Strategic Management: Eight Defensive Strategies (PART 2)

by Gary Rushin

in BUSINESS STRATEGY

According to former Sears, Roebuck and Co. CEO and U.S. general, Robert E. Wood, “Business is like a war in one respect, if its grand strategy is correct, any number if tactical errors can be made and yet the enterprise proves successful.” Strategy, through the strategic planning process, is a function for all managers at a company.

In business, strategy can be looked at as war planning, interpreting the business landscape, mapping the moves, determining where to attack and where to defend, timing when and where to enter the field of battle and when to withdraw, and preparing how to isolate, encircle, or outflank the competition.

Defensive Strategies

The adage, “the best offense is a good defense” is often used in many endeavors. Unfortunately, in strategic planning many solely concentrate on using offensive competitive moves. They fail to utilize the strategic benefits of defensive strategies in achieving the goal. In the writings of Machiavelli and Sun Tzu, defense is critical in warfare. As in the present war against terrorism, pre-emptive strikes, a defensive strategy, is at the heart of U.S. policy, i.e., “harm them before they harm us”.

Defensive moves are part of competitive strategies. As in war, as in sport, as in the game of chess, business defensive strategies are critical. Along with offensive strategies, defensive strategies allow the organization to move in various directions (forward, backward, and sideways). Eight critically important defensive strategies include:

  1. Signaling—warning the enemy not to enter the market with the objective to obtain victory without a fight. This can be simple by issuing new alerts of changing prices, which potential competitors feel that they would have difficulty to meet the challenge at a profit.
  2. Entry (fixed and mobile) barriers- creating obstacles to make it  difficult to overcome, which discourages potential competitors from entering the market segment. McDonald’s frequently introduce a range of new meals to protect its position.
  3. Global service—developing efficiencies that customers only buy for a separate, distinct provider. An example of is the Big 4 Accounting firms (Deloitte, KPMG, PricewaterhouseCoopers, and Ernst & Young). Global companies have limited requirements that only one of the international accounting firms offer.
  4. Pre-emptive strike—taking aggressive action before competitors realize what had happened. To protect its position in the diet food arena, Thompson Medical, manufacturer of Slim-Fast introduced Ultra Slim Fast that was directed at a wealthier market demographic that surprised competitors, which were selling near cost.
  5. Blocking—making moves to hinder competitors from entering. Look at the razor war between Gillette and Bic. Gillette perceived that Bic was encroaching on its market dominance in the mid 1970s. So Gillette introduced its Good News disposal razor one year prior to Bic’s entrance to maintain its position.
  6. Counter-attack—defending from an attack by following up with attacks. An example is when, high-end automaker, Mercedes was attacked by BMW with the introduction of the higher priced BMW Series 5, 7, and 8 models. To counter-attack, Mercedes introduced the Series 190, later known as the C.
  7. Holding the ground—allowing competitors to enter, then actively competing with them in order to maintain market position. Xerox entered into the equipment leasing business to fend off competition in the copy machine market. Ironically Kodak also used the hold the ground strategy, but recently was forced to file for bankruptcy protection.
  8. Withdrawal—sacrificing market position to increase the distance from a competitor. This is not surrendering. To protect intellectual property rights in the 1970s,  Coca-Cola and IBM withdrew from India.

In the business competitive spectrum, three phases in terms of timing exist when viewing the competitive landscape. This includes before a competitive attack phase, during a competitive attack phase, and after a competitive attack phase. See Exhibit I.

Source: J.A. Vasconcellos E SA, Strategy Move, Prentice Hall (2005)

For a company, using defensive strategies before a competitor’s attack phase would include using either one or a combination of 1) signaling, 2) entry barriers, 3) global service, and 4) pre-emptive strike strategies. These strategies are designed to dissuade competitors from entering the market. During a competitive attack phase, companies can use the 6) counter-attack and/or 5) blocking strategies. And for after a competitor’s attack would either be a blocking and counter-attack strategy. Counter-attack and blocking strategies can also be used in this phase.

For- Strategic Management: Defensive Strategies (Part 1)

For free online accounting mini course “Cracking the Accounting Code” designed for entrepreneurs go to http://AccountingMiniCourse.com

 

References

Kotler, P. & Keller, K.L. (2005). Marketing Management. Practice Hall

Vasconcellos E. Sa, J.A. (2005). Strategy Moves: 14 Complete Attack and Defense Strategies for Competitive Advantage. Prentice Hall

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