Business Strategy Chapter 9 Strategies Based on a Company’s Market Position

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S 1: Strategies  Based  on  a Company’s  Market  Positio
—Industry leaders

—Runner-up firms

—Weak or crisis-ridden firms

S 2: Industry  Leaders: The  Defining  Characteristics

•Strong to powerful market position

•Well-known reputation

•Proven strategy

•Key strategic concern – How to sustain
dominant leadership position

S 3: Strategy  Options:  Industry  Leaders

Stay-on-the-offensive strategy

Fortify-and-defend strategy

Muscle-flexing strategyS 4: Stay-on-the-Offensive  Strategies

•Be a first-mover, leading industry change.

•Best defense is a good offense.

•Concentrate on achieving a competitive advantage
and then widening the advantage over time.

•Relentlessly pursue continuous improvement
and innovation, being first to market with

–Technological improvements.

–New or better products.

–More attractive performance features.

–Customer service improvements.

S 5: Stay-on-the-Offensive  Strategies (continued)
•Aggressively seek out ways to

–Cut operating costs

–Establish competitive capabilities rivals cannot match

–Make it easier for potential customers to switch their purchases from other firms to the leader’s own products

•Aggressively attack profit sanctuaries of important rivals

•Launch fresh initiatives to expand overall industry demand

–Spur creation of new families of products

–Make product more suitable for consumers
in emerging-country markets

–Discover new uses for product

–Attract new users of product

–Promote more frequent use

•Grow faster than industry, taking market share from rivals

S 6:Fortify-and-Defend  Strategy

Objectives

•Make it harder for new firms to enter and for challengers to gain ground

•Hold onto present market share

•Strengthen current market position

•Protect competitive advantage

S 7:Fortify-and-Defend  Strategy: Strategic  Options
•Increase advertising and R&D

•Provide higher levels of customer service

•Introduce more brands to match attributes of rivals

•Add personalized services to boost buyer loyalty

•Keep prices reasonable and quality attractive

•Build new capacity ahead of market demand

•Invest enough to remain cost competitive

•Patent feasible alternative technologies

•Sign exclusive contracts with best suppliers and distributors

S 8:Muscle-Flexing  Strategy

Objectives

•Play competitive hardball with smaller

rivals that threaten leader’s position

•Signal smaller rivals that moves to cut
into leader’s business will be hard fought

•Convince rivals they are better off playing
“follow-the-leader” or else attacking each
other rather the industry leader
S 9:Muscle-Flexing  Strategy: Strategic  Options

—Be quick to meet price cuts of rivals

—Counter with large-scale promotional campaigns if rivals boost advertising

—Offer better deals to rivals’ major customers

—Dissuade distributors from carrying rivals’ products

—Provide salespersons with documentation about weaknesses of competing products

—Make attractive offers to key executives of rivals

—Use arm-twisting tactics to pressure present customers not to use rivals’ products

S 10:Muscle-Flexing  Strategy Risks—

Running afoul of antitrust laws

—Alienating customers with bullying tactics

—Arousing adverse public opinion
S 11:Types  of  Runner-up  Firms

—Market challengers

—Use offensive strategies to gain market share

—Focusers

—Concentrate on serving a
limited portion of market

—Perennial runners-up

—Lack competitive strength to do
more than continue in trailing position

S 12:Obstacles  Runner-Up Firms  Must  Overcome
When big size is a competitive asset, firms

with small market share face obstacles
in trying to strengthen their positions

—Less access to economies of scale

—Difficulty in gaining customer recognition

—Inability to afford mass media advertising

—Difficulty in funding capital requirements

S 13:Strategic  Options for  Runner-Up  Firms

 w—hen big size provides larger rivals with a cost advantage, runner-up firms have two options

—Build market share

—Lower costs and prices to grow sales or

—Out-differentiate rivals in ways to grow sales

—Withdraw from market

S 14:Offensive  Strategies  for  Runner-Up  Firms:  Building  Market  Share

—Acquire smaller rivals to expand company’s market reach and presence

—Find innovative ways to drive down costs
to win customers from higher-priced rivals

—Craft an attractive differentiation strategy

—Pioneer a leapfrog technological breakthrough

—Be first-to-market with new or better products and build reputation for product leadership

—Outmaneuver slow-to-change market leaders in adapting to evolving market conditions and customer needs

—Forge strategic alliances with key distributors, dealers, or marketers of complementary products

S 15:Strategic  Approaches  for  Runner-Up  Firms
1. Vacant niche strategy

2. Specialist strategy

3. Superior product strategy

4. Distinctive image strategy

5. Content follower strategy

S 16:Vacant  Niche  Strategy for  Runner-Up  Firms

—Focus strategy concentrated on end-use applications market leaders have neglected

—Characteristics of an ideal vacant niche

—Sufficient size to be profitable

—Growth potential

—Well-suited to a firm’s capabilities

—Hard for leaders to serve

S 17:Specialist  Strategy for  Runner-Up  Firms

—Strategy concentrated on
being a leader based on

—Specific technology

—Product uniqueness

—Expertise in

—Special-purpose products

—Specialized know-how

—Delivering distinctive customer services

S 18:Superior  Product  Strategy for  Runner-Up  Firms

—Differentiation-based focused strategy based on

—Superior product quality or

—Unique product attributes

—Approaches

—Fine craftsmanship

—Prestige quality

—Frequent product innovations

—Close contact with customers to
gain input for better quality product

S 19:Distinctive  Image  Strategy for  Runner-Up  Firms
—Strategy concentrated on ways to

stand out from rivals

— Approaches

—Reputation for charging lowest price

—Prestige quality at a good price

—Superior customer service

—Unique product attributes

—New product introductions

—Unusually creative advertising

S 20:Content  Follower  Strategy for  Runner-Up  Firms

—Strategy involves avoiding

—Trend-setting moves and

—Aggressive moves to steal
customers from leaders

—Approaches

—Do not provoke competitive retaliation

—React and respond

—Defense rather than offense

—Keep same price as leaders

—Attempt to maintain market position

S 21:Weak  Businesses:  Strategic  Options

—Launch an offensive turnaround strategy
(if resources permit)

—Employ a fortify-and-defend strategy
(to the extent resources permit)

—Pursue a fast-exit strategy

—Adopt a harvest strategy
(a slow-exit type of end-game strategy)

S 22:Achieving  a  Turnaround: The  Strategic  Options
—Sell off assets to generate cash and/or reduce debt

—Revise existing strategy

—Launch efforts to boost revenues

—Cut costs

—Combination of efforts
S 23:What  Is  a  Harvest  Strategy?
—Steers middle course between status quo and exiting quickly

—Involves gradually sacrificing market position
in return for bigger near-term cash flow/profit

—Objectives

—Short-term - Generate largest
feasible cash flow

—Long-term - Exit market

S 24:Types  of  Harvest  Options

—Reduce operating expenses to rock-bottom

—Hold reinvestment to minimum

—Place little priority on new capital investments

—Emphasize stringent internal cost controls

—Trim advertising and promotion expenses

—Do not replace employees who leave

—Shave equipment maintenance

S 25:When  Should  a  Harvest Strategy  Be  Considered?

Industry’s long-term prospects are unattractive

—Building up business would be too costly

—Market share is increasingly costly to maintain

—Reduced levels of competitive effort will not trigger immediate fall-off in sales

—Firm can re-deploy freed-up resources
in higher opportunity areas

—Business is not a major component of
diversified firm’s portfolio of businesses