Competitive Strategy

Asia-Pacific Marketing
Federation
Certified Professional Marketer
Copyright
Marketing Institute of Singapore

Outline
Introduction
Sustainable competitive advantage
(SCA)
Sources of SCA
Strategies for

Market Leaders
Challengers
Followers, and
Nichers

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

Sustainable Competitive
Advantage
A good strategist seeks not only to win the
hill, but hold on to it. Subash Jain
Sustaining competitive advantage requires
erecting barriers against the competition
Aakers suggested looking at the following:

How you compete

Basis of competition
Where you compete
Whom you are competing against

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

Discuss whether the later initiatives had been

sustainable

Sun Tzes defensive strategy

Do not assume the enemy will not come
but be prepared for his coming
Do not presume he will not attack,
but instead make your own position
unassailable.

Sun Tzes Offensive Strategies

Overt-offensive strategy

To knock out a business rival so as to take

over his company
To knock out a competing product so as
to take over its market share

Covert-offensive strategy

Keep as low a profile as possible while

making offensive moves

Strategies for Market Leaders

Market Leaders objectives:
Expand the total market by

Finding new users

Creating new uses, and
Encouraging more usage

Protect its current market share by

Adopting defense strategies (see following slides)

Increase its market share

Note the relationship between market share and

profitability

Which strategy to use?

Depends on your answer to the
following:
Is it worth fighting?
Are you strong enough to fight?
How strong is your defense?
Do you have any choice but to fight?

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

Defense Strategy (contd)

Position Defense
Least successful of the defense strategies
A company attempting a fortress defense
will find itself retreating from line after line
of fortification into shrinking product
markets. Saunders (1987)
e.g. Mercedes was using a position
defense strategy until Toyota launched a
frontal attack with its Lexus.

Defense Strategy (contd)

Mobile Defense
By market broadening and diversification
For marketing broadening, there is a need to

Redefine the business (principle of objective),

and
Focus efforts on the competition (the principle
of mass)

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

Defense Strategy (contd)

Flanking Defense:
Secondary markets (flanks) are the
weaker areas and prone to being
attacked
Pay attention to the flanks
e.g. San Miguel introduced a flanking
brand in the Philippines, Gold Eagle,
as a defense against APBs
Beerhausen

Defense Strategy (contd)

Contraction Defense

Withdraw from the most vulnerable

segments and redirect resources to

those that are more defendable
By planned contraction or strategic
withdrawal
e.g. Indias TATA Group sold its soaps
and detergents business units to
Unilever in 1993

Defense Strategy (contd)

Pre-emptive Defense

Detect potential attacks and attack

the enemies first
Let it be known how it will retaliate
Product or brand proliferation is a
form of pre-emptive defense e.g.
Seiko has over 2,000 models

Defense Strategy (contd)

Counter-Offensive Defense

Responding to competitors head-on

attack by identifying the attackers

weakness and then launch a counter
attack
e.g. Toyota launched the Lexus to
respond to Mercedes attack

Market Challenger Strategies

The market challengers strategic
objective is to gain market share and to
become the leader eventually
How?
By attacking the market leader
By attacking other firms of the same size
By attacking smaller firms

Market Challenger Strategies

(contd)
Types of Attack Strategies

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 Seibus 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-Follower Strategies (contd)

Each follower tries to bring distinctive

advantages to its target market--location,

services, financing
Four broad follower strategies:

Counterfeiter (which is illegal)

Cloner e.g. the IBM PC clones
Imitator e.g. car manufacturers imitate the

style of one another

Adapter e.g. many Japanese firms are
excellent adapters initially before developing
into challengers and eventually leaders

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

Market-Nicher Strategies (contd)

Nichers must create niches, expand

the niches and protect them

e.g. Nike constantly created new niches--

cycling, walking, hiking, cheerleading, etc

What is the major risk faced by

nichers?

Market niche may be attacked by larger

firms once they notice the niches are
successful

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

Example of Nicher:
Challenger Superstore

Challenger Superstore is a discount retailer

of computers and accessories

It opened its first overseas store in Bangkok
at a cost of 90 million baht (S$3.7 million)
In October 2000, it closed its Bangkok store
after failing to pay rent amounting to about
6 million baht
Discussion: Why do you think Challenger
failed in Thailand?