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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