Generic Competitive Strategies
1)Cost Leadership
2)Differentiation
3)Focus
Cost Leadership / Cost reduction - Gain sustainable cost advantages
- Experience curve
- Labor cost
- Accounting system / Utilization
- Economies of scale
- Linkages of Suppliers & Channel
Other Factors : Timing, location, regulation(tax,tariff...)
Differentiation
- Perception of buyers (reputation,advertising,packaging....)
- Premium product/ services
- Location (bank services)
- Advance Technology (apple inc.)
Defensive Strategy
Defensive Tactic - influence challenger's calculation of expected return from entry or repositioning
- Raising structural barriers (eg, Channel blocking tactics, raise cost of gaining trial,Tie up with suppliers)
- Increasing expected retaliation (eg, establish blocking position, Match guarantees, raise the penalty of exit or lost share, accumulate retaliatory resources, encourage good competitors, set examples, establish defensive coalition)
- Lowering the inducement for attack (reducing profit targets to reduce attractiveness, managing competitor assumptions)
Attacking an Industry Leader
Cardinal rule in offensive strategy is not attack head on with imitative strategy, regardless of the challenger's resources or staying power.
Case that violate the rule:
P&G v General Foods' Maxwell House (coffee)
Coca-cola v Gallo's (wine spectrum)
Successfully attacking leader requires 3 condition :
1) Sustainable competitive advantage ( Low cost or differentiation)
2) Proximity in other activities ( Partly or wholly neutralize leader's other inherent advantages. Eg, if challenger use differentiation, they also need to partly offset leader's natural cost advantage due to scale, first mover advantages...)
3) Some impediment to leader retaliation ( Blunting leader's retaliation. set impediment to their retaliation to avoid to bear unacceptable cost)
3 avenues of attact emerge as possible:
1) Reconfiguration (compete differently either lower cost or enhance differentiation although in same scope with leader) ( Sustainablility come from first mover advantages)
2) Redefinition ( Redefining the scope of competition) (can use focus within industry, integration or de-integration, geographic redefinition, horizontal strategy)
3) Pure spending ( final and riskiest way through investment to buy market share, cumulative volume, or brand identification.)
Other method
Alliances to attack leader (share resources, technology market access or other strength)
Conclusion
A challenger's attack on leader is unwise if it destroy industry structure. A closely related risk is where challenger gain market share but does not gain clear advantage over the leader, and the leader and the challenger are thus relatively balanced in competitive position. This resulting war can be protracted and expensive for both sides, 2 firm also gain any competitive advantages.
Does not simply attack leader because some leader are "good" , they are provide umbrella/protection for challenger's profitability.
