CHAPTER 6
STRENGTHENING A COMPANYS
COMPETITIVE POSITION
Strategic Moves, Timing, and Scope of
Operations
Student Version
Copyright 2012 The McGraw-Hill Companies, Inc. McGraw-Hill/Irwin
Maximizing the Power of a Strategy
Making choices that complement
a competitive approach and
maximize the power of strategy
Offensive and Competitive Scope of
Defensive Dynamics and the Operations along
Competitive Timing of Strategic the Industrys
Actions Moves Value Chain
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GOING ON THE OFFENSIVE
STRATEGIC OPTIONS TO IMPROVE A
FIRMS MARKET POSITION
Strategic Offensive Principles:
Relentlessly build competitive advantage and
then convert it into sustainable advantage.
Create and deploy resources in ways that cause
rivals to struggle to defend themselves.
Employ the element of surprise as opposed to
doing what rivals expect and are prepared for.
Display a strong bias for swift, decisive, and
overwhelming actions to overpower rivals.
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Choosing Which Rivals to Attack
Best Targets for
Offensive Attacks
Runner-up firms
Struggling Small local
Market leaders with weaknesses
enterprises on and regional
that are in areas where
the verge of firms with limited
vulnerable the challenger
going under capabilities
is strong
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DEFENSIVE STRATEGIES
PROTECTING MARKET POSITION
AND COMPETITIVE ADVANTAGE
Purposes of Defensive Strategies
Weaken the impact Influence challengers
Lower the firms risk
of an attack to aim their efforts
of being attacked
that does occur at other rivals
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TIMING A FIRMS OFFENSIVE AND
DEFENSIVE STRATEGIC MOVES
Timings Importance:
Knowing when to make a strategic move is
as crucial as knowing what move to make.
Moving first is no guarantee of success or
competitive advantage.
The risks of moving first to stake out a
monopoly position must be carefully
weighted.
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STRENGTHENING A COMPANYS
MARKET POSITION VIA ITS SCOPE
OF OPERATIONS
Defining the Scope of
the Firms Operations
Extent of its
Size of its
Range of its geographic
Breadth of its competitive
activities market
product and footprint on
performed presence and
service offerings its market
internally mix of
or industry
businesses
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HORIZONTAL MERGER AND
ACQUISITION STRATEGIES
Merger
Is the combining of two or more firms
into a single corporate entity that often
takes on a new name.
Acquisition
Is a combination in which one firm, the
acquirer, purchases and absorbs the
operations of another firm, the acquired.
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VERTICAL INTEGRATION STRATEGIES
Vertically Integrated Firm
Is one that participates in multiple segments
or stages of an industrys overall value chain.
Vertical Integration Strategy
Can expand the firms range of activities
backward into its sources of supply and/or
forward toward end users of its products.
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Types of Vertical Integration Strategies
Vertical Integration
Choices
Full Partial Tapered
Integration Integration Integration
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Backwards Integration Towards Suppliers
Integrating Backwards By:
Achieving the same scale economies as outside
supplierslow-cost based competitive advantage.
Matching or beating suppliers production efficiency
with no drop-off in qualitydifferentiation-based
competitive advantage.
Reasons for Integrating Backwards:
Reduction of supplier power
Reduction in costs of major inputs
Assurance of the supply and flow of critical inputs
Protection of proprietary know-how
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Integrating Forward to Enhance
Competitiveness
Reasons for Integrating Forward:
To lower overall costs by increasing channel
activity efficiencies relative to competitors.
To increase bargaining power through control
of channel activities.
To gain better access to end users.
To strengthen and reinforce brand awareness.
To increase product differentiation.
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STRATEGIC ALLIANCES AND
PARTNERSHIPS
Strategic Alliance
Is a formal agreement between two or more
separate firms in which they agree to work
cooperatively toward common objectives.
Joint Venture
Is a type of strategic alliance in which the
partners set up an independent corporate
entity that they own and control jointly,
sharing in its revenues and expenses.
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Capturing the Benefits of Strategic Alliances
Being sensitive
to cultural
differences
Recognizing that
Picking a good the alliance must
partner benefit both sides
Strategic
Alliance Factors
Ensuring both Adjusting the
parties keep their agreement over
commitments time to fit new
Structuring the circumstances
decision-making
process for swift
actions
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The Drawbacks of Strategic Alliances
and Partnerships
Culture clash and integration problems due to different
management styles and business practices.
Anticipated gains do not materialize due to an overly
optimistic view of the synergies or a poor fit of partners
resources and capabilities.
Risk of becoming dependent on partner firms for
essential expertise and capabilities.
Protection of proprietary technologies, knowledge
bases, or trade secrets from partners who are rivals.
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Principle Advantages of Strategic Alliances
They lower investment costs and risks for each
partner by facilitating resource pooling and risk
sharing.
They are more flexible organizational forms and
allow for a more adaptive response to changing
conditions.
They are more rapidly deployeda critical
factor when speed is of the essence.
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