Chapter 6 : Strengthening A Company's Competitive Position

Learning Objectives :

1) Learn whether and when pursue offensive or defensive strategic moves to improve a company's market position .

2) Recognize when being a first mover or a fast follower or a late mover is most advantageous .

3) Become aware of the strategic benefits and risks of expanding a company's horizontal scope through mergers and acquisitions.

4) Learn the advantages and disadvantages of extending the company's scope of operations via vertical integration.

5) Become aware of the conditions that favor farming out certain value chain activities to outside parties .

6) Understand when and how strategies alliances can substitute for horizontal mergers and acquisitions or vertical integration and how they can facilitate outsourcing.

The principal offensive strategy options include the following :

1) Offering an equally good or better product at a lower price .

2) Leapfrogging competitors  by being first to market with the next-generation products.

3) Pursuing continuous product innovation to draw sales and market share away from less innovative rivals.

4) Adopting and improving on the good ideas of other companies.

5) Using hit-and-run or guerrilla warfare tactics to grab market share from complacent or distracted rivals .

6) Launching a preemptive strike to secure an advantageous position that rivals are prevented or discouraged from duplicating . 

BLUE OCEAN STRATEGY 

-offers growth in revenues and profits by discovering or inventing new industry segments that create altogether new demand.

Strengthening A Company's Market Position Via Its Scope Of Operations . 

Horizontal Scope

-the range of product and service segments that a firm serves within its focal market .

Vertical Scope

-the extent to which a firm's internal activities encompass one,some,many,or all of the activities that make up an industry's entire value chain system,ranging from raw-material production to final sales and service activities . 

Backward integration

-involves entry into activities previously performed by suppliers or other enterprises positioned along earlier stages of the industry value chain system.

Forward integration

-involves entry into value chain system activities closer to the end user.

OUTSOURCING

-involves contracting out certain value chain activities to outside vendors .

-outsourcing certain value chain activities makes strategic sense whenever : an activity can be performed better or more cheaply by outside specialists,the activity is not crucial to the firm's ability to achieve sustainable competitive advantage,it improves organizational flexibility and speeds time to market,it reduces the company's risk exposure to changing technology or buyer preferences,it allows a company to assemble diverse kinds of expertise speedily and efficiently,it allows a company to concentrate on its core business,leverage its key resources, and do even better what it already does best.

STRATEGIC ALLIANCES

-is a formal agreement between two or more separate companies in which they agree to work cooperatively toward some common objective.

-the benefits of strategic alliances : picking a good partner,being sensitive to cultural differences,recognizing that the alliances must benefit both sides,ensuring that both parties live up to their commitments,structuring the decision-making process so that actions can be taken swiftly when needed,managing the learning process and then adjusting the alliance agreement over time to fit new circumstances.