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 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.”
Sun Tze’s 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 Leader’s 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 (cont’d)
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 (cont’d)
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 (cont’d)
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 APB’s Beerhausen
Defense Strategy (cont’d)
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
Defense Strategy (cont’d)
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 (cont’d)
Counter-Offensive Defense
 Responding to competitors’ head-on attack
by identifying the attacker’s 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
(cont’d)
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 Seibu’s 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 (cont’d)
 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 (cont’d)
 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?