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Chap006 Supplementing Chosen Strategy

Jul 17, 2016

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  • Fig. 6.1a: Strategy Options

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  • Fig. 6.1b: Strategy Options

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    Choosing Strategy Actions that Complement a Firms Competitive ApproachDecisions regarding the firms operating scope and how to best strengthen its market standing must be made:Whether and when to go on the offensive and initiate aggressive strategic moves to improve the firms market position.Whether and when to employ defensive strategies to protect the firms market position.When to undertake strategic moves based upon whether it is advantageous to be a first mover or a fast follower or a late mover.

    2013 by The McGraw-Hill Companies, Inc. All rights reserved.

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    Choosing Strategy Actions that Complement a Firms Generic Competitive Strategy Decisions re the firms operating scope and how to best strengthen market standing need to be made:Whether to integrate backward or forward into more stages of the industry value chain.Which value chain activities, if any, should be outsourced.Whether to enter into strategic alliances or partnership arrangements with other enterprises.Whether to bolster the firms market position by merging with or acquiring another company in the same industry.

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    Launching Strategic Offensives to Improve a Companys Market PositionAggressive strategic offensives are called for when a firm:Spots opportunities to gain profitable market share at the expense of rivals Has no choice but to try to whittle away at a strong rivals competitive advantageCan reap the benefits a competitive edge offersa leading market share, excellent profit margins, and rapid growthThe best offensives use a firms resource strengths to attack its rivals weaknesses.

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    Choosing the Basis for Competitive Attack

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    Principal Offensive Strategy OptionsAttacking the competitive weaknesses of rivalsOffering an equally good or better product at a lower pricePursuing continuous product innovationLeapfrogging competitors by being the first to market with next generation technology or productsAdopting and improving on the good ideas of other companies (rivals or otherwise)Deliberately attacking those market segments where a key rival makes big profitsManeuvering around competitors to capture unoccupied or less contested market territory

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    Principal Offensive Strategy Options (contd)Using hit-and-run or guerrilla warfare tactics to grab sales and market share from complacent or distracted rivalsLaunching a preemptive strike to capture a rare opportunity or secure an industrys limited resourcesSecure the best distributors in a particular geographic region or countrySecure the most favorable retail locations Tie up the most reliable, high-quality suppliers via exclusive partnerships, long-term contracts, or even acquisition

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    Choosing Which Rivals to Attack

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    Blue Ocean StrategyA Special Kind of Offensive

    Involves a firm seeking sizable and durable competitive advantage by abandoning its existing markets and, then, inventing a new industry or distinctive market segment in which that firm has exclusive access to new demand.By reinventing the circus, Cirque du Soleil annually attracts an audience of millions of people who typically do not attend circus events.

    2013 by The McGraw-Hill Companies, Inc. All rights reserved.

    Core Concept 6-*

    Blue ocean strategies offer growth in revenues and profits by discovering or inventing new industry segments that create altogether new demand.

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    Core Concept 6-*

    Competitive Advantage Cycle a framework describing how competitive advantage is affected by simultaneous occurrences of investments in renewal, leveraging on sources of advantage, and performance of competitive firms in a dynamic industry .

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    Core Concept 6-*

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    Core Concept 6-*

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    Using Defensive Strategies to Protect a Companys Market Position and Competitive Advantage

    Defensive strategies help fortify a competitive position:Lowers risk of being attacked, copied.Weakens the impact of any attack.Influences challengers to redirect efforts towards other rivals.Good defensive strategies help protect competitive advantage but rarely are the basis for creating itCausal Ambiguity, Duplicability, Threat of Retaliation.

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    Blocking the Avenues Open to ChallengersCreate Barriers to Imitiation:Causal AmbiguityDuplicabilityThreat of Retaliation

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    Blocking the Avenues Open to ChallengersIntroduce new featuresAdd new models Broaden product line to fill vacant nichesMaintain economy-priced modelsMake early announcements about upcoming new products or planned price changes Grant volume discounts or better financing terms to dealers and distributors to discourage them from experimenting with other suppliersADD: Create Barriers to Imitation

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    Signaling Challengers that Retaliation Is Likely

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    Signaling Challengers that Retaliation Is LikelyPublicly announce managements strong commitment to maintain the firms present market sharePublicly commit firm to policy of matching rivals terms or pricesMaintain war chest of cash reservesMake occasional counterresponse to moves of weaker rivals

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    Timing a Companys Offensive and Defensive Strategic MovesWhen to make a strategic move is often as crucial as what move to make.First-mover advantages arise when:Helps build a firms image as a PioneerEarly commitments (technology, channels) produce a cost advantage over rivalsFirst-time customers show loyalty through repeat purchasesServes as a preemptive strike, making imitation difficult, or unlikely

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    First-Mover DisadvantagesMoving early can be a disadvantage (or fail to produce an advantage) whenCosts of pioneering are sizable and loyalty of first time buyers is weakInnovators products are primitive, not living up to buyer expectationsRapid technological change allows followers to leapfrog pioneers

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    Principle 1Being a late mover can sometimes yield as good a result as being a first moverPrinciple 2Being a late-mover may or may not be fatal -- it varies with the situationPrinciple 3Being a fast follower can sometimes yield as good a result as being a first moverTiming and Competitive Advantage

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    The early bird catches the worm, but the late mouse gets the cheese!Timing and Competitive Advantage

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    Core Concept 6-*

    Because of first-mover advantages and disadvantages, competitive advantage can spring from when a move is made as well as from what move is made.

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    Deciding Whether to Be an Early Mover or Late MoverKey Issue:Is the race to market leadership a marathon or a sprint?Seeking first-mover competitive advantage involves addressing several questions:Does market takeoff depend on complementary products or services not currently available?Is new infrastructure required before buyer demand can surge?Will buyers need to learn new skills or adopt new behaviors?Are there influential competitors in a position to delay or derail the efforts of a first mover?

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    Concepts and Connections 6.1 Amazon.Coms First-Mover Advantage in Online Retailing

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    Choosing Functional StrategiesInvolves strategic choices about how functional areas are managed to support competitive strategy and other strategic movesFunctional strategies includeResearch and developmentProductionHuman resourcesSales and marketingFinanceTailoring functional-area strategies to support key business-level strategies is critical!

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    Vertical Integration: Operating Across More Industry Value Chain SegmentsInvolves extending a firms competitive and operating scope within the same industryBackward into sources of supplyForward toward end users of final productCan aim at either full or partial integration

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    Core Concept 6-*

    A vertically integrated firm is one that performs value chain activities along more than one stage of an industrys overall value chain.A vertical integration strategy has appeal

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