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8/13/2019 Offensive Strategy
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AMITY BUSINESS SCHOOL
Business Policy and Strategic
Management
ModuleIV
Vivek Singh Tomar
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Any competitive advantage
currently held will eventually
be eroded by the actions ofcompetent, resourceful
competitors!
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Time
Size of
C. Ad.
Build
Up
Benefit
Period Erosion
Moves calculated to yield a competitive advantage
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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 insuccessful achievement of competitive advantage )
- Defensive competitive strategies: attempts todiscourage offensive strategies (Can protectcompetitive advantage, but RARELY are the basis forachieving competitive advantage )
- Counter-parry: fending off a competitors attack in onecountry 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 strengths2. Capitalise on Weaknesses
3. Simultaneous initiatives on many fronts
4. End-run offensives
5. Guerilla offensives
6. Preemptive strikes
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Appeal
Gain market share by out-matching strengths ofweaker rivals
Whittle away at a rivals competitive advantage
Challenging strong competitors with a lower
price is foolhardy unless aggressor has aCOST ADVANTAGE or advantage of
GREATER FINANCIAL STRENGTH!
ATTACKING COMPETITOR STRENGTHS
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Possible Offensive Options
Offer equal ly good p roductat a lower pr ice
Develop low -cos t edge,then use it to under-pric e rivals
Leapfroginto next-generation technologies
Add appealing new features
Run compar ison ads
Construct new plant capaci tyin rivals market strongholds
Offer a wider produ ct l ine
Develop better cu stomer servicecapabilities
ATTACKING COMPETITOR STRENGTHS
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Basic Approach
Concentrate ones competitive strengths &
resources directly against rivals weaknesses
Weaknesses to Attack
Concentrate on geographic regions where rival has weakmarket share
Go after buyer segments rival is neglecting
Go after more performance-conscious customers ofrivals who lag behind challenger
Attack rivals with weaker advertising & brand recognition
ATTACKING COMPETITOR Weaknesses
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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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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 overpowera weaker rival by outspending it across-the-boardlong enough to buy its way into the market
LAUNCHING OFFENSIVES ON MANY FRONTS
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Objective
DODGE head-to-head confrontations thatescalate competitive intensity and RISKcutthroat competition -- Attempt toMANEUVER AROUND competition
Appeal
Gain first-mover advantage in a new arena
Force competitors into playing catch up
Change rules of competition in aggressors favor
END-RUN OFFENSIVES
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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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Approach
Use principles of surprise & hit-and-runto attack in locations & at times whereconditions are most favorable toinitiator
Appeal Well-suited to small challengers with
limited resources
GUERRILLA OFFENSES
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GUERRILLA OFFENSES: OPTIONS
Focus on narrow target weakly defended byrivals
Challenge rivals where they are overextended &when they are encountering problems
Make random scattered raids on leaders withtactics 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 ofdiscouraging 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 limitedcapabilities
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OFFENSIVE STRATEGY & COMPETITIVE
ADVANTAGE
Competitive advantage areas offering strongest basis for aSTRATEGIC OFFENSIVE
Develop lower-cost product design
Make changes in production operations that lower costs or enhancedifferentiation
Develop product features that deliver superior performance or lowerusers costs
Give more responsive customer service
Escalate marketing effort Pioneer new distribution channel
Sell direct to end-users
Chances for strategic success
are improved when offensive
is tied to what firm does best:
Key skill
Strong functional competence
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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 onlyone target at a time.
2) Find a weakness in the targets position. Attack at this point.Consider how long it will take for the target to realign theirresources 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 theadvantage of being able to concentrate their forces at one place.
4) Launch the attack quickly. The element of surprise is worth morethan a thousand tanks.
Offensive marketing Strategies
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Types of Offensive Strategies Frontal Attack
This is a direct head-on assault. It usually involvesmarshaling 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 andoften 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 targets 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 areable to re-deploy their resources in time, the attackers strategicadvantage 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. Thestrategy 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 targetproduct. Each product will liberate some market share from thetarget competitors product, leaving it weakened, demoralized, and
in a state of siege. If it is done stealthily, a full scale confrontationcan be avoided.
Alternatively, the encirclement can be based on market nichesrather than products. The attacker expands the market niches thatsurround and encroach on the target competitors market. Thisencroachment 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 segmentssimultaneously
the attacker has a decentralized organizational structure
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Pepsodent, launched in 1993, was the first toothpaste with a uniqueanti-bacterial agent to address the consumer need of checkinggerms even hours after brushing.
Pepsodent packs included a Germ Indicator in February-May 2002,
which allowed consumers to see the efficacy in fighting germs forthemselves. As a follow-up, in October 2002, Pepsodent offeredDental Insurance to all its consumers to demonstrate the confidencethe company has in the technical superiority of the product.
Pepsodent connects directly with kids and their parents. Pepsodenthas always worked in the direction of an overall awareness of dental
health. The relaunch campaign in October 2003 widened the contextto "sweet and sticky" food and leveraged the truth that children donot rinse their mouths every time they eat, demonstrating that thismakes their teeth vulnerable to germ attack.
Pepsodent's most recent campaign aims at educating consumers onthe need for germ protection through the night.
Pepsodent also includes a range of toothbrushes
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Colgate has developed a powerful Branding Strategy which hassignificantly helped the Brand in acquiring substantial amount ofshare in the oral care market of India. In order to strengthen its' BrandIdentity, Colgate is still restructuring its Branding Strategy.
Colgate Branding Strategy was strong enough to position thecompany as a major brand in the oral care market of India.
The Brand Colgate emerged as a market leader as it baggedconsiderable amount of market share in all the segments of oral caremarket like toothpaste segment, tooth powder segment and
toothbrush segment.Colgate has succeeded in establishing its Brand Image and gainingsubstantial market share in spite of facing tough competition from thebrands 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 orderto develop new products, Colgate may give emphasis on Researchand Development Projects.
The Brand Strategy of Colgate also aims at reaching to the rich andconsuming 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 theurban youth and the urban rich class.
Colgate Branding Strategy aims at introducing some special oral careproducts which will focus on functional benefits. The Brand canlaunch specific oral care products for different age groups.
The Branding Strategy of Colgate also plans to customize itspackaging techniques, based on price points. This, in a way willestablish a new pricing strategy.
Colgate Branding Strategy has a objective strengthening its' businesspromotion network. The company is undertaking advertisingstrategies and campaigning programs with the objective of reaching tothe customers of India across income classes
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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 WhiteningColgate Active Salt
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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Leapfrog strategy
This strategy involves bypassing the enemys forcesaltogether.
In the business arena, this involves either developingnew technologies, or creating new business models.
This is a revolutionary strategy that re-writes the rules ofthe game.
The introduction of compact disc technology bypassedthe established magnetic tape based defenders. Theattackers 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 StrategiesObjectives
Lessen risk of being attacked
Blunt impact of any attack that occurs Influence challengers to aim attacks at other
rivals
Strengthen firms 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 managements strong commitment tomaintain 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 StrategiesFundamental 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 theamount of support that the attacker might muster fromallies.
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 asitting duck. It can lead to a siege situation in which time
is on the side of the attacker, that is, as time goes by thedefender gets weaker, while the attacker gets stronger.
In a business context, this involves setting up fortificationssuch as barriers to market entry around a product, brand,product line, market, or market segment. This could include
increasing brand equity, customer satisfaction, customerloyalty, or repeat purchase rate. It could also includeexclusive distribution contracts, patent protection, marketmonopoly, or government protected monopoly status. It isbest used in homogeneous markets where the defenderhas dominant market position and potential attackers have
very limited resources.
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Mobile defense
This involves constantly shifting resources anddeveloping new strategies and tactics.
A mobile defense is intended to create a moving targetthat is hard to successfully attack, while simultaneously,
equipping the defender with a flexible responsemechanism should an attack occur.
In business this would entail introducing new products,introducing replacement products, modifying existingproducts, changing market segments, changing target
markets, repositioning products, or changing promotionalfocus. This defense requires a very flexible organizationwith strong marketing, entrepreneurial, productdevelopment, and marketing research skills.
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Flank position- This involves the re-
deployment of your resources to deter a flankingattack. 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 areattacked, retaliate with an attack on the
aggressors weakest point.
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Counter-parry
Popular strategy for multinationals
Respond to attack by attacking competitorin another country
Ex.: KodakWhen Fuji attacked Kodak in the
U.S., Kodak retaliated by attacking Fuji inJapan.
Goodyear also attacked Michelin in Europe as
response to attack in U.S.
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Strategies for
Using the Internet
Strategic ChallengeWhat 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 toDisseminate Product Information ApproachWebsite used to provide product information of
manufacturers or wholesalers
Relies on click-throughs to websites ofdealers for sales transactions
Informs end-users of location of retail stores
IssuesPursuing online sales may
Signal weak strategic commitment to dealers
Signal willingness to cannibalize dealers sales
Prompt dealers to aggressively market rivals brands
Avoids channel conf l ic twith dealersImportant where strong
support of dealer networks is essential
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Using the Internet as aMinor Distribution Channel
ApproachUse 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
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Brick-and-Click Strategies: AnAppealing Middle Ground Approach
Approach
Sell directly to consumers and
Use traditional wholesale/retail channels
Reasonsto pursuea brick -and-cl ick strategy
Manufacturers profit margin from online sales is bigger than that
from sales through traditional channels
Encouraging buyers to visit a firms 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
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Strategies forOnline Enterprises
ApproachUse Internet as the exclusive
channel for all buyer-seller contact and transactions Successdepends on a firms 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
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VERTICAL INTEGRATION STRATEGIES Vertical integration extends a firms 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 firms competitive position!
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APPEAL OF BACKWARD INTEGRATION
Generates cost savings only if volume needed isbig 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 qualitypart
Spares firm uncertainty of depending onsuppliers of crucial raw materials
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APPEAL OF FORWARD INTEGRATION
Advantageous for firm to set up its ownwholesale-retail distribution network if Undependable distribution channels undermine
steady production operations Integration into distribution & retailing may be
cheaper than going through independentdistributors
May help achieve greater product differentiation,allowing escape from price-oriented competition
For manufacturer, may provide better access toultimate 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 firms scope of activity, locking it deeper intoindustry
Poses problems of balancing capacity at each stage ofvalue chain
Requires radically different skills & capabilities
Can reduce firms manufacturing flexibility, lengtheningdesign 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 andservices
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ADVANTAGES OF OUTSOURCING STRATEGIES
Activity can be performed better or more cheaply byoutside specialists
Activity is not crucial to achieving competitive advantage
Reduces firms risk exposure to changing technologyand/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-criticalactivities 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 firms 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 easilyimitated by late movers
It is easy for latecomers to crack market
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