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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Offensive Strategy

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