Module 4

Offensive and defencive strategies

Offensive Defensive Strategies

considering strategic options from a competitor rather than customer orientation is referred to as competitive marketing strategy.

Offensive warfare• Offensive warfare

• 1. Frontal attack – This is the direct, head on attack meeting competitors with the same product line, price, promotion, etc. Because attack is on the enemy’s strengths rather than weakness it is considered the most risky and least advised strategy.

• 2. Flanking attack – The aim here is to engage competitors in those products markets where they are weak or have no presence at all. Its overreaching goal is to build a position from which to launch, an attack on the battlefield later.

• 3. Encirclement attack – Multi pronged attack aimed at diluting the defenders ability to retaliate in strength. The attacker stands ready to block the competitor no matter which way he turns the product market. Product proliferation supplying different types of the same product to the market. Market encirclement consists of expanding the products into all segments and distribution channels.

• 4. Bypass attack – This is the most indirect form of competitive strategy as it avoids confrontation by moving into new and as yet uncontested fields. Three type of bypass are possible; develop new products, diversify into unrelated products or diversify into new geographical markets.

• 5. Guerilla warfare – Less ambitious in scope, this involves making small attacks in different locations whilst remaining mobile. Such attacks take several forms. The aim is to destabilize the competitor by small attacks.

Defensive warfare• 1. Position defence – static defence of a current position, retaining current product

markets by consolidating resources within existing areas. Exclusive reliance on a position defence effectively means that a business is a sitting target for competition.

• 2. Mobile defence – A high degree of mobility prevents the attackers chances of localizing the defence and accumulating its forces for a decisive battle. A business should seek market development, product development and diversification to create a stronger base.

• 3. Pre-emptive defence – Attack is the best form of defence. Pre-emptive defence is launched in a segment where an attack is anticipated instead of moving into related or new segments.

• 4. Flank position defence – This is used to occupy a position of potential future importance in order to deny that position to an opponent. Leaders need to develop and hold secondary markets to prevent competitors from using them as a spring board into the primary market.

• 5. Counter offensive defence – This is attacking where the company is being attacked. This requires immediate response to any competitor entering a segment or initiating new moves.

• 6. Strategic withdrawal.

Strategic withdrawal• 6. Strategic withdrawal.• 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.

• Exit barriers make this difficult.a. Cost barriers include redundancy costs, the difficulty of selling assets.b. Managers might fail to grasp the principles of opportunity costingc. Political barriers includes government attitudesd. Marketing considerations may delay withdrawale. Psychology – managers hate to admit failure

• Reasons for exita. 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. A business might be sold to a competitor or occasionally to management.c. A company may be forced to close because of insolvency.d. Change of competitive strategy.e. Decline in attractiveness of the market.f. Funds can earn more elsewhere.

Co evolving• The promise of synergy is the prime rationale for the existence of the multibusiness

corporation. Yet for most corporations, the "1-plus-1-equals-3" arithmetic of cross-business synergies doesn't add up.

Companies that do achieve synergistic success use a corporate strategic process called coevolving; they routinely change the web of collaborative links among businesses to exploit fresh opportunities for synergies and drop deteriorating ones.

• The term coevolution originated in biology. It refers to the way two or more ecologically interdependent species become intertwined over time. As these species adapt to their environment, they also adapt to one another. Today's multibusiness companies need to take their cue from biology to survive: They should assume that links among businesses are temporary and that the number of connections--not just their content--matters. Rather than plan collaborative strategy from the top, as traditional companies do, corporate executives in coevolving companies should simply set the context and then let collaboration (and competition) emerge from business units. Incentives, too, are different than they are in traditional companies.

• Coevolving companies reward business units for individual performance, not for collaboration. So collaboration occurs only when two business-unit managers both believe that a link makes sense for their respective businesses, not because collaboration per se is useful. Managers in coevolving companies also need to recognize the importance of business systems that support the process: frequent data-focused meetings among business-unit leaders.

Organisational Agility• The• Organisational Agility (OA) Assessment questionnaire generates scores for the five following• organizational dimensions on a scale ranging from industrial era types of organization to• organic, self-organising forms of organisation:• Alignment - Organizational commitment to a shared vision, values, and goals• Adaptability - Employees’ freedom and accountability to take appropriate action• Collaboration - Ability and willingness to cooperate to achieve win-win outcomes• Innovation - Ability to generate and sustain a high-level of innovation• Vitality - Level of energy and commitment that employees bring to their work• For each dimension, the organization is assessed as being at one of four developmental levels:• 1. Bureaucratic - hierarchical structure; focus on rules, procedures and financial numbers• 2. Managerial - focus still on management systems but with a paternalistic culture and HR• practices• 3. Agile - efforts made to gain employee commitment to inspiring corporate vision and to tap• employee creativity• 4. Dynamic - practically no bureaucracy. Authority derives from know-how. Risk-taking,• experimentation, and innovation are the norm. Information flows freely and people• collaborate enthusiastically. Responses to marketplace changes occur almost• immediately. Employees tend to be excited, energized, and totally committed to creating• something that they care about.

Amity Business School

Strategy as Simple Rules

• The success of Yahoo!, eBay, Enron, and other companies that have become adept at morphing to meet the demands of changing markets can't be explained using traditional thinking about competitive strategy.

• Yahoo!, eBay, Enron have succeeded by pursuing constantly evolving strategies in market spaces that were considered unattractive according to traditional measures

Traditional strategy

Traditional strategy

Strategy as Simple RulesThe companies know that• the greatest opportunities for competitive advantage lie in market

confusion,• but they recognize the need for a few crucial strategic processes

and a few simple rules. • In traditional strategy, advantage comes from exploiting resources

or stable market positions.• In strategy as simple rules, advantage comes from successfully

seizing fleeting opportunities.• Key strategic processes, such as product innovation, partnering, or

spinout creation, place the company where the flow of opportunities is greatest.

• Simple rules then provide the guidelines within which managers can pursue such opportunities.

Three approaches to Strategy Position resources Simple rules

Strategic logic Establish position Leverage resources Pursue opportunities

Strategic steps Identify market,locate position,Fortify and defend

Establish vision ,build resources ,leverage markets

Jump into confusion,sieze opportunities, finish strong

Strategic questions Where should we be? What should we be ? Hoe should we proceed ?

Sources of advantage Unique, value position ,integrate activity system

Unique,valuable imitible resources

Key processes and unique simple rules

Works best in Slow chancing markets Moderately changing marketsWell structured

Rapidly changing amigious markets

Duration of advantage Sustained Sustained Unperdictable

Risk Difficult to alter position Company will be slow to reallocate ersources

Manager too tentative

Performance Goal Profitibility Long term dominance Growth

Strategy as Simple Rules

Simple rules, which grow out of experience, fall into five broad categories:

• how-to rules,• boundary conditions,• priority rules,• timing rules, • and exit rules.

Simple rules summarized

Type Purpose RemarksHow to Rule Key features of how the process is

executed•R&D must rotate through customer service• every quesrion must be answered on first call•Staff nust consist of technical gurus

Boundary rules Focus managers –opportunities which can pursed & those outside rules

Acquire companies over 75% engineers and having 75 employees

Priority rules Help managers to RANK opportunities

Allot manufacturing capacity based on Products gross margin

Timing rules Synchronize managers opportunity with emerging opportunities in the company

Intel,s new product time less than 18 months timed at decline point

Exit rules Decide when to pull mout of yesterday,s oppoutunity

If a key member chooses to walk out

Strategic management exhibit 8 – 11

Simple rules some remarks ?

Broad Do not confuse guiding principles with rules example encourse innovation but not assess a new venture partner/

Vague All investments must be undervalued???--- a simple screen will help in such a task.

Mindless Rules may destroy rather than create value… reverse engineer them and thow out those not relevant

stale If your share price is dropping compared to rivals?

Strategy as Simple rules

Conclusion Companies with simple-rules strategies must follow

the rules religiously and avoid the temptation to change them too frequently.

A consistent strategy helps managers sort through opportunities and gain short-term advantage by exploiting the attractive ones.

Patching

• Patching is a process by corporative executives routinely “restore” their business to match rapidly changing market opportunities – adding, splitting , transferring, exiting or combining chunks of business

PatchingStrategic Processes

• Decision making,operational activities and sales activities that are critical to business processess

Patching Strategic Positioning

• The way business is designed and processed to serve target markets

Parenting framework

• The perspective that the role of corporate headquarters (the parent) in multibusiness (the children) companies is that of a parent sharing wisdom,insight,and guidance to help developing its various business to excel

Parenting

• Size and age• Management• Business definition• Predictable Errors• Linkages• Common Capabilities

• Special expertise• External relations• Major decisions• Major changes

Strategy choice