2. Outline
Introduction
Sustainable competitive advantage (SCA)
Sources of SCA
Strategies for
Market Leaders
Challengers
Followers, and
Nichers
3. Introduction
Having a competitive advantage is necessary
for a firm to compete in the market
But what is more important is whether the
competitive advantage is sustainable
A firm must identify its position relative to the
competition in the market
By knowing if it is a leader, challenger,
follower or nicher, it can adopt appropriate
strategies to compete
4. Sustainable Competitive
Advantage
A good strategist seeks not only to “win the
hill, but hold on to it.” Subash Jain
Sustaining competitive advantage requires
erecting barriers against the competition
Aakers suggested looking at the following:
How you compete
Basis of competition
Where you compete
Whom you are competing against
5. Examples of SCA
For many years, Singapore Airlines were riding on
its SCA of having the best in-flight service
As more airlines improved their service and
narrowed the gap, SIA sought other competitive
advantages among which are
The most modern fleet
Outstanding Service on the Ground
A super entertainment system in its cabins
Comfort in its First Class cabins at an unparallel level
Discuss whether the later initiatives had been
sustainable
6. Sun Tze’s defensive strategy
“Do not assume the enemy will not come
but be prepared for his coming…
Do not presume he will not attack,
but instead make your own position
unassailable.”
7. Sun Tze’s Offensive Strategies
Overt-offensive strategy
To knock out a business rival so as to take over
his company
To knock out a competing product so as to
take over its market share
Covert-offensive strategy
Keep as low a profile as possible while making
offensive moves
8. Strategies for Market Leaders
Market Leader’s objectives:
Expand the total market by
Finding new users
Creating new uses, and
Encouraging more usage
Protect its current market share by
Adopting defense strategies (see following slides)
Increase its market share
Note the relationship between market share and
profitability
9. Which strategy to use?
Depends on your answer to the following:
Is it worth fighting?
Are you strong enough to fight?
How strong is your defense?
Do you have any choice but to fight?
10. Defense Strategy
A market leader should generally adopt a defense
strategy
Six commonly used defense strategies
Position Defense
Mobile Defense
Flanking Defense
Contraction Defense
Pre-emptive Defense
Counter-Offensive Defense
11. Defense Strategy (cont’d)
Position Defense
Least successful of the defense strategies
“A company attempting a fortress defense
will find itself retreating from line after line
of fortification into shrinking product
markets.” Saunders (1987)
e.g. Mercedes was using a position defense
strategy until Toyota launched a frontal
attack with its Lexus.
12. Defense Strategy (cont’d)
Mobile Defense
By market broadening and diversification
For marketing broadening, there is a need to
Redefine the business (principle of objective), and
Focus efforts on the competition (the principle of
mass)
e.g. Legend Holdings, the top China PC maker
Legend has announced a joint venture with AOL
to broaden its business to provide Internet
services in the mainland
13. Defense Strategy (cont’d)
Flanking Defense:
Secondary markets (flanks) are the weaker
areas and prone to being attacked
Pay attention to the flanks
e.g. San Miguel introduced a flanking brand
in the Philippines, Gold Eagle, as a defense
against APB’s Beerhausen
14. Defense Strategy (cont’d)
Contraction Defense
Withdraw from the most vulnerable
segments and redirect resources to those
that are more defendable
By planned contraction or strategic
withdrawal
e.g. India’s TATA Group sold its soaps and
detergents business units to Unilever in
1993
15. Defense Strategy (cont’d)
Pre-emptive Defense
Detect potential attacks and attack the
enemies first
Let it be known how it will retaliate
Product or brand proliferation is a form of
pre-emptive defense e.g. Seiko has over
2,000 models
16. Defense Strategy (cont’d)
Counter-Offensive Defense
Responding to competitors’ head-on attack
by identifying the attacker’s weakness and
then launch a counter attack
e.g. Toyota launched the Lexus to respond
to Mercedes attack
17. Market Challenger Strategies
The market challengers’ strategic objective is
to gain market share and to become the
leader eventually
How?
By attacking the market leader
By attacking other firms of the same size
By attacking smaller firms
19. Frontal Attack
Seldom work unless
The challenger has sufficient fire-power (a 3:1
advantage) and staying power, and
The challenger has clear distinctive
advantage(s)
e.g. Japanese and Korean firms launched
frontal attacks in various ASPAC countries
through quality, price and low cost
20. Flank attack
Attack the enemy at its weak points or
blind spots i.e. its flanks
Ideal for challenger who does not have
sufficient resources
e.g. In the 1990s, Yaohan attacked
Mitsukoshi and Seibu’s flanks by
opening numerous stores in overseas
markets
21. Encirclement attack
Attack the enemy at many fronts at the
same time
Ideal for challenger having superior
resources
e.g. Seiko attacked on fashion, features,
user preferences and anything that
might interest the consumer
22. Bypass attack
By diversifying into unrelated products
or markets neglected by the leader
Could overtake the leader by using new
technologies
e.g. Pepsi use a bypass attack strategy
against Coke in China by locating its
bottling plants in the interior provinces
23. Guerrilla attack
By launching small, intermittent hit-and-
run attacks to harass and destabilize the
leader
Usually use to precede a stronger attack
e.g. airlines use short promotions to
attack the national carriers especially
when passenger loads in certain routes
are low
24. Which Attack Strategy should a
Challenger Choose?
Use a combination of several strategies
to improve market share over time
25. Market-Follower Strategies
Theodore Levitt in his article, “Innovative
Imitation” argued that a product imitation
strategy might be just as profitable as a
product innovation strategy
e.g. Product innovation--Sony
Product-imitation--Panasonic
26. Market-Follower Strategies (cont’d)
Each follower tries to bring distinctive
advantages to its target market--location,
services, financing
Four broad follower strategies:
Counterfeiter (which is illegal)
Cloner e.g. the IBM PC clones
Imitator e.g. car manufacturers imitate the style of
one another
Adapter e.g. many Japanese firms are excellent
adapters initially before developing into challengers
and eventually leaders
27. Market-Nicher Strategies
Smaller firms can avoid larger firms by
targeting smaller markets or niches that
are of little or no interest to the larger
firms
e.g. Logitech--mice
Microbrewers--special beers
28. Market-Nicher Strategies (cont’d)
Nichers must create niches, expand the
niches and protect them
e.g. Nike constantly created new niches--
cycling, walking, hiking, cheerleading, etc
What is the major risk faced by nichers?
Market niche may be attacked by larger firms
once they notice the niches are successful
29. Multiple Niching
“[A] firm should `stick to its niching’ but not
necessarily to its niche. That is why
multiple niching is preferable to single
niching. By developing strength in two or
more niches the company increases its
chances for survival.”
Philip Kotler
30. Example of Nicher:
Challenger Superstore
Challenger Superstore is a discount retailer
of computers and accessories
It opened its first overseas store in
Bangkok at a cost of 90 million baht (S$3.7
million)
In October 2000, it closed its Bangkok store
“after failing to pay rent amounting to
about 6 million baht”
Discussion: Why do you think Challenger
failed in Thailand?
