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Definition:
Markets with:
i)
Overcapacity
ii)
Low margin
iii)
Immense
competition
iv)
Management
disarray
in
CAUSES:
1. Decline
in
demand
2. Competitive
expansion
3. Excess Output
FEW EXAMPLES:
1. Airline Industry due to
overcapacity
2. Telecom industry due to
intense competition
3. Smartphone manufacturer
due to low margins
4. E-Retail due to low margins
Differentiate on reliability
40%
Expand Market
Defend Market Share
Expand Market Share
Leader Threats
Ries and Trout argue: that well-known products generally
hold a distinctive position in consumers' minds.
Nevertheless, unless a dominant firm enjoys a legal
monopoly, its life is not altogether easy. It must maintain
constant vigilance.
Leader Actions
Remaining number one calls for action on three fronts.
First, the firm must find ways to expand total market demand.
The dominant firm normally gains the most when the total market
expands.
Example Maggi Noodles from Children to adults & health noodles
A.
B.
Second, the firm must protect its current market share through
good defensive and offensive actions.
While trying to expand total market size, the dominant firm must
continuously defend its current business.
For a market leader do to defend its terrain. The most constructive
response is continuous innovation. The leader leads the industry in
developing new product and customer services, distribution
effectiveness, and cost cutting. It keeps increasing its competitive
strength and value to customers.
Example Apple from IPod, MAC to Ipod
Third, the firm can try to increase its market share, even if market
size remains constant.
Defense Strategies
(2) Flank Defence
Attacker
(3)Preemptive
Defense
(4)CounterOffensive
Defense
(1)
Position (6) Contraction
Defense
Defense
Defender
(5)
Mobile
Defense
Defense Strategies
Defence Strategies
SBI
Defense Strategies
Counteroffensive Defense: When attacked, most market leaders will
respond with a counterattack. Counterattacks can take many forms.
A.
In a counteroffensive, the leader can meet the attacker frontally or hit
its flank or launch a pincer movement.
B. An effective counterattack is to invade the attacker's main territory
so that it will have to pull back to defend the territory.
After FedEx watched UPS successfully invade its airborne delivery
system, FedEx invested heavily in ground delivery service through a series
of acquisitions to challenge UPS on its home turf.
C
Another common form of counteroffensive is the exercise of
economic or political clout. The leader may try to crush a competitor by
subsidizing lower prices for the vulnerable product with revenue from its
more profitable products;
D
The leader may prematurely announce that a product upgrade will be
available, to prevent customers from buying the competitor's product; or the
leader may lobby legislators to take political action to inhibit the
competition.
Defense Strategies
Defense Strategies
40%
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Defend Market Share
Expand Market Share
Market
Challenger
30%
Attack Leader
Status Quo
Challenger Strategies
A market challenger must first define its strategic objective. Most aim to
increase
market share. The challenger must decide whom to attack:
A.
B.
C.
Many market challengers have gained ground or even overtaken the leader.
Defender
(3) Encirclement Attack
Attack Strategies
I.
II.
III.
Frontal Attack:
In a pure frontal attack, the attacker matches its opponent's
product, advertising, price, and distribution.
The principle of force says that the side with the greater
manpower (resources) will win.
A modified frontal attack, such as cutting price visa-vis the
opponent's, can work if the market leader does not retaliate and
if the competitor convinces the market that its product is equal to
the leader's.
Attack Strategies
Flank Attack : An enemy's weak spots are natural targets. A flank
attack can be directed along two strategic dimensionsgeographic and
segmental.
A. In a geographic attack, the challenger spots areas where the opponent
is underperforming. For example, some of IBM's former mainframe
rivals, such as Honeywell, chose to set up strong sales branches in
medium- and smaller-sized cities that were relatively neglected by IBM.
B. The other flanking strategy is to serve uncovered market needs, as
Japanese automakers did when they developed more fuel-efficient
cars.
C. Flanking is in the best tradition of modern marketing, which holds that
the purpose of marketing is to discover needs and satisfy them.
D. Flank attacks are particularly attractive to a challenger with fewer
resources than its opponent and are much more likely to be successful
than frontal attacks.
Attack Strategy
Attack Strategy
Attack Strategy
Technological leapfrogging: is a
bypass strategy practiced in high-tech
industries. The challenger patiently
researches and develops the next
technology and launches an attack,
shifting the battleground to its territory,
where it has an advantage.
Challenger Google used technological
leapfrogging to overtake Yahoo! and
become the market leader in search.
Attack Strategy
Price-discount
Cheaper goods
Prestige goods
Product proliferation
Product innovation
Improved services
Distribution innovation
Manufacturing cost reduction
Intensive advertising promotion
40%
Expand Market
Defend Market Share
Expand Market Share
Market
Challenger
30%
Attack Leader
Status Quo
Market
Follower
20%
Imitate
Market Followers
Follow closely
Follow at a distance
Market Followers.
S& S
40%
Expand Market
Defend Market Share
Expand Market Share
Market
Challenger
30%
Attack Leader
Status Quo
Market Market
Follower Nicher
20%
10%
Imitate Specialise
Quote-2
"The most serious mistakes are not being
made as a result of wrong answers. The truly
dangerous thing is not getting the right
questions."
Dr Ravindra
Pratap Gupta
Questions
Q10. Discuss what leads to performance
decline. Discuss
the strategic options for declining
markets?
Q11. Discuss various defense strategies?
Thanks