Amal R UnnithanBalam Lova RajuHari Prasad K PSwetha Suresh BabuVijish MadhavanVishnu CK

CHAPTER 6STRENGTHENI

NG A COMPANY’S

COMPETITIVE POSITION

Presented by Group No 1

CHAPTER ROADMAP

MAXIMIZING THE POWER OF A STRATEGY

Making choices that complement a competitive approach and

maximize the power of strategy

Offensive and Defensive

Competitive Actions

Competitive Dynamics and the Timing of Strategic

Moves

Scope of Operations along

the Industry’s Value Chain

OFFENSIVE AND DEFENSIVE

COMPETITIVE ACTIONS

Used to build new or stronger market position and/or create competitive

advantage

Used to protect competitive advantage (rarely used to create

advantage)

Offensive Strategies Defensive StrategiesStrategies

GOING ON THE OFFENSIVE STRATEGIC OPTIONS TO IMPROVE A FIRM’S

MARKET POSITION Strategic Offensive Principles:

Relentlessly build competitive advantage and then convert it into sustainable advantage.

Create and deploy resources in ways that cause rivals to struggle to defend themselves.

Employ the element of surprise as opposed to doing what rivals expect and are prepared for.

Display a strong bias for swift, decisive, and overwhelming actions to overpower rivals

CHOOSING WHICH RIVALS TO ATTACK

Market leaders that are

vulnerable

Runner-up firms with weaknessesin areas where the challenger

is strong

Struggling enterprises on

the verge of going under

Small local and regional

firms with limited capabilities

Best Targets for Offensive Attacks

BLUE OCEAN STRATEGYA SPECIAL KIND OF OFFENSIVE

Involves a firm seeking sizable and durable competitive advantage by abandoning its existing markets and, then, inventing a new industry or distinctive market segment in which that firm has exclusive access to new demand.

By “reinventing the circus,” Cirque du Soleil annually attracts an audience of millions of people who typically do not attend circus events.

DEFENSIVE STRATEGIES PROTECTING MARKET POSITION AND

COMPETITIVE ADVANTAGE

Purposes of Defensive Strategies

Lower the firm’s risk of being attacked

Weaken the impact of an attack

that does occur

Influence challengers to aim their efforts

at other rivals

Good defensive strategies help protect competitive advantage but rarely are the basis for creating it.

SIGNALING CHALLENGERS THAT RETALIATION IS LIKELY

Publicly announce management’s strong commitment to maintain the firm’s present market share

Publicly commit firm to policy ofmatching rivals’ terms or prices

Maintain war chest of cash reserves Make occasional counter response

to moves of weaker rivals

TIMING A FIRM’S OFFENSIVE AND DEFENSIVE STRATEGIC

MOVES Timing’s Importance:

Knowing when to make a strategic move is as crucial as knowing what move to make.

Moving first is no guarantee of success or competitive advantage.

The risks of moving first to stake out a monopoly position must be carefully weighted.

STRENGTHENING A COMPANY’S MARKET POSITION VIA ITS

SCOPE OF OPERATIONS

Range of its activities

performed internally

Breadth of its product and

service offerings

Extent of its geographic

market presence and

mix of businesses

Size of its competitive footprint on its market or industry

Defining the Scope of the Firm’s Operations

HORIZONTAL MERGER ANDACQUISITION STRATEGIES

Merger Is the combining of two or more firms into a

single corporate entity that often takes on a new name.

Acquisition Is a combination in which one firm, the

acquirer, purchases and absorbs the operations of another firm, the acquired.

VERTICAL INTEGRATION STRATEGIES

Vertically Integrated Firm Is one that participates in multiple segments or

stages of an industry’s overall value chain. Vertical Integration Strategy

Can expand the firm’s range of activities backward into its sources of supply and/or forward toward end users of its products.

TYPES OF VERTICAL INTEGRATION STRATEGIES

Full Integration

Partial Integration

TaperedIntegration

BACKWARDS INTEGRATION TOWARDS SUPPLIERS

Achieve the same scale economies as outside suppliers

Match or beat suppliers’ production efficiency with no drop in quality

INTEGRATING FORWARD TO ENHANCE COMPETITIVENESS

Gain better access to end users Improve market visibility Include the purchasing experience

as a differentiating feature

Backward Vertical Integration

When suppliers have large profit margins

Where the item being supplied is a major cost component

Where the requisite technological skills are easily mastered or acquired

When powerful suppliers are inclined to raise prices at every opportunity

Lower distribution costs Gain a cost advantage over

rivals Produce higher margins Allow for lower prices

charged to end users Competing directly against

distribution allies can create channel conflict and signal a weak commitment to dealers.

Forward Vertical Integration

When should we go for forward / backward integration ?

DISADVANTAGES OF A VERTICAL INTEGRATION STRATEGY

Boosts capital investment in the industry Increases business risk if industry growth and

profits sour May slow technological advances if the vertically

integrated company is saddled with older technology

Poses all types of capacity-matching problems May require radically different skills and business

capabilities

Outsourcing an activity is a consideration when:

It can be done cheaply by outside specialists.

It is not crucial to achieve a sustainable competitive advantage

Improves organizational flexibility and speeds time to market.

It reduces a firm’s risk exposure to changing technology and/or buyer preferences.

It allows a firm to concentrate on its core business.

The Big Risk of Outsourcing: Farming out the wrong types

of activities Hollowing out strategically

important capabilities ultimately damages a firm’s competitiveness and long-term success in the marketplace

OUTSOURCING

STRATEGIC ALLIANCES AND PARTNERSHIPS

Strategic Alliance Is a formal agreement between two or more

separate firms in which they agree to work cooperatively toward common objectives.

Joint Venture Is a type of strategic alliance in which the

partners set up an independent corporate entity that they own and control jointly, sharing in its revenues and expenses.

CAPTURING THE BENEFITS OF STRATEGIC ALLIANCES

Picking a good partner

Being sensitive to cultural differences Recognizing that

the alliance must benefit both sides

Adjusting the agreement over time to fit new circumstancesStructuring the

decision-making process for swift

actions

Ensuring both parties keep their

commitments

Strategic Alliance Factors

THE DRAWBACKS OF STRATEGICALLIANCES AND PARTNERSHIPS

Culture clash and integration problems due to different management styles and business practices.

Anticipated gains do not materialize due to an overly optimistic view of the synergies or a poor fit of partners’ resources and capabilities.

Risk of becoming dependent on partner firms for essential expertise and capabilities.

Protection of proprietary technologies, knowledge bases, or trade secrets from partners who are rivals.

PRINCIPLE ADVANTAGES OF STRATEGIC ALLIANCES

They lower investment costs and risks for each partner by facilitating resource pooling and risk sharing.

They are more flexible organizational forms and allow for a more adaptive response to changing conditions.

They are more rapidly deployed—a critical factor when speed is of the essence.

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