Chapter VI

BEYOND COMPETITIVE STRATEGY

 

Note:  See Fig. 6.1, page 142 for a menu of strategic options

I. Strategic Alliances and Collaborative Partnerships

bullet Well chose alliances can allow companies to bypass slower and costly process of building their own capabilities
bullet Strategic Alliances:  are cooperative arrangements between firms that go beyond normal day-day dealings, but fall short of merger or full joint partnerships.  Alliances are formed to:
bullet Get into critical global markets quickly
bullet Gain knowledge about unfamiliar markets
bullet Access skills and competencies
bullet Why alliances break apart
bullet Diverging objectives and priorities
bullet Inability to work well together
bullet Emergence of more technological path
bullet Market place rivalry

 

II. Merger and Acquisition Strategies

bullet Are suited for situations where alliances and partnerships do not go far enough
bullet Merger:  is a pooling of two or more companies as equals, with the newly created company often taking on a new name
bullet Acquisition:  is a combination in which one company purchases and absorbs the operations of another.
bullet M&A are driven by strategies to achieve one of five strategic objectives:
bullet To gain market share and create a more efficient operation
bullet To expand geographic coverage
bullet To extend business into new product categories
bullet To gain quick access to new technologies
bullet To invent a new industry and lead convergence of industries whose boundaries are being blurred
bullet M&A has its problems:
bullet Can involve resistance from rank and file
bullet Integration problems can be tough
bullet Cost savings may take longer

 

III.  Vertical Integration Strategies

bullet Have appeal only if they significantly strengthen a firms competitive position
bullet Integrating backward to achieve greater competitiveness
bullet If suppliers have large profit margins
bullet If item is major cost component
bullet If acquired skills can be mastered
bullet Integrating forward to achieve competitiveness
bullet When product line is not broad enough to justify stand alone distribution
bullet Disadvantages of vertical integration
bullet Locks firm deep into industry
bullet Increases capital in industry and business risk
bullet Poses problems of balancing capital at each stage in value chain
bullet Calls for radically different skills and business capabilities
bullet Can reduce manufacturing flexibility

 

IV. Outsourcing Strategies

bullet Outsourcing:  Involves withdrawing from certain stages/activities in the value chain system and relying on outside vendors.  Make sense when:
bullet Can be done at lower cost
bullet Activity is not crucial to sustained competitive advantage
bullet Reduces risk exposure to changing technology
bullet Streamlines operations and reduces cost, etc.
bullet Advantages of outsourcing
bullet Higher quality/lower cost components
bullet Allying with best-in-world suppliers
bullet Enhances flexibility should market conditions shift
bullet Quick assembly of needed expertise
bullet Etc.
bullet Pitfalls of outsourcing
bullet Farm out too many of wrong types of activities and thus, hollows out its own capabilities

 

V.  Using Offensive Strategies to Secure Competitive Advantage

bullet Initiatives to match or exceed corporate strengths
bullet Initiatives to capitalize on weaknesses
bullet Initiatives on many fronts
bullet End run offensives
bullet Guerilla offensives
bullet Preemptive strikes  

 

VI.  Choosing Which Rivals to Attack

bullet Market leaders that are vulnerable:  When leader, in terms of size and share is not true leader
bullet Runner up firms with weaknesses:  When you can exploit weaknesses
bullet Firms on the verge of going under:  When you can force exit from market
bullet Small local and regional firms with limited capabilities:  They must have limited expertise and resources.  

 

VII.  Using Defensive Strategies to Protect Competitive Advantage

bullet Purpose is to protect competitive advantage and fortify firm's competitive position
bullet Two approaches:
bullet  Blocking avenues open to challengers:  New features, new models, broaden product line, etc.
bullet Signaling challengers that retaliation is likely by announcing commitment to maintain share, etc.

 

VIII. Strategies for Using the Internet as a Distribution Channel

bullet Managers must decide:
bullet Whether to use the website as simply a means of disseminating product information
bullet Whether to use the website as a minor sales channel
bullet Whether to use the site as a primary channel; or
bullet Whether to use the site as an exclusive channel
bullet Using the internet just to disseminate product information
bullet Useful if the retailer network is already established
bullet Using the internet as a minor distribution channel
bullet Useful if channel conflict posses obstacles to online sales, or if only a small fraction of buyers make online purchases
bullet Brick and click strategies
bullet Useful when online sales have a good channel of distribution and can evolve into a manufacturing firm distribution channel
bullet Strategies for online enterprises
bullet Must incorporate the following features:
bullet The ability to deliver unique value to buyers
bullet Must engineer a value chain that enables differentiation, lower costs or better value for the money
bullet An innovative and entertaining Web site
bullet A clear focus on a limited number of competencies
bullet Innovative marketing techniques that are efficient in reaching the target audience
bullet Minimal reliance on ancillary revenues
bullet The issue of broad vs. narrow product offerings
bullet   Must make shrewd decisions with respect to the above
bullet The order fulfillment issue
bullet Must decide whether to perform order fulfillment internally or to outsource

 

IX.  First Mover Advantages/Disadvantages

bullet Advantages:
bullet Can build image and reputation
bullet Obtain first time customers who may remain loyal
bullet Gain visibility and reputation
bullet Etc.
bullet Disadvantages:
bullet Can be costly
bullet Product may not live up to expectations
bullet Followers, in fast changing technological market may leapfrog first mover

 

Next Steps:  Please review the PowerPoint Overview slides (1-40) for this chapter.  Then proceed to the Discussion Area.

 
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