Strategic Management: Defensive Strategies (PART 1)

Strategic Management: Defensive Strategies (PART 1)

Some would say that business competitive strategies are analogous to warfare or sports. This is similar to the way business turnarounds and restructurings are often viewed from the standpoint of a medical triage to cure a sick patient. Within the constructs of competitive strategies are the concepts of offensive and defensive strategies:

  • From a sporting perspective: an offensive strategy is to score, whereas a defensive strategy is to keep the opponent from scoring.
  • From a military perspective: an offensive strategy is to achieve victory, whereas a defensive strategy is to prevent defeat.

Now in business, as in sport and war, the purpose of an offensive strategy is to make something desirable happen i.e., the development of a new product or service, or capturing new business territories. The purpose of a defensive strategy is the neutralization of events that may harm the organization. Its aims are to lessen the probability of active assault on the core business, deflect them to less threatening areas, or lessen the intensity of the onslaught. Defensive strategies enhance a company’s competitive strategy making the organization more sustainable.

Defensive Strategies

Defensive strategies tend to require resources. This may include foregoing short-term profitability to enhance sustainability. But unfortunately according to Michael Porter (1985), most defensive strategies are hard to measure. How do you measure the ROI of defensive tactics that void competitors’ actions to enter the market place?

Defensive strategies should be considered as an integral part of strategic planning. Although one can look at defensive strategies to deter a known competitor or external competitors, defensive strategies can fend off unknown forces that can be detrimental to the organization. An example is the introduction of destructive technologies that can make the company’s products obsolete. Take a look at Apples Computer’s introduction of the iPod media player and its negative impact on Sony’s Walkman mp3 player. Sony had an ineffective defensive strategy. Today you hardly hear of anyone talking about a Walkman. The iPod dominates the media player market. Then you can also look at the defensive strategies Apple is employing to deflect Microsoft’s media player, currently Zune HD.  The iPod still rules.

The Risk-Threat Matrix

Overall, a key part of strategic management and planning is identifying and minimizing organizational vulnerabilities. A good starting point is to develop a Risk-Threat Matrix created by Beam and Carey (1991). The matrix is devised into a four-quadrant system with generalized responses in mapping defensive strategies. This will enable the organization to plan for and anticipate problematic situations prior to it happening. Additionally it will enhance management’s sensitivity to unanticipated detriments if one develops.

Beam and Carey Risk-Threat Matrix

Quadrants of Risk-Threat Characteristics:

  • Risks: Risks can be referred to as an undesirable outcome.
  • Threats: Threats can be referred to as a potential force or act that can cause harm to the organization
  • Blindsiding: Threats deliberately not communicated in advanced
  • Trends: Threats that develop gradually, but seldom dramatically.

In designing the Risk-Threat Matrix, the Knowledge of Source and Timing area (the horizontal axis) points out how much is known about future events that can affect the organization. This information is either known or unknown. Then we get to the vertical axis, which connotes specific targets and not specific targets. At the end, we have a four-quadrant matrix, each with its own characteristics for the purpose of defensive strategies. Upon defining the characteristics, appropriate responses for each quadrant is examined.

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References

Beam, H.H. & Carey, T.A. (1991). The Risk-Threat Matrix: Key to Defensive Strategy. The Mid-America Journal of Business. Volume 6, Number 2, page 39-44.

Porter, M. (1985). Competitive Advantage. The Free Press.

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