Preemptive strikes
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ATTACKING COMPETITOR STRENGTHS

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

Possible Offensive Options
• Offer equally good product at a lower price
• Develop low-cost edge, then use it to under-price rivals
• Leapfrog into next-generation technologies
• Add appealing new features
• Run comparison ads
• Construct new plant capacity in rival’s market strongholds
• Offer a wider product line
• Develop better customer service capabilities
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ATTACKING COMPETITOR Weaknesses

Basic Approach
• Concentrate one’s competitive strengths &
resources directly against rivals’ weaknesses

Weaknesses to Attack
• Concentrate on geographic regions where rival has weak
market share
• Go after buyer segments rival is neglecting
• Go after more performance-conscious customers of
rivals who lag behind challenger
• Attack rivals with weaker advertising & brand recognition
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COMPETITIVE STRATEGY PRINCIPLE

Challenging rivals where they are most

vulnerable is more likely to succeed than
challenging them where they are
strongest, ESPECIALLY when challenger
possesses competitive advantage in
areas where rivals are weak!

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LAUNCHING OFFENSIVES ON MANY FRONTS

Objective
• Launch several major initiatives to
– Throw rival off-balance,
– Splinter its attention in many directions, and
– Force it to use substantial resources to defend its position

Appeal
• A challenger with superior resources can overpower
a weaker rival by outspending it across-the-board
long enough to “buy its way into the market”

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END-RUN OFFENSIVES
Objective
• DODGE head-to-head confrontations that
escalate competitive intensity and RISK
cutthroat competition -- Attempt to
MANEUVER AROUND competition

Appeal
• Gain first-mover advantage in a new arena
• Force competitors into playing catch up
• Change rules of competition in aggressor’s favor
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END-RUN OFFENSIVES: APPROACHES

• Move aggressively into new geographic markets
where rivals have no market presence
• Introduce products with different attributes &
features to better meet buyer needs
• Introduce next-generation technologies &
leapfrog rivals
• Come up with more support services for
customers

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GUERRILLA OFFENSES

Approach
• Use principles of surprise & hit-and-run
to attack in locations & at times where
conditions are most favorable to
initiator
Appeal
• Well-suited to small challengers with
limited resources
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GUERRILLA OFFENSES: OPTIONS

• Focus on narrow target weakly defended by
rivals
• Challenge rivals where they are overextended &
when they are encountering problems
• Make random scattered raids on leaders with
tactics such as
– Occasional low-balling on price
– Intense bursts of promotional activity
– Legal actions charging antitrust violations, patent
infringements, & unfair advertising

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PREEMPTIVE STRIKES

Approach
• Involves moving first to secure an
advantageous position that rivals are
foreclosed or discouraged from
duplicating!

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PREEMPTIVE STRIKES: OPTIONS

• Expand capacity ahead of demand in hopes of
discouraging rivals from following suit
• Tie up best or cheapest sources of essential raw
materials
• Move to secure best geographic locations
• Obtain business of prestigious customers
• Build an image in buyers’ minds that is unique & hard to
copy
• Secure exclusive or dominant access to best distributors
• Acquire desirable, but struggling, competitor

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Choosing whom to attack?

•Market leaders
•Runner-up firms
•Struggling rivals on verge of going under
•Small local/regional firms with limited
capabilities

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OFFENSIVE STRATEGY & COMPETITIVE

ADVANTAGE

• Competitive advantage areas offering strongest basis for a

STRATEGIC OFFENSIVE
• Develop lower-cost product design
• Make changes in production operations that lower costs or enhance
differentiation
• Develop product features that deliver superior performance or lower
users’ costs
• Give more responsive customer service
• Escalate marketing effort
• Pioneer new distribution channel Chances for strategic success
• Sell direct to end-users are improved when offensive
is tied to what firm does best:
Key skill
Strong functional competence
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Offensive marketing Strategies

• Fundamental Principles (Offence)
There are four fundamental principles involved:
1) Assess the strength of the target competitor. Consider the amount
of support that the target might muster from allies. Choose only
one target at a time.
2) Find a weakness in the target’s position. Attack at this point.
Consider how long it will take for the target to realign their
resources so as to reinforce this weak spot.
3) Launch the attack on as narrow a front as possible. Whereas a
defender must defend all their borders, an attacker has the
advantage of being able to concentrate their forces at one place.
4) Launch the attack quickly. The element of surprise is worth more
than a thousand tanks.

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Types of Offensive Strategies

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

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In actuality, frontal attacks are rare.

There are two reasons for this.
• Firstly, they are expensive. Many valuable resources will
be used and lost in the assault.
• Secondly, frontal attacks are often unsuccessful. If
defenders are able to re-deploy their resources in time, the
attacker’s strategic advantage is lost. You will be
confronting strength rather than weakness.
• Also, there are many examples (in both business and
warfare) of a dedicated defender being able to hold-off a
larger attacker. The strategy is suitable when
– the market is relatively homogeneous
– brand equity is low
– customer loyalty is low
– products are poorly differentiated
– the target competitor has relatively limited resources
– the attacker has relatively strong resources
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Envelopment Strategy (also called encirclement strategy) –

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

anti-bacterial agent to address the consumer need of checking
germs even hours after brushing.
• Pepsodent packs included a Germ Indicator in February-May 2002,
which allowed consumers to see the efficacy in fighting germs for
themselves. As a follow-up, in October 2002, Pepsodent offered
Dental Insurance to all its consumers to demonstrate the confidence
the company has in the technical superiority of the product.
• Pepsodent connects directly with kids and their parents. Pepsodent
has always worked in the direction of an overall awareness of dental
health. The relaunch campaign in October 2003 widened the
context to "sweet and sticky" food and leveraged the truth that
children do not rinse their mouths every time they eat,
demonstrating that this makes their teeth vulnerable to germ attack.
• Pepsodent's most recent campaign aims at educating consumers on
the need for germ protection through the night.
• Pepsodent also includes a range of toothbrushes 32
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Colgate has developed a powerful Branding Strategy which has significantly

helped the Brand in acquiring substantial amount of share in the oral care market
of India. In order to strengthen its' Brand Identity, Colgate is still restructuring its
Branding Strategy.

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

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The future Branding Strategy of Colgate may comprise the following

steps and actions:
• For maintaining the Brand Equity in the market, every company
requires a system of continuous growth and upgradation . So, in order
to develop new products, Colgate may give emphasis on Research
and Development Projects.
• The Brand Strategy of Colgate also aims at reaching to the rich and
consuming customers of rural India by introducing some Ayurvedic
Oral Care Products.
• In order to strengthen its' Brand Image in the urban market of India,
Colgate may launch some oral care products specifically targeting the
urban youth and the urban rich class.
• Colgate Branding Strategy aims at introducing some special oral care
products which will focus on functional benefits. The Brand can
launch specific oral care products for different age groups.
• The Branding Strategy of Colgate also plans to customize its
packaging techniques, based on price points. This, in a way will
establish a new pricing strategy.
• Colgate Branding Strategy has a objective strengthening its' business
promotion network. The company is undertaking advertising
strategies and campaigning programs with the objective of reaching to
the customers of India across income classes
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Pepsodent Toothpaste Product Line
Pepsodent Complete + Gum Care
Complete 12
Pepsodent Herbal
Pepsodent Milk Teeth Orange
Pepsodent Milk Teeth Strawberry
Pepsodent Sensitive
Pepsodent Whitening
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Colgate Toothpaste Product Line
Colgate Dental Cream
Colgate Total 12
Colgate Sensitive
Colgate Max Fresh
Colgate Kids ToothPaste
Colgate Fresh Energy Gel
Colgate Herbal
Colgate Cibaca Family Protection
Colgate Advanced Whitening
Colgate Active Salt
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 Leapfrog strategy –
• This strategy involves bypassing the enemy’s forces
altogether.
• In the business arena, this involves either developing
new technologies, or creating new business models.
• This is a revolutionary strategy that re-writes the rules of
the game.
• The introduction of compact disc technology bypassed
the established magnetic tape based defenders. The
attackers won the war without a single costly battle.
• This strategy is very effective when it can be realized.

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Flanking attack –
• This strategy is designed to pressure the
flank of the enemy line so the flank turns
inward.
• You make gains while the enemy line is in
chaos. In doing so, you avoid a head-on
confrontation with the main force

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Defensive Strategies
Objectives
• Lessen risk of being attacked
• Blunt impact of any attack that occurs
• Influence challengers to aim attacks at other
rivals
• Strengthen firm’s present position
• Help sustain any competitive advantage held

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DEFENSIVE STRATEGIES: APPROACHES

Approach #1
• Block avenues challengers can take in
mounting offensive attacks

Approach #2
• Make it clear any challenge will be met
with strong counterattack
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DEFENSIVE STRATEGIES: APPROACH #1

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

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DEFENSIVE STRATEGIES: APPROACH #2

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

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Defensive Marketing Strategies

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

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Types of Defensive Strategies

 Position defense –
• This involves the defense of a fortified position.
• This tends to be a weak defense because you become a
“sitting duck”. It can lead to a siege situation in which time is
on the side of the attacker, that is, as time goes by the
defender gets weaker, while the attacker gets stronger.
• In a business context, this involves setting up fortifications
such as barriers to market entry around a product, brand,
product line, market, or market segment. This could include
increasing brand equity, customer satisfaction, customer
loyalty, or repeat purchase rate. It could also include
exclusive distribution contracts, patent protection, market
monopoly, or government protected monopoly status. It is
best used in homogeneous markets where the defender
has dominant market position and potential attackers have
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 Mobile defense –
• This involves constantly shifting resources and
developing new strategies and tactics.
• A mobile defense is intended to create a moving target
that is hard to successfully attack, while simultaneously,
equipping the defender with a flexible response
mechanism should an attack occur.
• In business this would entail introducing new products,
introducing replacement products, modifying existing
products, changing market segments, changing target
markets, repositioning products, or changing promotional
focus. This defense requires a very flexible organization
with strong marketing, entrepreneurial, product
development, and marketing research skills.

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• Flank position - This involves the re-

deployment of your resources to deter a flanking
attack. You protect against potential loss of
market share in a segment, by strengthening
your competitive position in this segment with
new products and other tactics. (see flanking
marketing warfare strategies)
• Counter offensive - This involves countering an
attack with an offense of your own. If you are
attacked, retaliate with an attack on the
aggressor’s weakest point.

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Counter-parry

• Popular strategy for multinationals

• Respond to attack by attacking competitor
in another country
– Ex.: Kodak—When Fuji attacked Kodak in the
U.S., Kodak retaliated by attacking Fuji in
Japan.
– Goodyear also attacked Michelin in Europe as
response to attack in U.S.
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Strategies for
Using the Internet
• Strategic Challenge – What use of the Internet should a company
make in staking out its position in the marketplace?
• Five Approaches
– Use company web site solely to disseminate product information
– Use company web site as a minor distribution
channel for accessing customers and generating sales
– Use company web site as one of several important
distribution channels for accessing customers
– Use company web site as primary distribution
channel for accessing buyers and making sales
– Use company web site as the exclusive channel
for accessing buyers and conducting sales transactions
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Using the Internet to

Disseminate Product Information
• Approach – Website used to provide product information of
manufacturers or wholesalers
– Relies on click-throughs to websites of
dealers for sales transactions
– Informs end-users of location of retail stores
• Issues – Pursuing online sales may
– Signal weak strategic commitment to dealers
– Signal willingness to cannibalize dealers’ sales
– Prompt dealers to aggressively market rivals’ brands
• Avoids channel conflict with dealers – Important where strong
support of dealer networks is essential

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Using the Internet as a

Minor Distribution Channel
• Approach – Use online sales to
– Achieve incremental sales

– Gain online sales experience

– Conduct marketing research

• Learn more about buyer tastes and preferences

• Test reactions to new products

• Create added market buzz about products

• Unlikely to provoke much outcry from dealers 49

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Brick-and-Click Strategies: An
Appealing Middle Ground Approach
• Approach
– Sell directly to consumers and
– Use traditional wholesale/retail channels
• Reasons to pursue a brick-and-click strategy
– Manufacturer’s profit margin from online sales is bigger than that
from sales through traditional channels
– Encouraging buyers to visit a firm’s website educates them to
the ease and convenience of purchasing online
– Selling directly to end users allows a manufacturer to make
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Strategies for
Online Enterprises
• Approach – Use Internet as the exclusive
channel for all buyer-seller contact and transactions
• Success depends on a firm’s ability
to incorporate following features
– Capability to deliver unique value to buyers
– Deliberate efforts to engineer a value chain that enables differentiation,
lower costs, or better value for the money
– Innovative, fresh, and entertaining website
– Clear focus on a limited number of competencies and a relatively
specialized number of value chain activities
– Innovative marketing techniques
– Minimal reliance on ancillary revenues 51
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VERTICAL INTEGRATION STRATEGIES

• Vertical integration extends a firm’s competitive
scope within same industry
– BACKWARD into sources of supply
– FORWARD toward end-users of final product
• Moves to vertically integrate can aim at
becoming
– FULLY INTEGRATED
– PARTIALLY INTEGRATED
A vertical integration strategy has appeal ONLY if it significantly
strengthens a firm’s competitive position!
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APPEAL OF BACKWARD INTEGRATION

• Generates cost savings only if volume needed is
big enough to capture efficiencies of suppliers
• Cost savings potential is strongest when
– Suppliers have sizable profit margins
– Item being supplied is a major cost component
– Necessary technical skills are easily mastered
• A differentiation-based competitive advantage
arises when firm ends up with a better quality
part
• Spares firm uncertainty of depending on
suppliers of crucial raw materials
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APPEAL OF FORWARD INTEGRATION

• Advantageous for firm to set up its own

wholesale-retail distribution network if
– Undependable distribution channels undermine
steady production operations
• Integration into distribution & retailing may be
cheaper than going through independent
distributors
• May help achieve greater product differentiation,
allowing escape from price-oriented competition
• For manufacturer, may provide better access to
ultimate consumer
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STRATEGIC DISADVANTAGES OF VERTICAL

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

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UNBUNDLING & OUTSOURCING STRATEGIES

Involves withdrawing from certain stages in

value chain system and relying on outside
vendors to perform needed activities and
services

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ADVANTAGES OF OUTSOURCING STRATEGIES

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

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PROS & CONS OF VERTICAL INTEGRATION

• Use of a vertical integration strategy depends on
• If it can enhance performance of strategy-critical
activities to EITHER
– Lower costs OR
– Increase differentiation
• Impact on
– Investment costs
– Flexibility & response times
– Administrative overhead of coordination
• If a competitive advantage can be created
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FIRST-MOVER ADVANTAGES

• WHEN to make a strategic move is often as

crucial as WHAT move to make
• First-mover advantages arise WHEN
– Pioneering helps build firm’s image & reputation
– Early commitments to raw material suppliers, new
technologies, & distribution channels can produce
cost advantage
– Loyalty of first time buyers is high
– Moving first can be a preemptive strike

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FIRST-MOVER DISADVANTAGES
Arise WHEN
• Costs of pioneering are sizable & loyalty of
first time buyers is weak
• Rapid technological change allows
followers to leapfrog pioneers
• Skills & know-how of pioneers are easily
imitated by late movers
• It is easy for latecomers to crack market
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Timing of Strategic Moves

Advantages / disadvantages of First Mover

+ if pioneering helps build brand image

+ if early contracts with suppliers etc advantageous
+ first time customer loyalty
+ makes imitation harder

- expense
- rapid change may lead to obsoletion
- weak customer loyalty
- easily imitated
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