Monday March 20, 2017 - Class #14 Strategic Moves: Offensive Strategy or Defensive Strategy

Today:

A business has a strategy that can not be static. It must continually be adjusted. This week we want to discuss strategies to handle competition.

Today companies and constantly under attack as all industries are changing due to the rapid change in technology. Even giants like Walmart are under attack by amazon and on-line retailers.

A company can  go on offense or defense to create opportunities and/or protect their markets and competitive advantage.

OFFENSIVE VS DEFENSIVE STRATEGIES

Offensive and defensive  strategies have distinct benefits, depending on the status of your business and how successful you are in the market. An offensive strategy provides a means for business to hit the market strong and establish a presence, whereas a defensive strategy can help keep you at the top of your industry. Each type of marketing requires careful planning and resource allocation to reach the largest number of consumers.

Offensive Marketing Definition

An offensive marketing strategy seeks to attack the market by targeting the weaknesses of the competition and emphasizing the company's strengths in comparison. Offensive marketing does not seek to challenge an industry leader's strengths since that would only play to the leader's defensive marketing capabilities. This strategy attacks the industry leader where the company is at its most vulnerable. For example, a company using an offensive marketing strategy may seek to target an established industry leader's shaky product safety record by emphasizing the safety of its own products.

Offensive Marketing Techniques

The marketing attack from an offensive-minded company must be as focused as possible. A focused attack hammers home the company's product message to consumers and casts doubt on the industry leader's weakest areas. An attack that is too broad risks its message losing focus with consumers. This may also mean a company using an attacking strategy will introduce only one product at first to clearly establish it as a challenger to the industry leader's own product.

Reactionary Marketing Strategy

A defensive marketing strategy is largely reactive to the competition or perceived occurrences in the market. A defensive strategy seeks to counter product claims made by the competition or to stem the tide of a perceived competitor advantage. For example, a company that highlights the effectiveness of its products in the wake of competitor claims of product inferiority is using a defensive marketing strategy. A company may also seek to introduce products into the market that are better than its existing offerings as part of a defensive marketing strategy.

Defensive Marketing Advantages

For an established company with a wide customer base, defensive marketing is a useful strategy. The company doesn't have to actively work to generate customer interest in its products and can simply reinforce its product messages with consumers. A well-built reputation through quality products makes it difficult for a new competitor to enter the market and attack the established company's customer base. The established company simply uses its defensive marketing to reinforce customer confidence in its products and swat the newcomer away.

OFFENSIVE ATTACK

Offensive business strategies involve taking proactive, often aggressive action in the market. This action can be focused directly at competitors or aimed at securing market share regardless of the existing competition.

Direct Competition

A classic example of an offensive business strategy is direct, head-to-head competition. This type of direct competition could take the form of selling a product similar to a competitor's at a lower price or highlighting quality differences between one product and another. This type of offensive strategy can lead to destructive price wars that ultimately harm both organizations, however.

Aggressive Marketing

Direct competition strategies often involve an element of aggressive marketing. For example, one competitor might openly point out flaws in another competitor's product or service as a way to dissuade customers from doing business with the competitor. Such advertisements could be done with an objective price comparison or a more aggressive form of derision. Companies must be careful when using overly aggressive advertisements directed at competitors, as some customers may find these advertisements to be in poor taste.

Niche Market

Not all offensive strategies are directly aimed at a specific competitor. Some companies aggressively seek out new niches in the market that have not been tapped by the existing companies. For example, if the market for automobiles consisted primarily of large muscle cars, a company with an aggressive approach could offer a smaller, more fuel-efficient model to establish a new market. Similarly, a company’s offensive strategy may target a new geographic market not presently being served with a particular type of product.

Innovation

Similar to establishing a new niche, many companies aggressively seek out new innovations to market to consumers. Innovation is not strictly limited to inventing a new product or a new process for creating a product. Innovation can also come in the form of inventive ways to run an existing business model more efficiently or more profitably.

DEFENSIVE ATTACK

Competition is inevitable in the business world. The threat of competitors swooping in to steal your customers or your share of the market can sometimes seem overwhelming for a small-business owner. There are steps you can take, however, to defend your products and your share of the market from competition.


Understanding Strategy
Defensive strategies are management tools that can be used to fend off an attack from a potential competitor. Think of it as a battleground: You have to protect your share of the market in order to keep your customers happy and your profits stable. Defending your business strategically is about knowing the market you're best equipped to operate in and about knowing when to widen your appeal to enter into new markets. In contrast to offensive strategies -- which are aimed to attack your market competition -- defensive strategies are about holding onto what you have and about using your competitive advantage to keep competitors at bay.

Approaches to Defensive Strategy
There are two approaches to defensive strategy in strategic management. The first approach is aimed at blocking competitors who are attempting to take over part of your business's market share. Cutting the price of your products, adding incentives or discounts to encourage customers to buy from you or increasing your advertising and marketing campaigns are the best common ways of going about this. The second approach is more passive. Here, you announce new product innovations, plan a company expansion by opening a new chain or reconnect with old customers to encourage them to buy from you. This is still a method to prevent the competition from taking away your customers and earning, but it is done in a more relaxed and less-aggressive manner, whereas the first approach is active and direct.

Advantages of Defensive Strategy
Employing a defensive strategy in your business can have many perceived and real benefits. First, you are increasing your marketing and advertising, which can be an effective way of getting both old and new customers through the door. Second, defensive strategies are typically less risk-laden than offensive strategies. You have the option to take passive measures to ensure your share of the market and you don't have to necessarily feel threatened at every turn. The third benefit of defensive strategy is that you are working to enhance the value of your products or services. By emphasizing the benefits of your brand, you are simultaneously devaluing the value of your competitors. This can be an effective long-term strategy in securing a niche market for your products and services.

Disadvantages to Defensive Strategy
The biggest disadvantage to defensive strategy comes when a business does not understand its target market. All products and services should be aimed at particular demographics of the broader marketplace. If you sell children's bicycles, for instance, aim your marketing at the demographic most likely to buy from you: probably young to middle-aged adults with children. It wouldn't make sense to target your children's bicycles to older adults without children or to teenagers who are no longer interested in riding children's sized bikes. The key is to know your share of the market and to work hard to hold onto that piece of the pie. Along with this major disadvantage comes the risk that you may rest on your laurels when it comes to innovation and product development. Successful businesses also keep their eyes open for opportunities to engage in new markets, to sell cutting-edge products and to reach new customers. Thus any defensive strategy you employ should be balanced with a long-term strategy for growing your business.

What happens when you do not develop a strategy against your competition?