Block 5 Flashcards
When are strategic offences used?
Strategic offences are called for when a company spots opportunities to gain profitable market share at its rivals’ expense or when a company has no choice but to try to whittle away at a strong rivals’ competitive advantage.
What are the four strategic offensive principles?
- Focusing relentlessly on building competitive advantage and then striving to convert it into sustainable advantage.
- Applying resources where rivals are least able to defend themselves.
- Employing the element of surprise as opposed to doing what rivals expect and are prepared for.
- Displaying a capacity for swift, decisive, and overwhelming actions to overpower rivals.
Name and explain the seven strategic offence options:
- Offering an equally good or better product at a lower price.
- Leapfrogging competitors by being first to market with next generation products.
- Pursuing continuous product innovation to draw sales and market share away from less innovative rivals.
- Pursuing disruptive product innovations to create new markets.
- Adopting and improving on the good ideas of other companies.
- Using hit-and-run or guerrilla marketing tactics to grab market share from complacent or distracted rivals by low balling or using intense bursts of promotional activities.
- Launching a preemptive strike to secure an industry’s limited resources or capture a rare opportunity. -Strike 1st-
Give four examples of companies that are the best targets for offensive attacks:
- Market leaders that are in vulnerable competitive positions.
- Runner-up firms with weaknesses in areas where the challenger is strong.
- Struggling enterprises on the verge of going under.
- Small local and regional firms with limited capabilities.
Name and explain the two market spaces that the business universe is divided into:
- An existing market with boundaries and rules in which rival firms compete for advantage.
- A “blue ocean” market space, where the
industry has not yet taken shape, with no
rivals and wide-open long-term growth and
profit potential for a firm that can create
demand for new types of products.
Explain the purpose of Defensive Strategies:
- Lower the risk of the firm being attacked.
- Weaken the impact of an attack that does occur.
- Influence challengers to aim their efforts at other rivals.
What are the two forms that a defensive strategy could take?
- Actions to block challengers.
- Actions to signal the likelihood of strong retaliation.
Explain different ways a company can create obstacles to restrict a competitors’ options to form a competitive attack:
- Introduce new features and models to broaden product lines, to close off gaps and vacant niches.
- Maintain economy-pricing to thwart lower price attacks.
- Discourage buyers from trying competitors’ brands.
- Make early announcements about new products or price changes to induce buyers to postpone switching.
- Challenge quality and safety of competitor’s products.
Explain how signaling can be an effective defensive strategy and how it’s done: (4)
It can be effective when a firm follows through by:
- Publicly announcing its commitment to maintaining the firm’s present market share.
- Publicly committing to a policy of matching
competitors’ terms or prices.
- Maintaining a war chest of cash and marketable securities (Cash set aside to deal with uncertainties)
- Making a strong counter-response to the moves of weaker rivals to enhance its tough defender image.
Give five conditions that lead to first-movers advantage:
- When pioneering helps build a firm’s reputation and creates strong brand loyalty.
- When a first mover’s customers will thereafter face significant switching costs.
- When property rights protections thwart rapid imitation of the initial move.
- When an early lead enables movement down the learning curve ahead of rivals.
- When a first mover can set the technical standard for the industry.
Give some considerations needed to be asked when deciding if the company should be a first mover, or not:
♦ Does market takeoff depend on complementary products or services that are currently not available?
♦ Is new infrastructure required before buyer demand can surge?
♦ Will buyers need to learn new skills or adopt new behaviors?
♦ Will buyers encounter high switching costs in moving to the newly introduced product or service?
How do you define the scope of a firm’s operations?
You need to look at:
- The range of its activities performed internally.
- The breadth of its product and service offerings.
- The extent of its geographic market presence and its mix of businesses.
- The size of its competitive footprint on its market.
Explain a horizontal and vertical scope:
Horizontal scope: The range of product and service segments that a firm serves within its focal market.
Vertical scope: The extent to which a firm’s
internal activities encompass one, some, many, or all of the activities that make up an industry’s entire value chain system, ranging from raw material production to final sales and service activities.
Explain a merger strategy:
Its the combining of two or more firms into a single corporate entity that often takes on a new name.
Explain an acquisition strategy:
Its a combination in which one firm (the
acquirer) purchases and absorbs the
operations of another firm (the acquired)