Strategy Midterm Chapter 6

Front 1

Dimensions of Strategic Actions for Complimenting Basic Competitive Strategy

Back 1

1. Offensive and defensive competitive actions

2. Competitive dynamics and the timing of
strategic moves

3. Breadth of a company’s activities.

Which all leads into:

1) Offensive Strategic Moves

2) Defensive Strategic Moves

3) Horizontal Integration (Related / Unrelated)

4) Vertical Integration (backward or forward)

5) Outsourcing of value chain activities AND

6) Strategic Alliances

*can pursue one selectively or a mix of them

Front 2

Strategic Offensive Principles

Back 2

– Focus on relentlessly building competitive
advantage and then converting it into
sustainable advantage.

– Apply resources where rivals are least able
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.

Front 3

OFFENSIVE STRATEGY OPTIONS Within Existing Market Space:

Back 3

• Offer an equally good or better value product
at a lower price as a cost-based (value)
advantage to attack competitors.

• Leapfrog competitors by being first to
market with next-generation products.

• Pursue continuous product innovation to
draw sales and market share away from less
innovative rivals.

• Adopt and improve on the good ideas of
any other firms.

• Use hit-and-run or guerrilla warfare tactics
to grab sales and market share from
complacent or distracted rivals.

• Launch a preemptive strike to secure an
advantageous market position that rivals
cannot easily duplicate.

Front 4

Strategic Defensive Principles:

Back 4

– Focus on lowering the risk of being attacked

– Focus on weakening the impact of any
attack that occurs

– Influence challengers to aim their attacks at
other rivals.

Front 5

DEFENSIVE STRATEGY OPTIONS

Back 5

• Adopt alternative technologies as a hedge
against rivals attacking with a new or better
technology.

• Introduce new features and models to
broaden product lines to close 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.

• Grant discounts or better terms to
intermediaries who handle the firm’s product
line exclusively.

*get bid for selling your product only ex. only your beer sold in arenas

Front 6

Decision to Pursue Offensive /Defensive

Back 6

• Dependent upon position along strategy
implementation continuum

• Subject to Considerations of Market

Readiness:

1. Does market takeoff depend on the
development of complementary products
or services that currently are not available?

2. Is new infrastructure required before
buyer demand can surge?

3. Will buyers need to learn new skills or
adopt new behaviors? Will buyers
encounter high switching costs?

4. Are there influential competitors in a
position to delay or derail the efforts of a
first-mover?

Front 7

Decision about Timing of Offensive or Defensive Pursuit is subject to Considerations:

Back 7

• Pioneering Cost / Benefit versus Imitative
Following Cost / Benefit

• Ability to establish high switching costs via
innovation

• Ability to establish rights protection/
proprietary privileges

• Ability to gain lead down learning curve

• Ability to establish benchmark quality /
technical standard

Front 8

Scope Breadth of Operations:

Back 8

Is the range of activities which the firm performs internally, the breadth of its product and service offerings, the extent of its geographic market presence, and its mix of businesses.

Front 9

Horizontal vs Vertical Scope

Back 9

Front 10

Horizontal Integration - Potential Benefits:

Back 10

– Improved operational efficiencies

– Heightened product differentiation

– Introduction into new product categories

– Reduced market rivalry

– Increased bargaining power over suppliers
and buyers

– Enhanced its flexibility and dynamic
capabilities & resources

– Expanded geographic coverage

Front 11

Vertical Integration (Backward) - Potential Benefits:

Back 11

– Improved operational efficiencies

– Reduced dependence on suppliers of crucial components

– Enhanced control of inputs (quantity, quality,
and timing)

– Lessened vulnerability to price increases
caused by powerful suppliers

– Enhanced protection of proprietary
knowledge

Front 12

Vertical Integration (Forward) - Potential Benefits:

Back 12

– Improved operational efficiencies

– Enhanced control of end user experience

– Diminished bargaining powers of buyers

Front 13

Outsourcing – Potential Benefits:

Back 13

– Activity performed better by outside
specialists

– Improved organizational flexibility and speed to market

– Reduced exposure to changes in market

– Rapid access to specialized expertise/services

– Enhanced ability to focus on core business/ competitive advantage enhancing services

Front 14

Strategic Alliances

Back 14

Is a formal agreement between two or more separate companies in which they agree to work cooperatively toward some common objective.

Front 15

Strategic Alliance – Potential Benefits:

Back 15

– Facilitates business objective / flexibility

– Enhances capabilities / resources

– Enhances bargaining powers over suppliers

– Enables entrance into new markets

– Requires minimal investment relative to
quality, quantity, and timing of returns

Front 16

Joint Ventures

Back 16

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.

Front 17

The best offensives use a company's...?

Back 17

Most powerful resources and capabilities to attach rivals in the areas where they are weakest.

Front 18

What is a blue-ocean stategy

Back 18

It offers growth in revenues and profits by discovering or inventing new industry segments that create altogether new demand.

Front 19

Are good defensive strategies a way to create a competitive advantage?

Back 19

Rarely, but they can help protect a competitive advantage.

Front 20

How can being a first-mover be a disadvantage?

Back 20

- When pioneering is costly and allows for follower to copy with lower cost

- When products of innovator are somewhat primitive and do not live up to buyers expectations; follower can win buyers by having better products

- When rapid market evolution (due to fast-paced changes in either technology or buyer needs) give second-movers the opening to leapfrog with more attractive next-version products

- When market uncertainties make it difficult to ascertain what will eventually succeed, allowing late movers to wait until these needs are clarified.

Front 21

What does the scope of the firm refer to?

Back 21

Refers to the range of activities which the firm performs internally, the breadth of its products and service offerings, the extent of its geographic market presence, and its mix of business

Front 22

What does a company need to guard against when outsourcing activities?

Back 22

A company must guard against outsourcing activities that hollow out the resources and capabilities that it needs to be a master of its of destiny.

Front 23

The best alliances are highly selective, why?

Back 23

They should enable a firm to build on its strengths and to learn by focusing on particular value chain activities and on obtaining a specific competitive benefit.