Strategic Management week4 Discussion

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chapter 6 Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices

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Arthur A. Thompson The University of Alabama

An e-book published and distributed by McGraw Hill Education

Sixth Edition of Strategy: Core Concepts and Analytical Approaches (2020-2021). Arthur A. Thompson, The University of Alabama. Published and distributed by McGraw Hill Education. Image of globe comprised of puzzle pieces with several pieces dislodged and scattered below the globe. Chapter 5 The Five Generic Competitive Strategy Options: Which One to Employ

“Winners in business play rough and don’t apologize for it. The nicest part of playing hardball is watching your competitors squirm.”

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George Stalk, Jr. and Rob Lachenauer

“Whenever you look at any potential merger or acquisition, you look at the potential to create value for your shareholders.”

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Dilip Shanghvi,

Founder and managing director of Sun Pharmaceuticals

“Don’t form an alliance to correct a weakness and don’t ally with a partner that is trying to correct a weakness of its own. The only result from a marriage of weaknesses is the creation of even more weaknesses.”

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Michel Robert

“Think of your priorities not in terms of what activities you do, but when you do them. Timing is everything.”

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Dan Millman

Learning Objectives

Become acquainted with the various types of offensive and defensive strategies and when and why to use them.

Learn the strategic options for utilizing a company’s Web site.

Understand when and why to have certain value chain activities performed by outside vendors with specialized expertise.

Understand when a company should consider using a vertical integration strategy to extend its operations to more stages of the overall industry value chain.

Gain an understanding of how strategic alliances and collaborative partnerships can bolster a company’s competitive capabilities and resource strengths.

Learn when and why merger and acquisition strategies make good business sense.

Discover when being a first-mover or a fast-follower or a late-mover can lead to competitive advantage.

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A Company’s Menu of Strategic Choices

Going on the Offensive—Strategic Options to Improve a Company’s Market Position

Defensive Strategies—Protecting Market Position and Competitive Advantage

Web Site Strategies

Outsourcing Strategies

Vertical Integration Strategies: Operating Across More Stages of the Industry Value Chain

Strategic Alliances And Partnerships

Merger and Acquisition Strategies

Choosing Appropriate Functional-Area Strategies

Timing a Company’s Strategic Moves

Chapter 6 Roadmap

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Supplementing a Firm’s Competitive Strategy: The Key Decisions

Whether to go on the offensive and initiate aggressive offensive strategic moves to improve the company’s market position?

Whether to employ defensive strategies to protect the company’s market position?

What role the company’s web site should play in its overall strategy?

Whether to outsource certain value chain activities or perform them in-house?

Whether to integrate further backward or forward into the industry value chain?

Whether to enter into strategic alliances or partnerships with other firms?

Whether to bolster its market position via mergers or acquisitions?

When to undertake strategic moves—be a first-mover, a fast follower, or a late-mover

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Figure 6.1 A Company’s Menu of Strategy Options

Access alternative text for slide image.

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Going on the offensive to improve the company’s market position and business performance is often necessary when:

A firm has no choice but to try to whittle away at a strong rival’s competitive advantage

It can reap the benefits a competitive edge offers—a leading market share, excellent profit margins and rapid growth (as compared to rivals)

It can gain the reputational rewards of being known as a firm on the move

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Going On the Offensive—Strategic Options to Improve a Firm’s Market Position

Strategy Principle

Successful offensive strategies are needed to build competitive advantage, widen an existing advantage, or narrow the advantage held by a strong competitor.

Core Concept

Sometimes a firm’s best strategic option is to seize the initiative, go on the attack, and launch a strategic offensive to improve its market position. It takes successful offensive strategies to build competitive advantage, widen an existing advantage, or narrow the advantage held by a strong competitor.

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Strategy Principle

The best offensives use a firm’s most competitively potent resources and capabilities to attack rivals in areas where they are competitively weak.

Focus relentlessly on

Building competitive advantage and

Striving to convert it into decisive advantage

Employ the element of surprise; do the unexpected, rather than what rivals may be prepared for

Attack rivals where they are least able to defend themselves

Be impatient with the status quo—take swift and decisive actions to try to overwhelm rivals

Crafting a Potent Offensive Strategy: Things to Do

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Attack competitor weaknesses rather than challenging competitor strengths, especially if those weaknesses represent important vulnerabilities and weaker rivals can be caught by surprise with no ready defense

Base offensives on the company’s most potent competitive assets

Its core competencies and competitively potent capabilities and resources—such as a better-known brand name, manufacturing or distribution cost advantages, superior technological capability, or a better product

Failure to tie an offensive to competitive strengths and what the firm does best dims its prospects for success.

Choosing the Basis for Competitive Attack

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Core Concept

The best offensives use a company’s most potent resources and capabilities to attack rivals where they are competitively weakest.

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Offer an equally good or better product at a lower price

Leapfrog competitors by being:

A first adopter of next-generation technologies

First to market with next-generation products

Pursue continuous product innovation to draw sales and market share away from less innovative rivals

Pursue disruptive product innovation to create new markets.

Adopt and improve on good ideas of other firms (rivals or firms in other industries)

The Principal Offensive Strategy Options

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Deliberately attack those market segments where a key rival makes big profits (to weaken the rival’s profitability)

Attack the competitive weaknesses of rivals

Maneuver around competitors to capture unoccupied or less-contested market territory

Use hit-and-run or guerrilla warfare tactics to grab sales and market share from complacent or distracted rivals

Launch a preemptive strike to secure an advantageous position that rivals are prevented or discouraged from duplicating

The Principal Offensive Strategy Options (continued)

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Seeks to gain a dramatic, durable competitive advantage by:

Abandoning efforts to defeat competitors in the existing market/strategic group where it has been competing and instead

Inventing a new industry or distinctive market segment in the blue ocean that renders existing competitors largely irrelevant (because they operate outside the newly-created segment/strategic group)

Thereby allowing a company to create and capture all of the newly-created demand in the newly-created blue ocean market space

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Blue Ocean Strategy—A Special Kind of Offensive

Typical Market Space

Industry boundaries are defined and accepted

Competitive rules of the game are well understood and accepted by rivals

Firms try to outperform rivals by capturing a bigger share of existing demand

Lively competition constrains a firm’s prospects for rapid growth and superior profitability

Blue Ocean Market Space

Does not exist yet

Is untainted by competition

Offers wide-open opportunities if a firm has a product and strategy allowing it to:

Create and capture new demand by migrating its entire business to the blue ocean market space

Avoid fighting over existing demand in its old market space/strategic group

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What Is Different About a Blue Ocean?

Choosing Which Rivals to Attack

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Best Targets for Offensive Attacks

Vulnerable market leaders

Struggling firms on the verge of going under

Small local or regional firms with limited resources and capabilities

Runner-up firms with weaknesses in areas where the challenger is strong

Objectives

Lower the risk of being attacked

Weaken the impact of any attack that occurs

Protect valuable resources and capabilities from imitation

Strongly defend any competitive advantage the company has

Influence challengers to aim attacks at other rivals

Approaches

Block the avenues open to challengers

Signal challengers that strong retaliation is likely if they attack

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Defensive Strategies—Protecting Market Position and Competitive Advantage

Core Concept

Good defensive strategies can help protect competitive advantage but rarely are the basis for creating it.

There are many ways to throw obstacles in the path of would-be challengers.

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The primary blocking options:

Participate in alternative technologies

Introduce new features, add new models, or broaden the product line to close gaps and niches rivals may pursue

Maintain economy-priced models and options

Lengthen warranties

Offer free training and support services

Reduce delivery times for spare parts

Provide coupons and free samples

Make early announcements about new products or price changes

Challenge quality or safety of rivals’ products

Offer volume discounts, better financing terms, and exclusive agreements with distributors

Blocking the Avenues Open to Challengers

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There are several effective ways to signal potential challengers of probable retaliation if they launch an offensive attack to grab a bigger market share:

Publicly announce management’s commitment to maintain the firm’s present market share

Publicly commit the firm to a policy of matching rivals’ prices or terms

Maintain a war chest (reserves) of cash and marketable securities

Make occasional strong counter-responses to moves of weaker rivals

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Signaling Challengers that Retaliation Is Likely

Strategic Question:

What role should a firm’s website play in its strategy?

Strategic Options

Only to disseminate product information

As secondary or minor distribution channel to sell directly to customers

As one of several distribution channels to access customers

As the primary distribution channel for assessing customers

As the firm’s exclusive channel for transacting sales with customers

Website Strategies

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Product Information-Only Strategies—Avoiding Channel Conflict

Emphasis is on providing extensive product information at the company’s website

Relies on click-throughs to the websites of distribution channel partners for sales transactions and/or

Enables site visitors to learn with one-click where nearby retail stores are located

An attractive option for manufacturers and/or wholesalers that have invested heavily in building and cultivating retail dealer networks to access end user WHY?

Because it avoids channel conflict (which makes dealers happy)

A company vigorously pursuing online sales to consumers at its own website is competing directly against its distribution allies and is trying to cannibalize their sales, profits, and growth potential

Competing directly against the company’s own dealers (called channel conflict) leads to angry dealers and loss of dealer goodwill—some (many?) dealers are likely to discontinue stocking the company’s product line and switch to the products of rival firms

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Website e-Stores as a Minor Distribution Channel

A small volume of online sales can serve several purposes:

Gaining online sales experience

Conducting marketing research

Learning more about buyer tastes and preferences

Testing reactions to new features, models, styles, and products

Creating added market buzz about new products

Achieving incremental sales (small enough to avoid angering dealers by cannibalizing their sales)

Communicating these purposes for online sales to dealers typically avoids provoking angry channel conflict outcries

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Other Reasons to Use Website e-Store as a Minor Distribution Channel

A strategy to gradually grow online sales into a direct distribution channel makes sense when:

Profit margins from online sales are bigger than those earned from selling to wholesale/retail customers

Encouraging buyers to visit a firm’s site educates them about the ease and convenience of shopping online, increasing the likelihood of more higher-margin online purchasing over time

Selling directly to end users allows a firm to make greater use of build-to-order manufacturing and assembly and begin the process of streamlining its value chain

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Brick-and-Click Strategies: An Appealing Middle Ground Approach

Two-Pronged Approach

Selling to consumers at firm-owned retail store locations (brick)

Selling directly to consumers at the firm’s website (click)

The strategic appeal of brick-and-click strategies for wholesalers and retailers:

Sales at the firm’s website are a low-cost means of expanding its geographic market reach

Customers have a choice of how to:

Communicate with the firm

Shop for product information

Make purchases and then either pick up purchases at local stores or wait for home delivery

Resolve customer service problems

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Strategies for Online Enterprises

Approach: Use the Internet as the exclusive channel for all buyer-seller contact and transactions

Strategic issues for an online firm:

How to deliver unique value to online buyers

Whether to pursue competitive advantage based on lower costs, differentiation, or better value

Whether to have a broad or narrow product offering

Whether to perform order fulfillment activities internally or to outsource them

How to draw traffic to its website and then convert an attractively high percentage of page views into revenues

Outsourcing strategies involve a conscious decision to not perform certain value chain activities internally and to instead farm them out to outside specialists and strategic allies.

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Outsourcing Strategies

Contract manufacturers

Distributors or retailers

Outsourcing Internally Performed Activities

Vendors with specialized expertise

Core Concept

Outsourcing involves farming out the performance of certain value chain activities to outside vendors and narrowing the scope of its internal operations.

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Strategy Principle

While outsourcing can result in appealing benefits, a company must guard against outsourcing activities that hollow out the competitive capabilities and resource strengths it needs to be a master of its own destiny.

When Is Outsourcing Advantageous?

Outsourcing a value chain activity is appealing when it:

Results in the activity being performed better or more cheaply

Is not crucial to achieving a sustainable competitive advantage and will not hollow out core competences, capabilities, or know-how.

Helps streamline operations, improves internal operating flexibility, or reduces time-to-market for new products

Reduces the firm’s risk exposure to changing technology or shifting buyer preferences

Helps improve the firm’s ability to innovate

Facilitates quick and efficient assembly of a diversity of expertise

Concentrates the firm on its core business, better leverages its resource strengths to do even better what it already does best

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Strategic Insight

A company must guard against outsourcing activities that can unwittingly degrade its capabilities to be a master of its own destiny.

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The Big Risk of Outsourcing Value Chain Activities

When a firm outsources too many or the wrong activities, it risks

Hollowing out its collection of internal capabilities and being held hostage by outside suppliers

Losing touch with activities and expertise that determine overall long-term success

Undermining its ability to lead the development of innovative new products (because cutting-edge ideas and technologies for next-generation products now come from outsiders)

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Vertical integration extends a firm’s competitive and operating scope within the same industry.

Backward into sources of inputs/supply

Forward toward end-users of the final product

A vertical integration strategy can entail either partial or full integration across the industry value chain

Vertical Integration Strategies: Operating Across More Stages of the Value Chain

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Activities, costs,

and margins of

forward channel

allies and strategic partners

Internally performed

activities, costs, and margins

Activities, costs, and margins of suppliers

Value Chain

Core Concepts

A vertically integrated firm is one whose business activities extend across several portions or stages of an industry’s overall value chain.

Backward vertical integration involves entry into activities performed by suppliers or other enterprises positioned in earlier stages of an industry’s overall value chain.

Forward vertical integration involves entering into the performance of industry value chain activities located closer to end users.

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The Advantages of a Vertical Integration Strategy

The two best reasons for investing company resources in vertical integration:

To strengthen the firm’s competitive position

To boost its profitability.

Vertical integration pays off only if it

Produces sufficient cost savings/profit increases to justify the extra investment

Adds materially to the firm’s technological and competitive strengths, and/or helps differentiate its product offering from the offerings of rivals in ways that buyers find valuable

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Integrating backward successfully requires a firm to:

Achieve the same scale economies as outside suppliers

Match or beat suppliers’ efficiencies with no drop-off in quality

Backward integration can lead to lower costs and/or reduced competitive risk when:

Suppliers have outsized profit margins

The item supplied is a major cost component

The requisite technological skills are easily mastered or acquired

It is a competitive necessity to keep proprietary know-how in-house

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Integrating Backward to Achieve Greater Competitiveness

Produces a differentiation-based competitive advantage when performing activities internally:

Yields a better quality product/service offering

Improves the caliber of its customer service

Enhances the performance of its final product

Reduces risk of depending on suppliers for crucial raw materials, parts, components, and/or support services

Adds to a firm’s differentiation capabilities by building or strengthening its core competencies and competitive capabilities

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The Potential Benefits of Backward Vertical Integration

Can enable better mastery of key skills or strategy-critical technologies formerly performed by outsiders

Can facilitate adding product features/attributes that deliver greater customer value

Reduces the firm’s vulnerability to powerful suppliers inclined to raise prices at every opportunity

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The Potential Benefits of Backward Vertical Integration (continued)

To gain better access to end users and build stronger brand awareness

To reduce dependence on marketing and sales efforts of independent distributors/retailers that stock multiple brands and often steer customers to the brands on which they earn the highest profit margins

To bypass independent distributors/ retailers in favor of direct sales at company-owned stores and/or the company’s Web site which may

Lower distribution costs

Produce a relative cost advantage over rivals

Enable lower selling prices to end users

Boost the company’s operating profit margins

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The Potential Benefits of Integrating Forward

The Disadvantages of a Vertical Integration Strategy

Increases a firm’s capital investment in its industry, increasing business risk if industry demand, growth and profitability should decline

Locks a firm into relying on its own in-house activities (which later may prove more costly than purchasing from best-in-class suppliers or using the services of independent distributors and retail dealers)

Can impair a firm’s flexibility to accommodate shifting buyer preferences or a product design that requires parts and components not made in-house

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The Disadvantages of a Vertical Integration Strategy (continued)

Creates a vested interest for the firm to stick with its vertically integrated value chain for a while longer rather than undertake an immediate value chain overhaul that entails big asset write-downs (even though the overhaul might have considerable merit due to new technology or other important industry developments).

The faster the pace of change in an industry’s value chain system, the bigger the risk of a vertical integration strategy

Poses many different kinds of barriers to achieving full economies of scale when only producing the volume needed internally

Often requires new or different skills and business capabilities that entail considerable time and expense to develop the needed proficiency (with no guarantee of success!)

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Whether integration is a plus or a minus depends on:

The difficulties and costs of acquiring or developing the resources and capabilities to operate in another stage of the value chain

The size of the benefits it offers in lowering costs or enhancing differentiation and the value delivered to customers

Its impact on investment costs, flexibility, and response times

The extent to which it enhances the firm’s competitiveness and profitability

Pursuing a vertical integration strategy hinges on which capabilities and value-chain activities are best performed in-house and which are performed better or cheaper by outsiders

Weighing the Pros and Cons of Vertical Integration

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A strategic alliance is a formal agreement between two or more separate firms in which there is:

Strategically relevant collaboration of some sort

Joint contribution of resources

Shared risk

Shared control

Mutual dependence

Collaborative relationships between partners may entail a contractual agreement but commonly stop short of formal ownership ties between the partners

The purpose of a strategic alliance or collaborative partnership is to join forces to achieve mutually beneficial outcomes.

Strategic Alliances and Partnerships

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Core Concept

Strategic alliances are collaborative arrangements where two or more companies join forces to achieve mutually beneficial outcomes.

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When Does an Alliance Become Strategic”?

An alliance becomes “strategic” when it:

Facilitates achievement of an important business objective such as lowering costs or delivering more value to customers

Helps build, strengthen, or sustain resources, competencies, and competitive capabilities

Remedies a key resource deficiency or competitive weakness

Speeds development of technologies and/or product innovations

Facilitates entry into new geographic markets or pursuit of important market opportunities

Blocks or defends against a competitive threat or mitigates a significant risk to a firm’s business

Why and How Strategic Alliances Are Advantageous

Firms commonly enter into strategic alliances to:

Expedite development of promising new technologies or products

Overcome deficits in their own expertise and capabilities

Bring together the personnel and expertise needed to create desirable new skill sets and capabilities

Improve supply chain efficiency

Gain economies of scale in production and/or marketing

Acquire or improve market access through joint marketing agreements

Open up learning opportunities that help partner firms better leverage their own resource strengths

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Why and How Strategic Alliances Are Advantageous (continued)

A firm racing for global market leadership needs alliances to:

Get into critical country markets quickly and accelerate the building of its global market presence

Gain inside knowledge about unfamiliar markets and cultures through alliances with local partners

Access valuable skills and competencies that are concentrated in particular geographic locations

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Why and How Strategic Alliances Are Advantageous (concluded)

A firm trying to build a strong position in an industry of the future needs alliances to:

Establish a stronger initial competitive position for participating in the target industry

Master new technologies, new expertise and competencies faster than through its internal efforts

Open up broader opportunities in the target industry by melding the firm’s own capabilities with the resources and capabilities of partners

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Strategic Insight

The best strategic alliances are highly selective, focusing on particular value chain activities and on obtaining a specific competitive benefit. They tend to enable a firm to build on its strengths and learn from alliance partners.

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Most alliances based on technology-sharing or providing market access turn out to be temporary because

The benefits of mutual learning have occurred

Both partners have developed to the point where they are ready to go their own ways

Alliances are more likely to be long-lasting when:

They involve collaboration with suppliers or distribution allies

Each party’s contribution involves activities in different portions of the industry value chain

Continued collaboration is in the mutual interest of the partners

Why Many Alliances Are Short-Lived or Break Apart

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Why Many Alliances Fail

50-70% of alliances are unsuccessful because:

The objectives and priorities of allies conflict or diverge

Allies discover they are unable to work well together

Changing conditions render the alliance obsolete

More attractive technological paths have emerged

One or more allies find they are becoming increasing strong market rivals with other allies

Alliances can help a firm reduce a competitive disadvantage but rarely help secure a durable competitive edge over rivals

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Strategic Insight

Large numbers of strategic alliances fail to live up to expectations and are dissolved after a few years.

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A merger is the combining of two or more firms into a single entity, with the newly created firm taking on a new name.

An acquisition is a combination in which one firm, the acquirer, purchases and absorbs the operations of another, the acquired.

The difference between a merger and an acquisition is in the details of ownership, management control, and financial arrangements–the resources, competencies, and competitive capabilities of the newly created enterprise end up much the same.

Merger and Acquisition Strategies

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Merger/acquisition strategies typically aim at:

Creating a stronger and more cost-efficient operations that maximize the combined firm’s resources, capabilities, and competitiveness.

Gaining quick access to new technologies or other valkuable resources and competitive capabilities

Expanding geographic coverage

Extending the company’s business into new product categories

Merger and Acquisition Strategies: The Typical Objectives

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Merger and Acquisition Strategies: The Typical Objectives

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Objectives of Merger and Acquisition Strategies

More cost-efficient operation of the combined firms

Expansion of geographic coverage

Entry into new product categories

Quick access to new technologies or other resources and competitive capabilities

When Does a Merger or an Acquisition Make Strategic Sense?

Mergers and acquisitions are best for situations in which alliances or partnerships do not go far enough in providing access to needed resources and competitive capabilities.

Combining two firms, via merger or acquisition, is an attractive means of achieving operating economies, strengthening competencies and competitiveness in important ways, and opening up new market opportunities.

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Strategy Principle

The main impetus for employing merger and acquisition strategies is to fundamentally alter a firm’s trajectory and improve its business outlook.

The managers overseeing the integration of operations make mistakes in melding the activities of the acquiring and acquired firms.

Cost savings prove smaller than expected while gains in competitive capabilities take longer to realize, or never materialize at all.

Efforts to mesh the corporate cultures stall out due to resistance from organization members as differences in management styles and operating procedures prove hard to resolve.

Key employees at the acquired firm become disenchanted with newly instituted changes and leave.

Personnel at the acquired firm stonewall changes, arguing forcefully for doing things the way they were done prior to the acquisition.

Why Mergers and Acquisitions Often Result in Disappointing Outcomes

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Choosing involves making strategic choices about how various functional parts of the business (R&D, production, marketing, finance, etc.) will be managed to support competitive strategy and other strategic moves

The nature of functional strategies is dictated by the choice of competitive strategy and other business-level strategy elements

Functional managers must tailor the firm’s functional-area strategies to support higher-level strategies

Choosing Appropriate Functional-Area Strategies

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A manufacturer employing a low-cost provider strategy needs

An R&D and product design strategy that emphasizes cheap-to-incorporate features and facilitates economical assembly

A production strategy that stresses capture of scale economies and actions to achieve low-cost manufacture (such as high labor productivity, efficient supply chain management, and automated production processes)

A low-budget marketing strategy

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An Example of How Functional-Area Strategies Must Be Supportive of Higher-Level Strategy

A business pursuing a high-end differentiation strategy needs

A production strategy geared to top-notch quality

A marketing strategy aimed at

Touting differentiating features

Using advertising and a trusted brand name to “pull” sales through the chosen distribution channels

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Timing is especially important when there are

Significant first-mover advantages

Significant first-mover disadvantages

The bigger the first-mover advantages, the more attractive and competitively important it is to be a first-mover or early mover

The bigger the first-mover disadvantages, the more attractive it is to be a follower or late mover

Timing a Company’s Strategic Moves

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When Being a First-Mover Pays Off

Being first to make a strategic move has appeal when:

Pioneering the market helps build the first mover’s image and reputation

Early commitments to new technologies, new-style components, new or emerging distribution channels, and so on produce an absolute cost advantage over rivals

First-mover’s customers face significant costs in later switching to the product offerings of follower firms

Moving first constitutes a preemptive strike (like securing an especially favorable location or acquiring an appealing company with uniquely valuable resources or capabilities)

First mover’s actions are protected by patents, copyrights, or other forms of property rights, thus thwarting a response by would-be follower rivals

Actions prove so overwhelmingly popular that its product sets the technical standards for the industry

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Core Concept

Because of first-mover advantages and disadvantages, competitive advantage can spring from when a move is made as well as from what move is made.

To sustain any advantage that initially accrues to a pioneer, a first-mover must be a fast learner and continue to move aggressively to capitalize on any initial pioneering advantage. It helps immensely if the first-mover has deep financial pockets, important competencies and competitive capabilities, and astute managers.

A first-mover’s advantages are fleeting if its skills, know-how, and actions are easily copied or even surpassed; in such cases, followers and even late-movers can catch or overtake the first-mover in a relatively short period.

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The Potential for Late-Mover Advantages or First-Mover Disadvantages

Being a fast-follower or even a late-mover can be advantageous when

Moving first is more costly than imitating followership when few experience or learning-curve benefits accrue to the first mover, thereby enabling a follower to end up with lower costs than the first-mover (because the follower escapes the added costs of pioneering).

When the innovator’s primitive products do not live up to buyer expectations, thus allowing a clever follower with better-performing products to win disenchanted buyers away from the leader.

When buyers’ skepticism about the benefits of a new technology or product pioneered by a first-mover causes them to delay purchases.

When rapid market evolution in either technology or buyer needs and expectations allows fast-followers and late-movers to leapfrog a first-mover’s products with more attractive next-version products.

When customer loyalty to the pioneer is low and a first-mover’s skills, know-how, and actions are easily copied or even surpassed.

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To Be a First-Mover or Not

Is the industry leadership race a sprint or a marathon?

First-movers and fast-followers tend to win sprints; followers and late-movers often win marathons

With sprints, being a first-mover is important because pioneering early introduction of a technology or product

Delivers clear and substantial benefits to early adopters and buyers

Gives a durable reputational head-start advantage because early adopters/buyers remain loyal to the pioneer’s product offering

When the race is a marathon:

The firms that end up dominating new-to-the-world markets are almost never the pioneers that gave birth to brand-new markets

First-mover advantages are fleeting, allowing resourceful fast-followers and even late-movers to overtake the early leaders

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Accessibility Content: Text Alternatives for Images

Figure 6.1 A Company’s Menu of Strategy Options, Text Alternate

Return to parent slide.

Generic Competitive Strategy Options, a company’s first strategic choice:

Low-cost provider?

Broad differentiation?

Focused low cost?

Focus differentiation?

Best cost provider?

Complementary Strategy Options, a company’s second set of strategic choices:

Initiate offensive strategic moves?

Employ defensive strategic moves?

What type of website strategy to employ?

Whether to outsource selected value chain activities?

Employ backward or forward vertical integration strategies?

Enter into strategic alliances and partnerships?

Use merger and acquisition strategies to strengthen competitiveness?

Functional Area Strategies to Support generic competitive strategy options and complementary strategy option (a company’s third set of strategic cchoices).:

Research and development engineering

Production

Marketing and Sales

Human Resources

Finance

Timing a Company’s strategic moves in the marketplace: First Mover? Fast Follower? Late-Mover?

When to initiate actions to pursue or make adjustments in any of the these strategy choices? Timing matters!

Strategic Management week4 Discussion

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