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Amity Business School
MBA (M&S) Class of 2011
Semester III Strategic Management
Vivek Singh Tomar email@example.com
Amity Business Institution Name of School
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.
rivalry. predetermined. buyers. and uncertain. They can be listed under the same five key competitive factors : entry barriers. The uncertain ones are the critical ones.Amity Business Institution Name of School Uncertainties are placed in one of three categories: constant. Example: Industry Scenario Pharmaceutical Industry 4 . substitutes and suppliers.
Having developed and analyzed the set of scenarios.Amity Business Institution Name of School Industry Scenarios (Cont«) A major purpose of industry scenarios is to ensure an internal consistency in the firm's view of the future. the net task is to formulate competitive strategy 5 .
Amity Business Institution Name of School 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 6 .
Amity Business Institution Name of School V-C Framework Value Buyer¶s Surplus The Firm¶s Economic Contribution Price Firm¶s Profit Cost 7 .
Amity Business Institution Name of School 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 8 .
Amity Business Institution Name of School What Is ³Competitive 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 9 .
resourceful competitors! 10 .Amity Business Institution Name of School Any competitive advantage currently held will eventually be eroded by the actions of competent.
Build Up Benefit Period Time Erosion 11 .Amity Business Institution Name of School Moves calculated to yield a competitive advantage Size of C. Ad.
but RARELY are the basis for achieving competitive advantage ) .Amity Business Institution Name of School Offensive Vs Defensive Moves Competitive strategies: strategic moves multinationals use to defeat competitors .Counter-parry: fending off a competitor¶s attack in one country by attacking in another country 12 .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.
Amity Business Institution Name of School Examples of Offensive Strategies Direct attacks: price cutting. 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 13 . adding new features.
Preemptive strikes 14 . Guerilla offensives 6.Amity Business Institution Name of School Types of Strategic Offensive 1. Capitalise on Weaknesses 3. End-run offensives 5. Simultaneous initiatives on many fronts 4. Match / exceed competitive strengths 2.
Amity Business Institution Name of School 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! 15 .
Amity Business Institution Name of School 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 16 .
Amity Business Institution Name of School 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 17 .
ESPECIALLY when challenger possesses competitive advantage in areas where rivals are weak! 18 .Amity Business Institution Name of School COMPETITIVE STRATEGY PRINCIPLE Challenging rivals where they are most vulnerable is more likely to succeed than challenging them where they are strongest.
± 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 ³buy its way into the market´ 19 .Amity Business Institution Name of School LAUNCHING OFFENSIVES ON MANY FRONTS Objective Launch several major initiatives to ± Throw rival off-balance.
Amity Business Institution Name of School 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 20 .
Amity Business Institution Name of School 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 21 .
Amity Business Institution Name of School 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 22 .
patent infringements.Amity Business Institution Name of School 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. & unfair advertising 23 .
Amity Business Institution Name of School PREEMPTIVE STRIKES Approach Involves moving first to secure an advantageous position that rivals are foreclosed or discouraged from duplicating! 24 .
competitor 25 . but struggling.Amity Business Institution Name of School 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.
Amity Business Institution Name of School Choosing whom to attack? Market leaders Runner-up firms Struggling rivals on verge of going under Small local/regional firms with limited capabilities 26 .
Amity Business Institution Name of School 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 are improved when offensive Sell direct to end-users is tied to what firm does best: Key skill Strong functional competence 27 .
Consider the amount of support that the target might muster from allies. Whereas a defender must defend all their borders. 2) Find a weakness in the target¶s position. Choose only one target at a time. The element of surprise is worth more than a thousand tanks. an attacker has the advantage of being able to concentrate their forces at one place. Attack at this point. 4) Launch the attack quickly. 3) Launch the attack on as narrow a front as possible. Consider how long it will take for the target to realign their resources so as to reinforce this weak spot.Amity Business Institution Name of School Offensive marketing Strategies Fundamental Principles (Offence) There are four fundamental principles involved: 1) Assess the strength of the target competitor. 28 .
It often involves an attempt to ³liberate´ a sizable portion of the target¶s customer base. All parts of your company must be geared up for the assault from marketing to production.Amity Business Institution Name of School Types of Offensive Strategies Frontal Attack ± This is a direct head-on assault. 29 . It usually involves marshaling all your resources including a substantial financial commitment. 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.
they are expensive. If defenders are able to re-deploy their resources in time. the attacker¶s strategic advantage is lost. 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 30 . frontal attacks are rare. Many valuable resources will be used and lost in the assault. Secondly.Amity Business Institution Name of School In actuality. there are many examples (in both business and warfare) of a dedicated defender being able to hold-off a larger attacker. You will be confronting strength rather than weakness. There are two reasons for this. frontal attacks are often unsuccessful. Also. Firstly.
demoralized. and in a state of siege. Each product will liberate some market share from the target competitor¶s product. If it is done stealthily. a full scale confrontation can be avoided.Amity Business Institution Name of School Envelopment Strategy (also called encirclement strategy) ± This is a much broader but subtle offensive strategy. You could introduce a range of products that are similar to the target product. It involves encircling the target competitor. Alternatively. This encroachment liberates market share from the target. The attacker expands the market niches that surround and encroach on the target competitor¶s market. leaving it weakened. This can be done in two ways. 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 31 . the encirclement can be based on market niches rather than products.
Pepsodent connects directly with kids and their parents. which allowed consumers to see the efficacy in fighting germs for themselves. As a follow-up. demonstrating that this makes their teeth vulnerable to germ attack. Pepsodent packs included a Germ Indicator in February-May 2002. Pepsodent has always worked in the direction of an overall awareness of dental health. Pepsodent also includes a range of toothbrushes 32 . 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. Pepsodent's most recent campaign aims at educating consumers on the need for germ protection through the night. launched in 1993.Amity Business Institution Name of School Pepsodent. was the first toothpaste with a unique anti-bacterial agent to address the consumer need of checking germs even hours after brushing. Pepsodent offered Dental Insurance to all its consumers to demonstrate the confidence the company has in the technical superiority of the product. in October 2002.
In order to strengthen its' Brand Identity. 33 . Colgate Branding Strategy was strong enough to position the company as a major brand in the oral care market of India. Colgate is still restructuring its Branding Strategy. Still the Brand Colgate is continuously updating and improving its' branding strategy in order to strengthen its' Brand Name and Brand Identity. tooth powder segment and toothbrush segment. Babool and Anchor.Amity Business Institution Name of School 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. 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. 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.
in order to develop new products. in a way will establish a new pricing strategy. The Brand can launch specific oral care products for different age groups. The Branding Strategy of Colgate also plans to customize its packaging techniques. Colgate may give emphasis on Research and Development Projects. In order to strengthen its' Brand Image in the urban market of India. based on price points. Colgate may launch some oral care products specifically targeting the urban youth and the urban rich class.Amity Business Institution Name of School The future Branding Strategy of Colgate may comprise the following steps and actions: For maintaining the Brand Equity in the market. So. The company is undertaking advertising strategies and campaigning programs with the objective of reaching to the customers of India across income classes 34 . every company requires a system of continuous growth and upgradation . Colgate Branding Strategy has a objective strengthening its' business promotion network. This. Colgate Branding Strategy aims at introducing some special oral care products which will focus on functional benefits. 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.
Amity Business Institution Name of School Pepsodent Toothpaste Product Line Pepsodent Complete + Gum Care Complete 12 Pepsodent Herbal Pepsodent Milk Teeth Orange Pepsodent Milk Teeth Strawberry Pepsodent Sensitive Pepsodent Whitening 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 35 .
In the business arena. This is a revolutionary strategy that re-writes the rules of the game. This strategy is very effective when it can be realized. this involves either developing new technologies. The introduction of compact disc technology bypassed the established magnetic tape based defenders. 36 .Amity Business Institution Name of School y Leapfrog strategy ± This strategy involves bypassing the enemy¶s forces altogether. or creating new business models. The attackers won the war without a single costly battle.
you avoid a head-on confrontation with the main force 37 .Amity Business Institution Name of School 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.
Amity Business Institution Name of School 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 38 .
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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
Assess the strength of the competitor. Attack your weak spots and rebuild yourself anew. 42 .Amity Business Institution Name of School Defensive Marketing Strategies Fundamental principles (Defence) There are five fundamental principles involved: 1) Always counter an attack with equal or greater force. 4) The best defense is to attack yourself. Consider the amount of support that the attacker might muster from allies. 5) Defensive strategies should be the exclusive domain of the market leader. 3) Be forever vigilant in scanning for potential attackers. 2) Defend every important market.
It could also include exclusive distribution contracts. This could include increasing brand equity. customer satisfaction. patent protection. while the attacker gets stronger. 43 . brand. customer loyalty. It is best used in homogeneous markets where the defender has dominant market position and potential attackers have very limited resources. market. this involves setting up fortifications such as barriers to market entry around a product. as time goes by the defender gets weaker. It can lead to a siege situation in which time is on the side of the attacker. product line. In a business context. This tends to be a weak defense because you become a ³sitting duck´. market monopoly.Amity Business Institution Name of School Types of Defensive Strategies y Position defense ± This involves the defense of a fortified position. that is. or government protected monopoly status. or market segment. or repeat purchase rate.
entrepreneurial. This defense requires a very flexible organization with strong marketing.Amity Business Institution Name of School y Mobile defense ± This involves constantly shifting resources and developing new strategies and tactics. changing target markets. while simultaneously. product development. changing market segments. 44 . and marketing research skills. introducing replacement products. or changing promotional focus. A mobile defense is intended to create a moving target that is hard to successfully attack. In business this would entail introducing new products. modifying existing products. equipping the defender with a flexible response mechanism should an attack occur. repositioning products.
If you are attacked.This involves the redeployment of your resources to deter a flanking attack.Amity Business Institution Name of School Flank position . by strengthening your competitive position in this segment with new products and other tactics. You protect against potential loss of market share in a segment. 45 .This involves countering an attack with an offense of your own. retaliate with an attack on the aggressor¶s weakest point. (see flanking marketing warfare strategies) Counter offensive .
Kodak retaliated by attacking Fuji in Japan.Amity Business Institution Name of School Counter-parry Popular strategy for multinationals Respond to attack by attacking competitor in another country ± Ex.S.: Kodak²When Fuji attacked Kodak in the U.. 46 . ± Goodyear also attacked Michelin in Europe as response to attack in U.S.
Amity Business Institution Name of School 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 47 .
Amity Business Institution Name of School 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 48 .
Amity Business Institution Name of School 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 .
Amity Business Institution Name of School 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 greater use of build-to-order manufacturing and assembly 50 .
or better value for the money ± Innovative. lower costs.Amity Business Institution Name of School 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. 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 .
Amity Business Institution Name of School 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! 52 .
Amity Business Institution Name of School 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 53 .
may provide better access to ultimate consumer 54 .Amity Business Institution Name of School 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.
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.Amity Business Institution Name of School 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. lengthening design time & ability to introduce new products 55 .
Amity Business Institution Name of School UNBUNDLING & OUTSOURCING STRATEGIES Involves withdrawing from certain stages in value chain system and relying on outside vendors to perform needed activities and services 56 .
Amity Business Institution Name of School 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 57 .
Amity Business Institution Name of School 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 58 .
Amity Business Institution Name of School 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 59 .
Amity Business Institution Name of School 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 60 .
rapid change may lead to obsoletion .weak customer loyalty .expense .Amity Business Institution Name of School 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 .easily imitated 61 .
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