Competitive strategies can be divided into the offensive and the defensive. Companies pursuing offensive strategies directly target competitors from which they want to capture market share. In contrast, defensive strategies are used to discourage or turn back an offensive strategy on the part of the competitor.
There are a number of ways in which a company can pursue an offensive strategy:
1. Direct attack
It can slash prices, introduce new features, launch comparison advertisements unfavourable to the competition, or go after parts of the market that the competition has served poorly.
For smaller companies, such strategies can be accompanied by low-cost guerrilla marketing campaigns designed to attract attention.
Companies can avoid direct competition but still pursue an offensive attack by going into unoccupied markets or countries that have been ignored completely by the rest of the industry.
Sometimes the first company into a market gains a position from which later entrants cannot dislodge it. The first company into a market can secure relationships with the best suppliers, it can acquire the best locations, and it can target and build relationships with the best customers.
A truly aggressive company with deep pockets can eliminate a rival simply by purchasing it. Acquiring a company in a foreign market can also bring with it a position in the marketplace, geographic coverage, and established relationships. Even so, such a strategy is complex and expensive, and it should not be pursued unless it can be shown to be contributing to the firm’s bottom line. It may also run afoul of local competitive or anti-monopoly legislation.
On the other side, there are also a number of defensive strategies that managers can adopt to deflect attacks from competitors.
One way of defending a position is to set up exclusive arrangements with key suppliers in the market. Such exclusive arrangements can block the access of rivals to the best suppliers, sources or partners.
A simple strategy is to match any price cuts by the competition with similar discounts, as long as the price war does not get out of hand and ruin both sides.
Adding new features or capabilities can be a positive and appealing way of countering a competitive challenge.
A company can respond to competitor price-cuts or new features by emphasizing after-sales service or warranties, implicitly demonstrating that it stands by the superiority of its products.
A strong public campaign demonstrating commitment to the market, confidence in the products, or a willingness to meet the competitor’s challenge.
Companies respond to an attack in their own market from a foreign competitor by moving into the competitor’s home market. This can draw off resources and blunt the initial foray. When Fujitsu entered the American market, Kodak responded by marketing in Japan. Goodyear responded to Michelin in North America by marketing in Europe. To do this effectively, the new entry has to establish itself as a good corporate citizen in the new environment. Companies will participate in community and family oriented events to position themselves as friendly and familiar rather than foreign and aggressive.
In fact, the international environment is far more complicated, with global corporations pursuing numerous lines of business in many markets with many competitors simultaneously. As a result, competitive strategy can get extremely complex.
Ultimately, the choice of a strategy will depend on country-by-country analysis. International managers should remain sensitive to regional differences and local variations, developing strategies customized to the specific circumstances in each country in which they operate.
There is, however, also the possibility of pursuing corporate-level strategies that focus on getting the best mix of products and markets given the nature of the competition.