defensive strategies

Marketing Strategies

Market Leader

• Occupies 40% of the market share. Eg Pepsi, Gillete, etc.

Sun Tze’s 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.”

Strategies for Market Leaders

Market Leader’s objectives:• Expand the total market by– Finding new users - E.g.: perfume:--> non-users (mkt-

penetration strat)– Creating new uses - Cereals: as snacks --> increase

frequency of use– Encouraging more usage – Sunsilk, Clinic Plus

• Protect its current market share by– Adopting defense strategies.

• Increase its market share

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

Position Defense• Least successful of the defense strategies • This involves the defense of a fortified position. This tends to

be a weak defense because you become a “sitting duck”. • As time goes by the defender gets weaker, while the attacker

gets stronger• e.g. Mercedes was using a position defense strategy until

Toyota launched a frontal attack with its Lexus. • eg. Coke --> multi segments of cola market--> enter wine market--> acquire fruit drink companies--> desalination equipment-> plastics

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)

Eg. MB: shifts more resources into aeronautics, auto design equipment CAD/CAM,

Flanking Defense: • Secondary markets (flanks) are the weaker areas and prone to being

attacked• Pay attention to the flanks.

Eg. strengthening via superstore concept -->• traditional foods - meat/canned/packaged• non-traditional --> ethnic foods, wines• prepared foods --> restaurant, salad, bakery

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. India’s TATA Group sold its soaps and detergents business units to Unilever in 1993

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 2,300 modelsCounter-Offensive Defense• Responding to competitors’ head-on attack by identifying the

attacker’s weakness and then launch a counter attack. Done viaprice cut,promo blitz,product improvement,sales-territory invasion• e.g. Toyota launched the Lexus to respond to Mercedes attack

Strategic Withdrawal

• It might be the right decision to cease producing a product and/ or to pull out of a market completely. This is a hard decision for managers to take if they have invested or if the decision involves redundancies.

Reasons for exit

a. The company’s business may be buying firms turning them around and selling them at a profit.

b. Resource limitations mean that less profitable businesses have to be abandoned.

c. A company may be forced to close because of insolvency.d. Change of competitive strategy.e. Decline in attractiveness of the market.

Advantages of defensive strategies• Lessen risk of being attacked • Blunt impact of any attack that occurs • Influence challengers to aim attacks at other rivals • Strengthen firm’s present position • Help sustain any competitive advantage held• The major benefit of a defensive strategy is that it is considerably

less risky than an offensive strategy and requires fewer resources.

DisadvantagesThe single largest drawback of a defensive strategy is that it does not

allow for development. A company that uses only defensive strategies may be able to hang on to its current position and present competitive advantage, but it is unable to grow beyond that stage

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

Types of Attack Strategies• Frontal attack• Flank attack• Encirclement attack• Bypass attack• Guerrilla attack

1) Frontal attack – it is a direct head-on assault• Seldom work unless– The challenger has sufficient fire-power (a 3:1

advantage) and staying power, and– The challenger has clear distinctive advantage(s)

• The strategy is suitable when – 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

• e.g. Japanese and Korean firms launched frontal attacks in various ASPAC countries through quality, price and low cost

2) 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

3) Encirclement attack (Envelopment)• 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

4) 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

5) 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

Advantages of offensive strategies• Used to build new or stronger market position and/or create

competitive advantage Principles of offensive strategiesFocus relentlessly on • Building competitive advantage • Striving to convert it into decisive advantage Employ the element of surprise as opposed to doing what rivals

expect Apply resources where rivals are least able to defend themselves Be impatient with the status quo and display a strong bias for swift,

decisive actions to boost a firm’s competitive position vis-à-vis rivals