Organizations need to adopt competitive strategies for their existence and for maintaining their position in market. When it comes to adopting a competitive strategy, organizations need to consider what factors separate them from their competitors. Research firm Dun & Bradstreet suggests evaluating the competitive advantages in business process, expertise, uniqueness or relationships an organization enjoys with its suppliers, customers and marketing channels before adopting any of the strategies.
Competitive strategies can be divided into offensive and the defensive strategies. Companies pursuing offensive strategies directly target competitors from which they want to capture market share. In contrast, defensive strategies are used to discourage or turn back an offensive strategy on the part of the competitor.
Offensive strategy: An offensive competitive strategy is a type of corporate strategy that consists of actively trying to pursue changes within the industry. Companies that go on the offensive generally invest heavily in research and development (R&D) and technology in an effort to stay ahead of the competition. Offensive strategies directly target competitors from which they want to capture market share. Some of the offensive strategies are as follows:
Frontal Attack: A frontal attack is attacking a competitor ahead on by producing similar products with similar quality and price; it is highly risky unless the attacker has a clear advantage. The most prominent example is war between Pepsi & Coca Cola. Both are cash rich. Since ages they use frontal attack strategy against each other. Both are market leaders in beverage market. When Pepsi introduced diet Pepsi, Coke introduced diet Coke.
Flank Attack: The Flank attack is the marketing strategy adopted by the challenger firm and is intended to attack the weak points or blind spots of the competitor, especially when competitor enjoys leadership position in market. LG outflanked the other colored TV producers in India, by launching a rural-specific colour TV “Sampoorna”, thereby becoming the first one to tap the rural areas. LG demonstrated that Rural Customers are not just price conscious, but are actually value conscious and are ready to pay reasonable premium if organization deliver solution to their long-standing problem with their Sampoorna CTV.
Encirclement Attack: This form of market challenger strategy is used when the competitor attacks another on the basis of strengths as well as weaknesses and does not leave any stone unturned to overthrow the competition. The current e-commerce scenario is the best example of the encirclement attack where the E-commerce companies are ready to go negative in their margins to beat a competitor on turnover basis. They want to come on top and gain maximum customers by hook or crook.
Bypass Attack: This type of strategy is found in a firm which has the brains to innovate. And when it innovates, it bypasses the complete competition and creates a segment of its own. Off course, other competitors soon follow. But the attack is very useful in the long term to create brand reputation and gain customers. Sony Corp. co-founder Masaru Ibuka who liked to listen to music during his frequent business trips was tired of carrying his bulky TC-D5 cassette deck around. He asked his designers to create something smaller. They came back with the headphone-equipped TPS-L2. It looked sleek and striking, which they showed to chairman Akio Morita. “Try this,” Ibuka said. “Don’t you think a stereo cassette player that you can listen to while walking around is a good idea?” On July 1, 1979, the sleek little device hit the market, priced at $150. Sony called it the ‘Soundabout’, and then changed the name to the Walkman. Walkman became such a craze, consumers wound up buying 400 million of them. Today, with half of Smartphone owners using their devices to listen to music, it’s easy to forget how radically the Walkman changed things. Another example of Bypass attack is I phone and I Pod.
Guerrilla marketing: Making small but useful changes, which repeatedly puts a brand in the forefront, and slowly but surely makes it a huge name in the market, is the crux of Guerrilla marketing. A small brand, which wants to take on huge competitors, which first becomes famous in a local market, then will introduce price discounts and trade discounts. Guerrilla marketing campaigns are highly targeted in terms of location where they are launched.
Guerilla marketing is born a way of marketing which allows brand differentiation concerning the competition. In fact, right guerrilla marketing actions are usually, activities remembered by the people who have witnessed it. One of the usual places to create guerrilla marketing actions is the zebra crossings. The lines painted on the ground give you a lot to play with if you have the necessary creativity. For example, McDonald’s simulates that the lines are French fries coming out of the typical package of the hamburger brand. What is interesting about this action is that, besides of being part of a real zebra crossing, which still has the same function, it has achieved that the image is one of the company’s products. And besides, with the image type of the M in the sight of all pedestrians.
Defensive strategies: Defensive strategy is defined as a marketing tool that helps companies to retain valuable customers that can be taken away by competitors. When rivalry exists, each company must protect its brand, growth expectations, and profitability to maintain a competitive advantage and adequate reputation among other brands. To reduce the risk of financial loss, firms strive to take their competition away from the industry. Following are some regularly used defensive strategies by firms:
Retrenchment: It consists of the reduction of the expenses by employees’ layoffs to increase profitability. This forces employees to manufacture the company’s products with limited resources or with cheaper raw material. For example, HSBC lay off 200 employees in Pune recently. In 2009, Starbucks had closed down 600 units in the United States and 61 in Australia; they lay off employees in thousands. Another example is Tech Mahindra and IBM in India went on retrenchment drive in past two years.
Divest: When the company sells some of its assets to accomplish a certain objective, such as higher returns or reduces debts. Usually, companies that implement this strategy want to invest that capital to create higher future revenue. This strategy has helped some organizations to get more focused on their core business and improve their performance in the market. It is common that enterprises sell their poor assets or divisions.
For example, in 2009 Ailing Lehman Brothers Holdings divested its venture-capital division as the firm sol In December 2009, L&T sold its 17% stake in Bangalore International Airport Ltd (Bial) to GVK Power and Infrastructure Ltd. (GVKPIL) for ₹ 686 crore; part of the assets were sold to generate enough cash to pay their debts. L&T wants to sell its holding in the Dhamra Port in Odisha to Adani Ports.
Liquidation: Liquidation is the hardest strategy to perform by a company because it means that it went into bankruptcy. This can be caused because the operation and administration of the firm was not appropriate or the managers were not trained enough to control the activities of the firm. In this case, the unique solution is to sell all the company’s assets in small parts to shareholders, stakeholders or other companies that are economically solvent. Although this is a tough decision, it is better to stop the operational chaos instead of continuing losing more money. The National Company Law Tribunal (NCLT) has ordered liquidation of two Rotomac group companies’ Global and Exports companies whose promoter Vikram Kothari is accused of being involved in a banking fraud. The order was pronounced at the NCLT’s Allahabad chapter in 2016. But, as of October 1st 2019, there are no buyers for junk priced Rotomac.
