The aim of all business and competitive strategies is to be significant and powerful player in an industry and to be able to dominate markets. To be able to achieve market status, companies have to assume competitive positions, which can be either as a market leader, market challenger, market follower or market nicer. Firms assume positions in an industry depending on their strengths, weaknesses, assets and competencies, and their business goals. These positions are not static and do change over time as the industry conditions change and firm’s business goals as well as strengths and weaknesses change.

(a) Market leader

The market leader is the dominant firm in the industry. Market leadership has traditionally been defined as the firm which leads in market share by volume and or value. For years has been believed that a dominant market share is the most profitable strategy for the firm as this was corroborated by the PIMS study. The PIMs database is an annual study conducted since 1970 on a database of over 3000 companies in the US and amongst other things reveals a co-relation between market share and profitability. This learning led to a number of organizations, over the years, blindly following the strategy of acquiring market share, only to see their profitability and consequently shareholder value steadily decline over the years. General motors’ is still the world’s largest automobile company (market share), with accumulated losses of $ 1.8 billion.

Key strategic actions:

1. Expand the total market

Market expansions are the primary task of the market leader and it usually gains the most when the total market expands.

A firm can expand the market by finding:

(i) New users of the product: by following market penetration strategy, new market segment strategy and geographical market expansion strategy.

(ii) New users of the product.

(iii) More usage on each use occasion.

(iv) More occasions of usage.

(v) Generate replacement demand.

2. Defend share

Remaining a market leader calls for action on several fronts. It is an old adage that “A good leader is one who is continuously attacking himself”. According to Sun Tzu, (Art of War) “one does not rely on the enemy not attacking, but on the fact that he himself is unassailable”.

Firms use a combination of defense strategies to protect market share:

Position (Fortress) defense: involves building superior brand power, strong brand portfolios.

Flank defense: protect weak fronts and strengthen weak areas. Companies launch flanker or fighter brands, to protect flagship brands in case of competitor attack or price war.

Pre-emptive defense: pre-empt an attack by attacking first. Dominant firms with resources may chose to entice an opponent into costly wars to wear down opponent.

Counteroffensive: wait for the invasion and then launch a counter attack.

Mobile defense: market is under threat due to macro environmental changes. Firms chose to broaden the scope of activities by developing new capacities and diversifying into other areas.

Contraction defense: here is a firm chooses to entirely exit a market divesting the business.

3. Increase sales when market size is constant

This is the most challenging task for any firm. “A rising tide raises all the ships in the harbor”. In growth mrkets, all companies will experience growth; however to a greater or lesser extent dependent on their strengths and weaknesses. It is when market growth and demand slows down that the real weakness advantage will survive and sales and market share and yet maintain profitability.

The strategic options are entirely dependent on the firm’s competitive advantage. Cost leaders may use pricing tactics to undercut rivals to gain share. This however is a suicidal can lead to an all out price war. Differentiator firms must use product value addition options to provide better perceived value to their customers.

Market share gains can also be made by improving distribution effectiveness, higher and more effective communication.

(b) Market challenger

A market challenger is a firm in a strong, but not dominant position that is following an aggressive strategy of trying to gain market share. It typically targets the industry leader (for example, Pepsi targets Coke), but it could also smaller, more vulnerable competitors.

General attack strategies that a market challenger would use are:

Frontal attack: match your opponent 3:1 on all fronts

Flank attack: concentration of strengths against an opponent’s weakness. A flank attack would be on areas/markets where the opponent is under performing.

Encirclement attacks: surround your launch an offensive on all fronts.

Bypass attack: is an indirect assault strategy in which a firm bypasses the other firms and attacks easier markets not served by any of the larger companies.

Guerilla warfare: waging small intermittent attacks to harass and demoralize the opponent.

(c) Market follower

A market follower is a firm in a strong, but dominant position that is content to stay at that position. The rationale is that by developing strategies that are parallel to those of the market leader, they will gain much of the market from the leader while being exposed to very little risk. Theodore Levitt wrote in his article “Innovative Imitation”, that a strategy of product imitation can be as profitable as the strategy of product innovation. The innovator bears the expenses of developing the product, educating the market and bears the risk of product failure. The reward for a pioneer or first mover is usually market leadership.

(d) Market Nicer

An alternative to being a leader in large market segment is to be a leader in a small market. In a niche strategy, same as the focus strategy, a firm concentrates on a select few target markets. The niche should be large enough to be profitable but small enough to be ignored by the major industry players. Profit margins are emphasized rather than revenue or market share. The firm typically looks to gain a competitive advantage through effectiveness rather than efficiency. It is most suitable for relatively small firms and has much in common with guerilla marketing strategies.

Services:- Competitive Strategies Homework | Competitive Strategies Homework Help | Competitive Strategies Homework Help Services | Live Competitive Strategies Homework Help | Competitive Strategies Homework Tutors | Online Competitive Strategies Homework Help | Competitive Strategies Tutors | Online Competitive Strategies Tutors | Competitive Strategies Homework Services | Competitive Strategies