Marketing strategies used by companies to achieve or defend its competitive advantage. The main strategies used are defensive and offensive strategies. Offensive strategies are used to secure the company’s competitive advantage whereas a defensive strategy is used to defend the competitive advantage of the company. These strategies have various types that are further explained with the help of techniques used by companies to capture or defend their competitive advantages. The examples elaborate in simplified terms the marketing warfare that takes place to maintain and capture market share.
The Defensive Marketing Strategies
This strategy aims at maintaining the market share the company has already achieved. It does not enhance the firm’s competitive advantage but helps fortify the firm competitive position. Normally a defensive strategy should be employed by the market leader due to its market share advantage and position.
There are various types of defensive strategies which are elaborated below.
1. Position Defense:
It involves consolidating all the resources of the companies to maintain ones position in the market. This normally occurs when there is stiff competition or the firm is undergoing major structural changes. The company here is normally the market leader and the attackers have limited access to resources. The firm wants to stay in the business it is best at and avoid diversification. The firm basically is trying to maintain status quo.
2. Counter Attack:
The strategy here is to exploit the competitor’s weakness; it allows the defender to cash on the attacker’s mistakes. There are many methods to counterattack.
- Cutting the attacker’s cash supply.
- The attacker cannot defend and attack simultaneously.
3. Mobile Defense:
It involves mobilizing your ground to explore new opportunities. It occurs when the mobility is high preventing the attacker from localizing the forces. For example the Nike corporations does not limit its operations to USA but explores newer markets for their products as well as takes advantage of the cheaper labor costs the developing nations offer in terms of operations.
4. Strategic Retreat:
This strategy uses the method of cutting down on unwanted expenses and keeping only the bare minimum to function. The firm basically retreats from its non core competencies. To explain further, firm Chrysler used this strategy during the 1978 when the company was affected by the oil price shock, it had to cut down on the salaries of the top management, use back and white annual reports, cut on stock holdings and many more to steer the company away from a shutdown. Within a matter of 3 years the break even of the company had dropped to $1.1 million from $2.3 million.
5. Fortification Strategy:
In this strategy the idea is to have all the competency areas or every product of the firm protected leaving no area for attacking. This type of defense could be risky; the product must be molded according to the changing technologies and market conditions. For example General Foods has entries in all the physical, price, and perceptual positions at the marketplace. Moving decaffeinated coffees to niche brands, General Foods covered the market fully, leaving no space for competitor’s entry. Because of such market domination, other competitors have few unserved or poorly served markets to attack.
Offensive Marketing Strategies
These strategies involve obtaining a advantage over the competitor who is much stronger in all aspects. It normally involves something drastic such as a dramatic price cut, an eye catching commercial, or smash hit new product. There are many types which are discussed below.
1. Guerrilla Marketing Strategy:
The guerrilla marketing strategy involves attack at a small segment; it involves small attacks on the company’s such that they don’t get the attention, these small victories snowball into a large market share for the company. This is normally used by companies that are smaller in nature fighting the market leaders.
An example of guerrilla warfare happened when IBM won a lawsuit against Hitachi stating that Hitachi had stolen IBM software. As IBM won this petty battle, and Japanese computer manufacturers become defensive by investing huge amounts of capital into research and development of software where the programmers had to re-write the programs and develop programs from scratch, that did not interfere with IBM’s patent or copyrights. This type of guerrilla strategy pushed the Japanese computer makers back several years.
2. Bypass Strategy:
A Bypass attack wins the battle through attacking areas not defended. There are basically three types of bypass strategy: develop new products, diversify into unrelated products, and expand into new geographical markets for existing products. For example Colgate-Palmolive ventured into the non-woven textiles and health care business, it did not fight the Procter and Gamble’s strengths due the bypass strategy used.
There three types:
- Developing new products.
- Diversifying into unrelated products
- Place your products in an extended market or try to capture markets in newer demographics.
A simple strategy is to create a new product which is entirely new, thereby gaining on market share.
Diversifying into product lines that are totally unrelated to the current line is another type of bypass strategy that aims at putting off the competitor who is much stronger hold. For example Sony has employed this strategy by diversifying into the restaurant business and construction business.
One of the reasons companies use bypass strategy is due to numerous players in the competitive market. For example, when a company produces a new product, the company basically moves the product (new one) to a next or newer level within the same product market area or the same line. Another example would be moving into digital and electronic watches that would bypass the mechanical watch market; however, the company is still fighting for a position within that industry. Conversely, the movement into an entirely new demographic market usually allows a firm to bypass its competitors completely.
3. Encirclement:
Encirclement is another type offensive strategy. For this strategy a firm must have a stronghold in most of the areas of the product, in all angles and forms possible. The competitor must be much stronger in comparison the firm. The motive or aim is to force the competitor to protect its product. . Encirclement attacks the competitor from all sides simultaneously. A ratio of ten to one is needed to employ this type of strategy. The apt example would be Smirnoff for introducing products in the price slash manner to gain market share.
Product and market encirclement are the types of strategies used here. In the product encirclement strategy the company uses different qualities, features and types of products introduced in almost are the segments and the price ranges possible. This withholds competition as the competitor is unable to enter the market and even if it does it is unable to capture the market share. For example Huwaei Ltd. in India which launched internet modems which implemented this very strategy to capture market share and stall competition. It patented the various types of modems resulting in the competitors unable to launch products due to the Intellectual Property Rights Act.
4. Flanking Strategy:
In this type of attack the it tries to dedicate its effort towards the competitor’s weakness. It strikes the competitor where it hurts the most. In a flanking strategy, a company focuses it’s forces on the weaker sides of it’s competitor. It is normally used by a firm that does not have stronghold in the market. It mainly seeks to weaken the market leader by cashing in on the territories not protected by the company. For example Samsung a Korean company focused on consumer electronics a market the leader GE did not see as significant and turned itself into a giant consumer electronics manufacturer.
The main know how to implement the strategy is:
- Always look out for areas that are not protected or segments that are undervalued.
- Start off with making small attacks that quickly snowball into larger ones.
- Attack competitors who have a much larger market share.
- The moves must normally not be anticipated.
By the time the competitors realizes the severity of the move, it must have helped you in capturing the market share or advantage.
The above principles when applied to the GE, Samsung case we can clearly see the flanking moves made by the smaller company of the giant, that has a much larger market share as well as stronghold. This strategy is normally suitable when the
- The market is segmented.
- The target company cannot be attacked head-on.
- The company does not consider the area that is attacked to be critical to the firms operations.
5. Frontal Attack:
This type of attack involves full frontal confrontation with the competitor. In this case the attacker must have strength manifold in nature to the competitor. Frontal attack occurs when a company takes all of their forces and face them directly opposite of the opponent. This attack normally a giant company in that market segment. For example in the case of IBM which is a market leader in the computer network industry was attacked simultaneously by three majors players in the industry, this was done intentionally to capture the market share and competitive advantage of IBM.
There are various types of frontal attack are the pure frontal attack, the price based attack, the research and development attack and the limited frontal attack and many more types.
- Pure frontal attack is raw in nature implying a full frontal attack on the competitor such that he is fully aware of the attack. An example of it is the price of the attacker to match that of the competitor. Another example could be a promotional campaign to attack the competitor directly.
- Limited frontal attack involves specific segments addressing target customers. Entering into the soft toothbrush segments would target the children in the age group of 4 to 12 years. The Oral-B toothbrush addressed the dental conscious people.
- Price frontal attack involves slashing of prices to meet he competitors. Example of this would the mobile tariffs seen for the STD segment, wherein Airtel and Vodafone are neck tot neck in terms of the rates of STD.