15 STRATEGIES FOR COMPETITIVE ADVANTAGE

MARKET LEADER STRATEGIES

(A) EXPANDING THE TOTAL MARKET

1. NEW CUSTOMERS 2. MORE USAGE 3. MORE USES

MARKET LEADER STRATEGIES

(B) DEFENDING THE MARKET SHARE 1. SIGNALING 2. POSITION DEFENSE (CREATING FIXED BARRIERS TO ENTRY ) 3. MOBILE DEFENSE 4. PREEMPTIVE DEFENSE 5. BLOCKING ( FLANKING DEFENSE ) 6. COUNTEROFFENSIVE DEFENSE 7. CONTRACTION DEFENSE (STRATEGIC WITHDRAWAL )

1. SIGNALING
1. PRIOR ANNOUNCEMENT
IT SHOULD BE NOTED THAT ANNOUNCEMENT CAN BE BLUFFS, BECAUSE THEY NEED NOT BE ALWAYS CARRIED OUT.

2. ANNOUNCEMENT AFTER PRODUCT LAUNCH

E.G. TATA LAUNCHING NANO

1. SIGNALING
3. PUBLIC DISCUSSION OF A COMPETITOR
. A COMPANY MAY DESCRIBE THAT
COMPETITORS PRICES ARE TOO HIGH

. A COMPANY MAY SAY THE RECENT MOVE OF X

OF EXTENDING CREDIT TO DEALERS IS INAPPROPRIATE . A COMPANY MAY PRAISE COMPETITORS. HERE THE AIM IS TO REDUCE TENSIONS.

1. SIGNALING
4. DIVERGENCE FROM COMPANY HISTORY OR INDUSTRY STANDARD
A COMPANY REDUCING PRODUCT PRICES WHERE IN PAST IT HAD ALWAYS PRICED ITS PRODUCTS HIGH AND ENTIRE INDUSTRY PRICES OF PRODUCTS HAD NEVER DROPPED BEFORE.

2. POSITION DEFENSE ( CREATING FIXED BARRIERS TO ENTRY )

CONTROL OF DISTRIBUTION CHANNELS
e.g. COCA-COLA AND PEPSI WERE ABLE TO BLOCK VIRGIN COLA FROM GETTING CRUCIAL SHELF SPACE IN HALF OF UKS SUPERMARKETS.

STRENGTHENING LINKS WITH SUPPLIERS

e.g. COCA- COLA USED FRUCTOSE CORN SWEETNER AS A REPLACEMENT FOR SUGAR TO GAIN 20% COST SAVING . TO STOP COMPETITORS DOING SAME COKE SIGNED LONG TERM PURCHASE CONTRACTS WITH FRUCTOSE SUPPLIERS .

PRODUCT DURABILITY / HIGH LEVEL OF SERVICE / INTENSIVE ADVERTISING

e.g. ZIPPO GAVE GURANTEE IF ANY ZIPPO LIGHTER FAILS TO WORK , WE WILL FIX IT FREE AND INVESTED HEAVILY IN PROMOTING THE SAME .

3. MOBILE DEFENSE
PRODUCT DEVELOPMENT
NEW MODELS SHOULD BE OFFERED EVERY TWO OR THREE YEARS e.g. GILLETE COMING OUT WITH SENSOR EXCEL , MACH 3 , MACH 3 POWER , FUSION.

DIVERSIFICATION
e.g. ITC LIMITED FACED WITH GROWING CONCERNS OVER ILL-EFFECTS OF SMOKING AND BAN ON SMOKING CIGARETTES IN MANY PLACES MOVED QUICKLY INTO HOTELS , GARMENTS ETC .

4. PREEMPTIVE DEFENSE
PREREQUISITES
ENTRY OCCURS BEFORE COMPETITORS MOVE ENTRY INTO NEW SEGMENT FOR US. THIS ENTRY CAN BE IN ,
a. b. c. SEGMENT WHERE COMPETITOR IS . SEGMENT WHERE COMPETITOR IS THINKING ENTERING SEGMENT WHERE COMPETITOR IS NOT PRESENT BUT THAT SEGMENT IS SO SIMILAR THAT IT THREATENS THE SEGMENT WHERE COMPETITOR IS IN e.g. GILLETE MANUFACTURING ITS DISPOSABLE RAZOR GOOD NEWS IN USA MARKET IN 1976 BEFORE BIC WHO HAD PIONEERED DISPOZABLE RAZORS IN EUROPE IN 1975.

5. BLOCKING (FLANKING DEFENSE)

PREREQUISITES
ENTRY OCCURS AFTER COMPETITORS MOVE ENTRY INTO NEW SEGMENT FOR US THAT SEGMENT IS SIMILAR TO SEGMENT WHERE COMPETITOR HAS ATTACKED
e.g. BRITISH AIRWAYS COMING OUT WITH THEIR NO FRILL AIRLINE GO IN RESPONSE TO EUROPEAN NO FRILL AIRLINES LIKE EASYJET , VIRGIN EXPRESS .

6. COUNTEROFFENSIVE DEFENSE
PREREQUISITES
ENTRY OCCURS AFTER COMPETITORS MOVE ENTRY INTO NEW SEGMENT FOR US THAT SEGMENT IS DIFFERENT THAN SEGMENT WHERE COMPETITOR HAS ATTACKED
e.g. 1. 2. MERCEDES COUNTERATTACKED BMW WITH CHEAPER MODEL C-CLASS WHEN BMW INTRODUCED EXPENSIVE MODELS SERIES 5,7,8 SWISS WATCH INDUSTRY CAME OUT WITH LOW PRICED AND FASHIONABLE WATCH SWATCH WHEN JAPANESE BRANDS CASIO, CITIZEN, SEIKO STARTED MOVING INTO HIGHER QUALITY , HIGH PRICED WATCHES .

7. CONTRACTION DEFENSE (STRATEGIC WITHDRAWAL)

IT IS SACRIFICE RATHER THAN SURRENDER IT IS GIVING UP WEAKER TERRITORIES AND REASSIGNING RESOURCES TO STRONGER TERRITORIES e.g. GE , NOKIA

MARKET CHALLENGER STRATEGIES

1. 2. 3. 4. 5.

FRONTAL ATTACK FLANK ATTACK BYPASS ATTACK (LEAPFROG ATTACK) GUERILLA ATTACK ENCIRCLEMENT STRATEGY

GUERILLA
A) IS THE SEGMENT SOMEWAY SUBSTITUTES FOR SEGMENTS THE INDUSTRY LEADER IS IN ? B) ARE WE OCCASIONALLY STEALING ANY CUSTOMERS OF INDUSTRY LEADER? NO NO

YES

NO OF SEGMENTS IN WHICH OUR COMPANY ENTERS

ONE IS INDUSTRY LEADER ALREADY IN THESE SEGMENTS ?

BYPASS

YES

FLANKING
HOW MUCH DOES THAT SEGMENT CONSTITUTE TOTAL TURNOVER OF INDUSTRY LEADER? SMALL

TWO OR MORE

WHAT IS RELATIONSHIP BETWEEN THESE SEGMENTS?

LARGE

FRONTAL
TOTALLY DIFFERENT SEGMENTS

SYNERGY BETWEEN SEGMENTS

UNDIFFERENTIATED CIRCLE

DIFFERENTIATED CIRCLE

FRONTAL ATTACK
PREREQUISITES
ONE SEGMENT OF COMPETITOR IS ATTACKED THAT SEGMENT REPRESENTS LARGE SHARE OF LEADERS TURNOVER.
e.g. WENDY COMING OUT WITH AD WHERE IS THE BEEF ? TO ATTACK McDONALD

FLANKING ATTACK
PREREQUISITES
HERE ONE ATTACKS LEADER IN A SEGMENT WHERE HE IS UNDER-SERVING
e.g. LITTLE CAESARS AND POKERS PIZZA ARE SPECIALISED IN TAKEAWAYS ARE PERFORMING FLANKING ATTACK ON PIZZA HUT WHERE TAKEAWAYS ACCOUNT FOR LESS THAN 15% OF ITS TURNOVER.

IN A REGION WHERE HE IS UNDER-REPRESENTED

e.g. JAPANESE CAR COMPANIES ATTACKED MARKET LEADERS IN SWITZERLAND , FINLAND WHERE THEY WERE WEAK . THEN THEY ENTERED UK , FRANCE , GERMANY WHERE MARKET LEADERS HAD BETTER PRESCENCE .

BYPASS ATTACK ( LEAPFROG ATTACK )

PREREQUISITES
DIVERSIFYING INTO UNRELATED PRODUCTS
e.g. PEPSI BOUGHT JUICE GIANT TROPICANA WHICH WAS A NEW WEAPON AGAINST COKE WHICH HAD ITS OWN MINUTE MAID

INTRODUCING NEW CHANNEL OF DISTRIBUTION

e.g. DELL WAS THE FIRST COMPUTER COMPANY TO FOCUS ON DIRECT MARKETING OF COMPUTERS

GUERILLA ATTACK
THIS IN MANY WAYS IS BEST SUITED FOR SMALLER COMPANIES WITH A RELATIVELY LIMITED RESOURCE BASE. A GUERILLA ATTACK IS MADE UP OF A SERIES OF HIT & RUN MOVES DESIGNED TO DEMORALIZE THE OPPONENT & KEEP HIM OFF BALANCE. THIS MAY INVOLVE , DRASTIC SHORT TERM PRICE CUTS . SUDDEN , INTENSIVE BURSTS OF ADVERTISING . POACHING A COMPETITORS KEY STAFF.

GUERILLA ATTACK
PREREQUISITES
IT IS ADVISABLE FOR ANYTHING NEW IT IS ADVISABLE FOR BOTH SMALL AND NEW FIRMS GUERILLA CAN BE OF LOW AND HIGH PRICE
e.g. JEEP AND ROLLS ROYCE ARE BOTH GUERILLAS

GUERILLA CAN EXIST BECAUSE IT IS DIFFERENT OR IT IS COMPLEMENTARY

e.g. A PERSON CAN HAVE PIAGET (WHY YOU SHOULD INVEST IN PIAGET, THE MOST EXPENSIVE WORLDWIDE WATCH) ALONG WITH A CHEAP SEIKO.

AMBUSH MARKETING ( PARASITIC MARKETING )

THIS TERM WAS COINED BY MARKETING GURU JERRY WELCH . A VARIATION OF GUERILLA MARKETING IS AMBUSH MARKETING. HERE ONE TAKES ADVANTAGE OF COMPETITORS EVENT. e.g. 1) NIKE & AUDI WERE NOT OFFICIAL SPONSORS OF 1996 OLYMPICS. THEY RAN A NUMBER OF PRIOMOTIONS THAT WERE TIED UP WITH OLYMPICS & IN DOING SO OUTFOXED THE OFFICIAL SPONSORS. 2) YEARS AGO WHEN KING OF POP MICHAEL JACKSON COULD NOT PERFORM FOR A PEPSI SPONSORED CONCERT IN THAILAND DUE TO DEHYDRATION , COCA COLA PUT AN AD NEXT DAY SAYING , DEHYDRATED ? HAVE A COKE . 3) JET CAME UP WITH HOARDING SAYING WE HAVE CHANGED TO WHICH KINGFISHER RESPONDED WE MADE THEM CHANGE . GO AIRLINES FOLLOWED UP WITH WE HAVE NOT CHANGED. WE ARE STILL THE SMARTEST WAY TO FLY.

ENCIRCLEMENT (ENVELOPING) STRATEGY

PREREQUISITE
CHALLENGER ATTACKS 2 OR MORE SEGMENTS
e.g. A HIGH PRICED RESTAURANT WITH A SIDE COUNTER FOR TAKEAWAYS WILL BE ENCIRCLEMENT STRATEGY AGAINST PIZZA HUT

SPECIAL STRATEGIES
1.
2. 3. 4. 5. 6. 7.

TO CAPTURE A COMPETITOR FIRST LET IT GO (INNOVATION AND COPYING CAN CO-EXIST ) LOOT A BURNING HOUSE HIDE A DAGGER BEHIND A SMILE CREATE SOMETHING OUT OF NOTHING BORROW A CORPSE FOR THE SOULS RETURN FROM GUEST TO HOST BORROW THE ROAD TO CONQUER GAO

INNOVATION AND COPYING CAN CO-EXIST

INTRODUCTION COMPANIES CAN INNOVATE AND COPY EACH OTHER AND SURVIVE
E.G.
INNOVATION
1980- COCA COLA SWITCHES FROM SUGAR TO LOWER PRICED HIGH FRUCTOSE CORN SYRUP USED IN COLA 1984- PEPSI INTRODUCES A TWO LTR. BOTTLE

COPY
PEPSI COPIES 3 YEARS LATER

COCA COLA INTRODUCES ITS OWN TWO LTR. BOTTLE 4 MONTHS LATER

LOOT A BURNING HOUSE

INTRODUCTION SEIZE ON MISFORTUNE OF OTHERS TO BUILD POWER e.g. JET AIRWAYS PILOT STRIKE IN SEPTEMBER, 2009

HIDE A DAGGER BEHIND A SMILE

INTRODUCTION HIGHLY COMPETITIVE COMPANIES GO OUT OF WAY TO MAINTAIN FRIENDSHIP AND AVOID TRIGGERING RESISTANCE IN THEIR ADVERSARIES e.g. TO COUNTER UNEXPECTED SUCCESS OF JAPANESE CAR MANUFACTURERS IN USA, BIG 3 CAR MANUFACTURERS (GM, FORD, CHRYSLER) LAUNCHED BUY AMERICAN CAMPAIGN . INSTEAD OF ATTACKING THIS CAMPAIGN JAPANESE CAR MAKERS OPENED MANUFACTURING PLANTS IN USA AND INCREASED JOBS FOR AMERICANS . SO WHEN GM ADVISED A CONSUMER TO BUY AMERICAN, CONSUMER WOULD CONSIDER BUYING TOYOTA COROLLA .

CREATE SOMETHING OUT OF NOTHING

INTRODUCTION IN LATE 70s IN USA, PEPSI WAS FINDING IT DIFFICULT TO COUNTER COKE. MOST OF RESTAURANTS LIKE MCDONALD WERE SELLING COKE. e.g. PEPSI BOUGHT PIZZA-HUT IN 1978 AND KFC LATER. AIM WAS THAT THESE RESTAURANTS WOULD SELL PEPSI AND INCREASE ITS CUSTOMER BASE.

BORROW A CORPSE FOR THE SOULS RETURN

INTRODUCTION IT SAYS THAT ONCE WE THROW SOMETHING AWAY, WE STOP WONDERING IF IT IS USEFUL BUT IT CAN BE OF HELP TO US .THE TACTIC OF REVIVING SOMETHING OLD, DISCARDED IS CALLED BORROW A CORPSE FOR THE SOULS RETURN. e.g. IN EARLY 70s IN USA , AIRLINES USED TO HAVE POINT TO POINT MODEL. AFTERWARDS THEY DISCOVERED THAT HUB AND SPOKE SYSTEM WAS MORE EFFICIENT BECAUSE IT COULD FILL PLANES. SOUTHWEST AIRLINES SHOOK INDUSTRY BY REINTRODUCING OLD POINT TO POINT MODEL, SO THAT PASSENGERS COULD REACH FASTER TO THEIR DESTINATIONS. IT WAS DIFFICULT FOR RIVALS TO COPY THIS BECAUSE THEY HAD ALREADY INVESTED HEAVILY IN HUBS.

FROM GUEST TO HOST

INTRODUCTION THE TACTIC IS CENTRAL TO OVERALL SUCESS OF WALMART. e.g. ONE ASIAN APPAREL MANUFACTURER SHARED HIS EXPERIENCE WORKING WITH WALMART. WALMART PLACES RELATIVELY SMALL ORDERS AND KEEPS ORDERING MORE AS TIME PROGRESSES. THIS PROCESS IS REPEATED FEW TIMES AND WALMART INCREASES ITS SHARE OF MANUFACTURERS PRODUCTION. AFTER SOMETIME WALMART REPRESENTS SIGNIFICANT SHARE OF MANUFACTURERS PRODUCTION AND STARTS DEMANDING MORE DISCOUNTS.

BORROW THE ROAD TO CONQUER GAO

INTRODUCTION TEMPORARY ALLIANCE.

e.g. IN 1991 INDIAN SOAPS AND DETERGENT MARKET WAS RS 45OO CRORES . HLL WAS MARKET LEADER FOLLOWED BY GODREJ.TOMCO WAS ACQUIRED BY HLL. MYSORE SANDAL OF KARNATAKA SOAPS AND DETERGENTS WAS IN DEEP RED. IN 1991 P&G HAD JUST ENTERED INDIA THROUGH ARIEL . GODREJ WAS LOOKING FOR PROTECTION FROM RIVALS AND BETTER CAPACITY UTILIZATION OF ITS PLANTS WHILE P&G WAS LOOKING FOR LOW COST MANUFACTURING AND DISTRIBUTION MECHANISM. BOTH COMPANIES ENTERED INTO A JOINT VENTURE P&GG WHICH WAS EFFECTIVE FROM APRIL, 1993.UNDER THIS P&GG WOULD MARKET SOAP AND DETERGENT BRANDS OF BOTH COMPANIES. THE EQUITY SHARING WAS 51 : 49 FOR P&G AND GODREJ .

BORROW THE ROAD TO CONQUER GAO

SOME DETERGENT BRANDS OF GODREJ LIKE TRILO, KEY , EZEE HAD BEEN ACQUIRED BY P&G FOR RS 40 CRORES . SALES OF GODREJ BRANDS SUFFERED HEAVILY AT HANDS OF JV. BRANDS LIKE CHINTHOL, EVITA, FRESCA, MARVEL HAD MARKET SHARE OF 18% IN PREMIUM SEGMENT IN 1992 WHICH CAME DOWN TO 12% IN 1996 . IN 1996 PARTNERSHIP BROKE. P&G WALKED AWAY WITH DISTRIBUTION NETWORK WHICH GODREJ HAD BUILT OVER DECADES.