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Outline
Introduction
Having a competitive advantage is necessary for a firm to compete in the market But what is more important is whether the competitive advantage is sustainable A firm must identify its position relative to the competition in the market By knowing if it is a leader, challenger, follower or nicher, it can adopt appropriate strategies to compete
Examples of SCA
For many years, Singapore Airlines were riding on its SCA of having the best in-flight service As more airlines improved their service and narrowed the gap, SIA sought other competitive advantages among which are
The most modern fleet Outstanding Service on the Ground A super entertainment system in its cabins Comfort in its First Class cabins at an unparallel level
Covert-offensive strategy
Keep as low a profile as possible while making offensive moves
Defense Strategy
A market leader should generally adopt a defense strategy Six commonly used defense strategies
Position Defense Mobile Defense Flanking Defense Contraction Defense Pre-emptive Defense Counter-Offensive Defense
e.g. Legend Holdings, the top China PC maker Legend has announced a joint venture with AOL to broaden its business to provide Internet services in the mainland
Frontal attack Flank attack Encirclement attack Bypass attack Guerrilla attack
Frontal Attack
Seldom work unless
The challenger has sufficient fire-power (a 3:1 advantage) and staying power, and The challenger has clear distinctive advantage(s)
e.g. Japanese and Korean firms launched frontal attacks in various ASPAC countries through quality, price and low cost
Flank attack
Attack the enemy at its weak points or blind spots i.e. its flanks Ideal for challenger who does not have sufficient resources e.g. In the 1990s, Yaohan attacked Mitsukoshi and Seibu s flanks by opening numerous stores in overseas markets
Encirclement attack
Attack the enemy at many fronts at the same time Ideal for challenger having superior resources e.g. Seiko attacked on fashion, features, user preferences and anything that might interest the consumer
Bypass attack
By diversifying into unrelated products or markets neglected by the leader Could overtake the leader by using new technologies e.g. Pepsi use a bypass attack strategy against Coke in China by locating its bottling plants in the interior provinces
Guerrilla attack
By launching small, intermittent hit-and-run attacks to harass and destabilize the leader Usually use to precede a stronger attack e.g. airlines use short promotions to attack the national carriers especially when passenger loads in certain routes are low
Which Attack Strategy should a Challenger Choose? Use a combination of several strategies to improve market share over time
Market-Follower Strategies
Theodore Levitt in his article, Innovative Imitation argued that a product imitation strategy might be just as profitable as a product innovation strategy e.g. Product innovation--Sony Product-imitation--Panasonic
Market-Nicher Strategies
Smaller firms can avoid larger firms by targeting smaller markets or niches that are of little or no interest to the larger firms e.g. Logitech--mice Microbrewers--special beers
Multiple Niching
[A] firm should `stick to its niching but not necessarily to its niche. That is why multiple niching is preferable to single niching. By developing strength in two or more niches the company increases its chances for survival. Philip Kotler