Chapter 6 - Strengthening Company's Competitive Position

Strategic Offensive Principles (4)

• Focusing on building competitive advantage and converting it to sustainable competitive advantage

• Applying resources where rivals are weakest

• Doing what rivals won’t expect

• Acting fast with impact

How to Competitively Attack a Rival Firm (4)

• Avoid challenging competitor where they are strongest

• Use firms strengths to attack competitors weakness

• Understand results may not occur immediately

• Be prepared for counter-response

Offensive Strategy Options (7)

• Offering equal or better product at lower price

• Being first to make next gen product

• Pursuing continuous product innovation

• Creating new markets

• Adopting/improving ideas of rivals

• Launching preemptive strike

• Using guerrilla marketing tactics

Best Targets for Offensive Attacks  (4)

• Market leaders in vulnerable position

• Challenging firms who’s weaknesses are your strengths 

• Struggling firms 

• Small firms 

Purposes of Defensive Strategy (3)

• Lower firms risk of being attacked

• Weaken impact of attack if occurs

• Redirects focus to other rivals

Forms of Defensive Strategy (2)

• Actions that block challengers

• Actions that signal likelihood of strong retaliation

Ways to Block Attack From Competitors (7)

• Introduce new features and close any gaps 

• Maintain economy pricing 

• Discourage buyers from trying competitors 

• Make early announcements to induce buyers to postpone switching

• Offer special features to reduce attractiveness of switching 

• Challenge quality/safety of products 

• Give discounts or better terms to intermediaries 

Ways of Signalling Retaliation (4)

• Public announcements of commitment to maintaining market share

• Publicly committing to matching terms and prices of competitors

• Keep large amount of cash

• Making strong counter response

First Mover

First company to introduce product/service to market

First Mover Advantages (8)

• Brand Recognition

• Intellectual Property Protection

• Quick Market Share

• Economies of Scale

• Strategic Resources

• Exclusive Relationships

• Customer Lock in

• Price Premium

Conditions that lead to First Mover Advantage (6)

• Pioneering builds brand loyalty

• High Switching Costs

• Property Rights Protection hinders imitation

• Enables scale economies

• First mover sets industry standard

• Strong Network Effects

First Mover Disadvantages (6)

• High Costs

• Late Movers Can Learn From Mistakes

• Replication

• Regulatory Hurdles

• Market Readiness Risk

• Consumer Resistance

Conditions That Lead to First Mover Disadvantages (6)

• Pioneering is more costly than imitating

• Product doesn't live up to expectations

• Rapid Market Evolution

• High Market Uncertainty

• Customer Loyalty is Low

• High Investment Fees

Scope of the Firm (4)

• Activities Performed Internally

• Product Breadth

• Geographic Market Presence 

• Size of Competitive Footprint

Horizontal Scope

Range of Product/Service segments firm serves within market

Vertical Scope

Extent to which firm controls different stages of production and distribution process

Merger

Combining two or more firms into a single entity, often taking on new name

Acquisition

When one firm, the acquirer, purchases and absorbs the operations of another firm, the acquired 

Objectives of Mergers & Acquisitions (5)

• Creating more cost-efficient operation

• Expanding geographic coverage

• Extending into new product categories

• Gaining quick access to new resources and capabilities

• Leading the convergence of industries

Strategic Issues With Mergers & Acquisitions (2)

• Cost savings are smaller than expected

• Gains in competitive capabilities take longer to realize

Organizational Issues With Mergers & Acquisitions (3)

• Culture Clash

• Key employees at acquired firm are lost

• Managers make mistakes 

Vertically Integrated Firm

Participates in multiple segments of industry’s overall value chain

Vertical Integration Strategy

Can expand firms range of activities backwards into its sources of supply or forward towards end users of its product

Types of Vertical Integration Strategies 

• Full Integration

• Partial Integration

• Tapered Integration 

Full Integration

Firm participates in all stages of vertical activity chain

Partial Integration

Firm builds positions only in selected stages of the vertical chain

Tapered Integration

Firm uses a mix of in house and outsourced activity in any stage of vertical chain

Benefits of Vertical Integration (3)

• Add to firms technological capabilities 

• Strengthens competitive position

• Boosts firms profitability 

How is Integrating Backwards Profitable

• Achieving same scale economies of scale

• Matching or beating suppliers production efficiency

Reasons For Integrating Backwards

• Reduction in supplier power

• Reduction in costs of major inputs

• Protection of proprietary rights

• Assurance of the supply and flow of critical inputs

Reasons for Integrating Forwards (5)

• Lower costs

• Increase bargaining power

• Gain better access to end users

• Strengthen brand awareness

• Increase differentiation

Disadvantages of Vertical Intefgration Strategy (6)

• More Risk

• Slow acceptance of tech 

• Less Flexibility

• Doesn’t create economies of scale 

• Capacity matching issues

• New capability requirements

When Should You Outsource Activities (5)

• Performance is better and cheaper

• Not crucial to achieving sustainable competitive advantage

• Increases Flexibility

• Reduces Risk

• Allows concentration on core activities

Risk of Outsourcing (2)

• Loss of control

• Doesn't meet needs

Strategic Alliance

Agreement between 2 or more separate firms to work together to achieve common goal

Joint Venture 

Partnership involving establishment of independent corporate entity

Factors that Make Alliance Strategic (7)

• Achieves bushiness objectives

• Builds competitive advantage

• Remedies competitive weakness

• Defends threat

• Increases bargaining power

• Creates market opportunities

• Speeds development

Benefits of Strategic Alliance (5)

• Minimizes problems with vertical integration

• Extends scope of operations

• Reduces need of independence

• Increased Flexibility

• Useful when industry is rapidly evolving

How Are Strategic Alliances Advantageous (4)

• Improves supply chain efficiency 

• Creates economies of scale

• Provides new market access

• Increases capabilities of firm

Succesful Strategic Alliance Factors (5)

• Picking good partner

• Sensitive to cultural differences

• Alliance must benefit both sides

• Both parties keep promise

• Adjusting agreement over time

Factors Influencing Longevity of Alliance

• Partners that aren’t direct competitors

• Establish permanent trust

• Continuing to collaborate in mutual interest

Drawbacks of Strategic Alliance

• Culture Clash

• Gains not being realized

• Risk of being dependent on partner

• Protection of knowledge from rivals who are partners

Why Strategic Alliance is More Advantageous Than Vertical Integration or M&A

• Lower investment cost and risk

• More flexible

• Rapidly deployed

How to ensure Strategic Alliances Work 

• Create system for managing alliance 

• Build trust 

• Set up safeguards

• Make commitments to partners

• Make shared learning a routine