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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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