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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.
It involves consolidating all the resources of the companies to maintain ones position in the market. This normally occurs under stiff competition or under 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.
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.
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.
In this strategy the idea is to have every area of competency 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 physical, price, and perceptual positions in the marketplace. From decaffeinated coffees to premium brands, General Foods has complete coverage of the market. Because of such market domination, other competitors have few un-served or poorly served markets to attack.
OFFENSIVE MARKETING WARFARE
Frontal attack, Flanking, Encirclement, Bypass and Guerilla warfare are some examples of offensive strategy. When using the offensive strategy in marketing warfare, Al Ries and Jack Trout suggest three offensive principles which include: 1. The main consideration is the strength of the leaders' position. 2. Find a weakness in the leader's strength and attack at that point. 3. Launch the attack on as narrow a front as possible.
Frontal attack occurs when a company takes all of their forces and faces them directly opposite of the opponent. In order to be successful with this type of an attack, statistics show that a factor of five to one is needed for a successful frontal attack. For example, in the 1970's three electronic giants tried to attack IBM head on against their stronghold on the mainframe computer market .Each electronic corporation failed because they used a pure frontal attack against IBM's massive stronghold.
There are many types of frontal attacks including: a pure frontal attack, a limited frontal attack, price based frontal attack, and research and development based frontal attack. A pure frontal attack involves matching a competitor's product in all areas of marketing. The product is matched price versus price, promotion versus promotion, characteristic versus characteristic and so on. Basically, a pure frontal attack is taking a "look alike" or "me too" strategy. When using a pure frontal attack, companies should be prepared to expend large sums of money.
The next type of frontal attack is the limited frontal attack. A limited frontal attack focuses on specific customers and tries to lure them away from competitors. One example of a limited frontal attack may occur when a new product enters the market such as a new type of paint. The paint company would pursue a select number of their competitor's customers and bring them in on a whole number of product dimensions simultaneously.
Another type of frontal attack is the price based frontal attack. In priced based frontal attack, the aggressor focuses mainly on the price of a product to gain more customers. Every product characteristic is matched; however, the competition beats his competitor on price.
Finally, research and design is a fourth type of frontal attack. This is a more difficult type of attack to employ. The competitor tries to reduce production costs, improve the product, and other characteristics which would enhance product value. With this type of attack, more creative ideas are implemented which allow for a better product.
There are three conditions that need to be met by a firm before it embarks in a frontal attack. First, the firm needs an adequate amount of resources to support the attack. Second, the firm must be able to create and sustain a competitive advantage over it's competitors. Finally, the company must be able to persuade their competitor's customers to try their product and become their loyal customer. In the frontal attack, it is important that everyone in the firm and those who purchase the product perceive a competitive advantage.
Flanking Marketing Warfare
A second type of offensive strategy is the flanking strategy. In a flanking strategy, a company focuses its forces on the weaker sides of its competitor. Three principles of flanking warfare are mentioned in Al Ries and Jack Trout's book, Marketing Warfare. These principles are: 1. A good flanking move must be made in an uncontested area. 2. Tactical surprise ought to be an important element of the plan, and 3. The pursuit is as critical as the attack itself. Usually this offensive strategy is used by a company that does not have overwhelming superiority, but may have an advantage in one particular area. For example, in the mid 1970's Xerox owned eighty-eight percent of the plain-paper copier market; however, almost ten years later the Japanese based Canon Copier took over half of Xerox's market. The main reason Canon took over such a large portion of Xerox's market was by use of the flanking strategy. Canon focused on the small size copier market that could not afford Xerox's larger copiers. This attack was successful because it put the attacker's strength against the defenders weakness.
There are two types of flanking strategy; Geographical and segmented flanking. Geographical flanking occurs when a firm attacks different areas within the world or country where competitors are nonexistent or not very strong. The Coca-Cola Company uses this type of marketing strategy. When I interviewed Anna Whaley, Director of worldwide marketing and sales, she said a majority of Coca-Cola's profits will come from the international areas where competition is not as fierce.
A second type of flanking involves identifying market areas or needs not being served by competitors within a geographical area. Segmented flanking potentially can be more powerful than geographical flanking attacks because they satisfy market needs the competitor has ignored. The Japanese have used segmented flanking when entering the United States market. They brought products that were different and aimed them at neglected market segments. These products were smaller or stripped down versions of established products, and they had more features for the same or lower price . The overall idea of flanking strategy is to bring a broader coverage of a markets varied needs.
Marketing warfare through encirclement
Encirclement is a third type of offensive strategy. When using this type of strategy a company must have superiority in all areas. Encirclement attacks the competitor from all sides simultaneously. A ratio of ten to one is needed to employ this type of strategy. The basic idea of encirclement is to force the competitor to protect their product from all sides. For example, Smirnoff Vodka used encirclement strategy when another product was introduced and positioned itself directly against Smirnoff, but at a lower price. Smirnoff counterattacked by first raising its prices, which preserved their quality image. After raising their prices, they introduced another brand, marketed it at the same price as the competition, and introduced another brand at a lower price.
There are two types of encirclement strategy: product encirclement and market encirclement. Product encirclement introduces products with many different qualities, styles, and features that overwhelm the competition's product line. Many Japanese firms have encircled U.S. products such as televisions, radios, hand-held calculators, watches, and stereo equipment. Market encirclement goes beyond the end user, and focuses on the distribution channels. Seiko is one example of market encirclement. By gaining every available distribution channel for watches, Seiko took over as much shelf space as possible. There are some risks to be aware of when employing the encirclement strategy. Having the substantial resources and organizational commitment are two factors needed before using encirclement strategy. Because it is necessary to have these two requirements; winning a battle through encirclement takes a great deal of time.
Marketing warfare through bypass
A fourth type of offensive strategy involves the bypass. A bypass attack wins the battle through attacking areas not defended. When Colgate-Palmolive tried to enter the nonwoven textiles and health care business, it did not have to fight Procter and Gamble's strengths because they used the bypass strategy.
There are basically three types of bypass strategy: develop new products, diversify into unrelated products, and expand into new geographical markets for existing products. Developing new products is a fairly easily understood bypass method. Rather than copying the leader, the competitor creates entirely new products thus gaining a larger market share of untapped customers.
Diversifying into unrelated products is a second type of bypass strategy. Rather than remaining in a single-industry business the firm will venture out into product lines that are different from their one single product. Sony has employed this bypass strategy through entering the restaurant and construction business.
One reason companies may use the bypass strategy is the large amount of congestion in the competitive battleground. For example, if a company produces a new product, the company basically moves the new product to a new level within the same product market area. Moving into digital and electronic watches may bypass the mechanical watch market; however, the company is still fighting for a position within the watch industry. Conversely, movement into an entirely new geographical market usually allows a company to bypass competitors completely.
Guerilla marketing warfare
A final type of offensive warfare is guerilla warfare. Some of the principles that can be used when determining when to use guerrilla warfare are the following: 1. Find a segment of the market small enough to defend, 2. No matter how successful you become, never act like the leader, and 3. Be prepared to buyout at a moment's notice. Guerilla warfare basically involves winning small victories that can over time amount to a large gain in market share. This attack works because it is very unconventional which makes it difficult for the defender to counter-attack, and because they are aimed at small, weak, and unprotected market positions.
One example of guerilla warfare occurred when IBM won a lawsuit against Hitachi on the grounds that Hitachi stole IBM software. Because IBM won this small battle, Japanese computer manufacturers had to become defensive by investing large sums of money into scarce software research and development personnel who had to re-write old programs and develop new programs which did not interfere with IBM's intellectual property rights .This type of guerilla warfare pushed Japanese computer makers back many years.
Guerilla strategy is usually implemented by companies who are smaller in market position and resource base than the firm they attack. This strategy has usually been used by the Japanese on U.S. firms which have caused a large drain on the resources used by the U.S. firms.