Tag Archives: competitive strategy

Know Your Niche

Getting to Know Your Niche

“Niches typically describe smaller sets of customers who have more narrowly needs or unique combination of needs.”

Philip Kotler

Sometimes, deciding what niche to focus on for your niche marketing business can be quite difficult. How do you choose when there are so many possibilities? Other times, the answer quickly becomes as clear as day.

Whether you have a concrete idea and are ready to roll, or need to spend a little time deciding just what niche is right for you, you will need to do some research before truly beginning your niche marketing business.

Your niche should be something you enjoy (like hiking, biking, painting or cooking) but that also allows for you to fill a void in that niche. For example, if you enjoy cooking with organic ingredients, maybe you can provide a product like an organic cookbook, offer recipes of the month and exclusive coupons for organic foods.

Just be sure you know what you are talking about and enjoy it, because it will quickly become your bread and butter, both literally and figuratively!

Once you have chosen your niche, you will then want to ask yourself the following questions: (All may not apply.)

* What is the formal definition of this niche/topic?

* Who is typically interested in this niche?

* Who is/are my target market(s)?

* Is there a broad target market? Or a narrow target market?

* Are there many other marketers already catering to this niche?

* How can I stand out from other marketers in this niche?

* How will my business/offering be different/better/valuable?

All of these questions and more are critical to answer before getting to work. Why? Because it is absolutely critical to understand what you are doing before you begin doing it!

You will also most likely need to differentiate yourself because unless you have hit the jackpot with an off the wall, yet realistic idea, you will most likely be joining a niche that already has marketers catering to it.

How do you stand out? Well, you begin by offering quality products and services. Don’t just say you know what you are talking about. Actually do the research, put together valuable information, and provide your customers with something your competition isn’t; Expertise!

Your target market/customers will soon realize that your products are better than the rest and that your commitment to customer service is what truly sets you apart. Respond to requests in a timely manner. Act on calls to action, like increased functionality or product improvements. And pay attention to feedback. What your customers are saying to others is often just as important (if not arguably more) than what they are saying directly to you. While not everything they say is worth listening to, 99% of it certainly is. Just as the old adage goes in the restaurant and retails businesses, the customer is always right!

Remember, niche marketing isn’t about you. It’s about them. Your customers are the very essence of your business. They are who you are selling to and providing for. If you put them at the top of your list, you will soon be at the top of theirs!

 

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Niche Marketing, Don’t Be Fooled By the Myths

3 Common Myths About Niche Marketing

Effective businesses analyze their competitors as closely as they do their customers. Studying and evaluating competition help owners decides where to compete and how to position against the competition in each market margin. Global competition requires constant analysis of competing forces. Competitive strategies need to take advantage of opportunities and to avoid threats. Market leaders and competitors cannot fulfill market-fulfilling role unless customer needs and desires are understood and satisfied.

By attempting to expand market size, dominant companies continuously defend their current business against rival attacks. Businesses that are second, third and lower ranks are often called runner-up, or trailing, firms. To avoid being a follower in a large market, many attempt to be a leader in a niche, a smaller market

However, there are many myths surrounding niche marketing and the opportunity it provides for making money. Although many have questioned the possibility of great success by marketing to a niche, or small market group, it can and will be profitable if you do it right.

So how do you separate fact from fiction when it comes to niche marketing and how you can benefit from it?

Here are 3 of the most common myths that surround niche marketing and the truth behind them.

Myth #1:         Small Market, Small Profit

A small market does not dictate a small profit. Sure this can be true, but it is a blanket statement to say the least. Take for example the market of multimillion dollar residential real estate. This is arguably a small market as most of us are not in the market for such expensive homes. But there are some who are and the realtors who sell to them make anything but a small profit. In fact, they probably make more off of one sale than most of us do in an entire year! Therefore, just because you are focusing on a particular segment of a larger market does not make your earning potential small. It makes your target more focused. Think about Starbucks. Who would pay over a buck for coffee? Hmmm. Howard Schulz proved that niche markets can change from a small market, small profit to large market, large profit.

Myth #2:         You need to expand your offerings

Are you familiar with the old adage, less is more? Well, it’s a phrase that carries on in its infinite wisdom for a reason. It’s true! And it is especially true for niche marketing.

You will never hear of a carpenter who manufacturers handcrafted rocking chairs begin to offer leather sofas. Why? Because he has a specialty and knows there is a very specific group of people who enjoy and appreciate his work. Just the same, you may never hear of a fast food restaurant offering five course meals. Again, they know their market, they understand what their market wants, and they stick to it.

You should do the same! Remember, you can’t sell everything to everyone. You should focus your efforts and continually work on perfecting them. That is how you will set yourself apart and gain the trust and respect of your customers.

Myth #3:         If people don’t need it, they won’t buy it.

If you’ve ever stepped foot in a store that is right ANY store, you know that this is far from the truth. How many times have you walked into a grocery story for a gallon of milk and walked out with a carton of eggs, a candy bar, magazine and bottle of water?

Or, how many times have you walked into a shoe store and bought a second pair because they were buy one, get one half off?

Or, how many times have you stocked up on your favorite perfume or cologne because it was being discontinued?

We’ve all done it. We are consumers and we live in a consumer-drive world. Therefore, people don’t just buy what they need. They buy what they want. Hopefully, you are providing them with both!

Footwear company KLAS Shoes LLC of Bedford offers a full children’s line, under the name Roc-A-Bouts, along with three lines in the adult health and wellness category — Rotasole, KLASFit and Strolleez. Its shoes are sold in at approximately 300 individual store locations nationally, including many independent retailers in the mid-South, as well as some online retail venues. The company was founded in 2008. Not a very good time to establish a company. Gross sales are now over $6 million.

So define your niche market. This allows you to become an expert to that market. The more specific you are about who you serve, the better it is for people to send business your way. Keep focused and streamline your marketing efforts and dollars.

 

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Turn Your Passion into Your Niche

Make your niche something you love!

Niche marketing is about focusing your marketing efforts on a particular market segment, or niche and creating a product and/or service that speaks directly to that niche. Niches must be a part of your competitive strategy. As an Entrepreneur, niche marketing is a must.

For example, the pet market is quite large. It includes all types of animals from mammals to amphibians. So, a segment of the pet market might be horses. But a niche takes it one step further. A niche would be something more specific, like polo ponies or riding ponies.

Another example might be the food market. A segment of that market is fruits and vegetables and a niche would be organic fruits.

The list goes on and on and once you truly understand what a niche is, you can then begin to decide which niche is right for you. Niche marketing is all about doing what you love. That’s right! You get to make money by focusing your efforts on something you enjoy. Whether it’s hiking, cooking, painting or fishing, you can create your niche marketing business on just about anything in the world.

  • Here are some helpful questions to ask yourself when trying to figure out which niche market is right for you:
  • Do you enjoy sports? If so, which one is your favorite?
  • Do you enjoy reading? If so, what are your favorite kinds of books?
  • What, if any, hobbies do you have? What hobbies do you wish you had?
  • What was your favorite subject in school? What was your major in college?
  • What is the one thing you think you do particularly well?

This line of questioning will help you hone in on your likes, dislikes, and what really stands out as a topic or area of interest for you. Once you realize what that is, make that your niche! So simple…..

 

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Niche Marketing…The Do Nots

The Do Nots of Niche Marketing

Aspiring entrepreneurs must select a market to go after. Selecting a market niche is crucial. You cannot be all things to all people. Focus must be you mantra. So you must utilize niche-marketing tactics. This must be a part of your competitive strategy. While there are many things you can do right with your niche marketing business, there are also many things you will want to avoid doing wrong. Through the don’ts, you will, most likely, develop a bad strategy.

Here are some classic don’ts of niche marketing that you should avoid:

Don’t #1:     Don’t act without thinking.

Make sure not to invest time, money or other resources until you fully understand your niche, have a plan in place and know what it will take to go after it successfully.

 Don’t #2:     Don’t wait too long!

Once you decide on which niche to go after, and have taken the proper time and course of action to ensure it is a good one (namely profitable) then go for it! You don’t want to wait too long only to have someone else beat you to the punch.

Don’t #3:     Don’t limit your opportunities.

You can sell your products online, but you can also use good, old-fashioned word of mouth. Tell everyone you meet and know about who you are, what you do and how you can help him or her.

Don’t #4:     Don’t listen to naysayers!

There will always be critics and those who bring negativity to the table. But don’t let them rain on your niche marketing parade! Be confident in the work you have done to ensure this is a good idea, that this will work and that you do know what you are talking about!

Just like with anything else, you will want to avoid potential downfalls with your business. That being said, bring your common sense to the table and you will have a good chance at success. Remember, choose a niche that you enjoy, are knowledgeable in and can fulfill a need for. If you do, the rest will fall into place.

For more information on niche marketing, go to http://garyrushin.com/category/marketing/ and learn more about accelerating your business with Entrepreneurial 10X  go to http://garyrushin.com.

 

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SEO and The Significance in Niche Marketing

Entrepreneurs have realized the importance of Internet Marketing (IM) in putting a “stake in the ground” in creating their market footprint. IM must be a part of good competitive strategies to capture business. So too is the impact of using SEO. Search Engine Optimization (SEO) is a critical piece to the niche-marketing puzzle. If you do not tackle SEO head on, you will get lost in the crowd.

SEO is basically the process of helping search engines (i.e. Google, Bing, or Yahoo) not only recognize and find your site, but also list and rank your site content. The purpose of this process is to ensure Internet searchers see your website in the (hopefully) first, if not first couple of pages of results when performing a search related to your niche.

When you set up your niche marketing website, you will want to first create a list of keywords that are relevant to your target market. For example, if your niche is vegan dinner dishes, your keywords might include vegan, vegan dinner, vegan dinner recipes, vegan dinner dishes, and vegan recipes.

However, you will want to be careful not to make your list too long because you can only realistically top so many keywords. With SEO, it is critical to focus.

Once you have a set list of keywords (preferably anywhere from 5 to 10 should suffice_ you then must include these words within your site content, your site headings, footers, site page titles, meta tags and anywhere you deem appropriate. You want to weave these keywords into your messaging as much as possible in a casual way that allows for maximum optimization but still makes sense to your readers.

SEO is all about strategy, so take your time when deciding how to approach your niche market. This is not something to take a shot in the dark with. You will want to put careful planning into your SEO efforts, as they will drive traffic to your site, and ultimately, drive your business.

Read more on entrepreneur strategies and lifestyles at http://GaryRushin.com.

 

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Strategy: Is War Strategy and Business Strategy Similar?

In business as in war, a company can be small and win or can be large but lose. The rules of success or failure depends on key variables:

  • Understand to read the business landscape and act strategically
  • Understand time to attack or defend
  • Understand time to enter the field of battle or withdraw
  • Understand in what ways to isolate, outflank or even encircle the competition
The War Strategists

A pictorial of war strategists (military and business) including Winston Churchill, Carl von Clausewitz, George Patton, Sun Tzu, Peter Drucker, Napoleon, Steve Jobs, Michael Porter, and Norman Schwarzkopf.

The Debate—Similar or Dissimilar

A debate exists as to whether business strategy and war strategy are equivalent. The attraction of applying strategic, operational and tactical strategies of war to business is similar. Many principles and tools of war strategies can be applied to assist those in the business world. Some view business and war strategies differently and come up with a new view of how they can be applied.

One dissimilarity with business is that, within the context of past military planning and doctrine, there tended to be, generally, only one enemy and the purpose of the planning activity is to fashion the conditions for a specific, decisive act to bring defeat to the enemy. However, the nature of current warfare has transformed vastly from the days of state-to-state positional warfare and two well-defined enemies fighting within distinct geographic theaters of conflict.

For more than seventy years, war planners have been dealing with asymmetric warfare, fourth generation warfare, low intensity conflict, nonstate actors participating in various wars and skirmishes. As in business, rarely do we deal with a single enemy or a single decisive battle to end a conflict and bring about the defeat or surrender of the single enemy. The Iraq and Afghan wars of conflict are examples of this assessment.

Current Warfare Strategy

In Iraq, the US military and its allies were fighting Iraq’s the Sunni Arab community upon their toppling of Saddam Hussein’s brutal Baathist regime and subsequently these same Iraqi Arab Sunnis allied themselves with US forces to extract from communities the menace and plague of Al Qaeda. Both in Afghanistan and Pakistan, US military forces were fighting alongside of, and supporting, the national security forces of these two nations while the next minute they are combating them directly and indirectly while fighting the Taliban, fragments of Al-Qaeda and different Jihadist combatants.

Accordingly, current warfare strategy, as we know it today, and business strategy have begun to converge with more remarkable similarities than differences. In business, the competitive landscape is generally complex and dynamic. Strategy and tactical interplay are vital in business. Similarly in warfare, the multitude of different stakeholders must be considered. In Afghanistan, the US military must, at the same time, plan and manage relationships encompassing Pakistanis, the Iranians, the Russians and several Afghan clans. Some times they are treated as friends and sometimes as foes. This complex relationship is also trues in business. Look at Apple Computer and Samsung. Both are fighting in the battlefield of the courts over intellectual property rights and at the same time cooperating and collaborating on other projects.

The competition is more vague and often operates over an ill-defined territory. Consequently, modern warfare is more about politics and community action than purely military engagement and its goal is to wear down the various forces working against your army and render them ineffective and unwilling to continue fighting rather than totally eliminating them. An example is Coca Cola versus Pepsi. Both companies have waged a very expensive conflict, however none have the intention of totally destroy the opponent.

Types of Warfare

In large part, warfare strategy, at a tactical level, fosters “kill, capture, destroy” asuch of the military opponent’s capabilities as fast as possible while protecting current forces. In business strategy, parallel tactics are called upon. Types of warfare include:

Limited War—a military example is the US versus the Nicaragua Sandinistas whereas the US used overwhelming superiority to defeat. A business example is Microsoft versus smaller software producers in the 1980s and 1990s. Microsoft used patent trolling techniques and it market dominance to block competition.

Counter-Insurgency (COIN)—a military example is the US versus the Taliban. Although decisive victory probably cannot be achieved within the normal mode of warfare, a COIN strategy use the divide and rule tactic that bifurcates the existing power structure and prevent smaller power groups from linking up. The strategy is designed to fracture the connections between insurgency and the population thus weakening the enemy. A business example is the US versus Microsoft for violating the Sherman Antitrust Act. Microsoft used its WINTEL dominance to crush its competition during the browser wars with Netscape’s Navigator and Opera Software’s Opera browsers. By bundling its Internet Explore web browser into its operating systems (O/S), making it difficult to download competing browsers into the Window O/S, and forming restrictive licensing agreements with its original equipment manufacturers, Microsoft prevented smaller companies effectively from competing or gaining any traction.

Total War—a military example is the Soviet Union versus Nazi Germany. Typically a high intensity conflict of balanced opponents, such wars tend to be a victory at any price, even if truce would be advantageous for both parties during a stage of the war. An example is two of Germany’s most well known brands Volkswagen and Porsche and reclusive industrial families, the Porsches and the Piechs; both belong to the same family line. This resulted in the 2008 majority takeover by Porsche of Volkswagen. The typical strategy is total exhausting of the opponent similar to war.

Conclusion

Correspondingly, purpose of much of the best of current business strategy is to transform the rules of the game in favor of the business. Creating unique market niches based on the first move advantage, and discovering a unique technology as well as product, and process innovation can grab an unquestionable market share based on a combination of these factors that competitors simply cannot weaken. Accordingly, warfare, whether business or military, becomes a series of battles whereby the cleverest “wins”, but where victory is more about the superiority at what you do rather than total dominance leading to a wholesale decimation of the company’s competition.

Strategic Business Warfare Tactics Series:

This it is first of a blog series on business warfare strategies. The series will discuss various war tactics that can be used as competitive strategies for family businesses, entrepreneurs, small businesses, and business executive to thrive in both good and tough market conditions. Sign up at http://garyrushin.com to follow the series.

 

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Strategy: 10 Steps Necessary for Operating through the Next Business Downturn

The great recession and the recent economic turmoil did its damage on businesses. So to be prepared, how should a manager be prepared for the next economic downturn?  Here are ten fundamental priorities that should be performed:

  1. Take a closer look. Before starting a retraction of business activities (i.e., cancelling projects, contracts, or executing a reduction-in-force), management should observe the overall situation. Taking hasty moves can result in loss opportunities and hurt the business in the long run.  Look at the drivers behind the economic downturn, which segments are affected, the impact on customers, and the company’s industry.  Management must be aware of the environment. It may not be business as usual, however this may be an opportunity to leverage its current business attributes.
  2. Act decisively.  Management should not live off its past, but act when it is necessary. During turbulent time, positioning the company to the new environment should set the company towards a proper direction.
  3. Cash is king. Having liquidity during hard times is the lifeblood for survival and provides the necessary working capital to act once “signs of recovery” appear.  Make sure that the company has access to sufficient lines of credit. Unfortunately, many companies were caught short when banks pulled lines of credit and banks retrenched. In fact, most of the commercial banks and large corporations hoard cash during times of crisis. Stabilize cash flow with active working capital management.
  4. Focus on the customers. During economic downturns, gaining customer loyalty is paramount. Management must focus on customer service and delivery. Remember that customers can switch at any time. Sales volumes are critical in driving the business through economic turmoil. Plan on how to mitigate it. Recognize which products and/or services are core to the business and think about how to exploit any competitive advantages.
  5. Manage Costs. Place an emphasis on knowing the business costs. Re-evaluate the relationship between costs and profits. Take a look at procurement of goods and services. Improve efficiencies and drive out waste. Reexamine overhead and especially how it is being allocated. Inefficient cost allocation can result in misleading profitability reporting as perceived profitable products and services are in fact losers, as other products and services may be cross-subsidizing costs. Determine true products and services profitability.
  6. Leverage Information. Especially during economic downturn reliable management information is vital in making informative decisions. Rapid change in the external environment may require new key performance indicators (KPI). Cash and liquidity indicators (cash management) are critical during this period. Additionally, good information can be used to ferret operational leakages and hidden gems.  Think of the benefits brought about by having excellent management information systems to Walmart.
  7. Plan for Different Scenarios. During economic turmoil, flexibility, anticipation, and reaction are a must in any rapidly changing business environment. Scenario planning is a useful tool for strategic planning. To ensure survival, management needs to rethink business operations and value creation for its customers. Stress testing risks should be done to ensure business continuity also exist. Plan for changes in customer taste. Make sure the business can effectively respond to competitive challenges.
  8. Open dialogue with stakeholders. Economic downturn creates “business challenges”, but also for the stakeholders. This calls for good stakeholder management that provides shareholders, lenders, and key suppliers with clear communications about management’s business strategies. You must keep in mind that stakeholders dislike nasty “surprises”.
  9. Leverage opportunities. Capitalize and exploit competitive advantages that the business may have in adverse conditions. Assess the company’s competitive advantages. Utilize management tools i.e., Michael Porter’s five competitive forces, etc. to determine the company’s position and opportunities that may create high rates of return on invested capital.
  10. Value your people. Too often, management loses sight of the business’ most important asset, its personnel. Begin by identifying talent that cannot be lost. Think about talent rather than headcount will enable the business to leverage this earning asset.  Have regular and open communications to assure employees that company will weather the storm. Being transparent can foster employee loyalty. Also make sure to articulate the company’s strategic plan. Employees cannot carry out what they do not know. Promote continuous improvement and performance matrices that:
  • Align the employee efforts with business needs
  • Engage true dialogue between the employees and the manager, not just processing a form
  • Create common frameworks and measurement criterion for all employees
  • Look at results and behaviors of people to deliver high performances, it is not about measuring personality trait
  • Enhance job fit and defining shared responsibilities
  • Focus employees’ current job requirements and expected results

Recognize that active steps are necessary during times of economic turmoil.

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

 

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Strategic Management: Eight Defensive Strategies (PART 2)

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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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.

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

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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Strategy: Good Strategy or Bad Strategy? 5 Lessons to Follow

Tackling the austerity created by the 2008 financial crisis and the 2011 debt crisis, leaders today must focus in on competitive strategy to leverage the new reality. A leader’s central task is developing and implementing a strategy. Whether the leader is a CEO, an entrepreneur, CEO of a Fortune 500 or a small to medium size enterprise, a church pastor, or a government leader, the leader must provide a specific and coherent response to obstacles faced my today’s enterprises and muster available resources to bear to achieve results.

Surprisingly, good strategy is unexpected. This is because most organizations do not have a strategy. In its place, these organizations have “visions” and mistake financial goals for strategy, and pursue muddling activities or “dog’s dinner” of conflicting policies and actions.

Good strategy attempts to harness and apply power where it will have the greatest effect. Strategy is a united and coordinated “set of commitments and actions planned” to exploit core competencies and gain a competitive advantage.  For the leader the first challenge is to understand that good strategy’s starting point is getting clear about the challenge.

Unfortunately, most organizations that claim to “have a strategy” have nothing. They have set some financial goals, but a real coherent strategy does not exist. This is because their plans do not provide the road map as to how to achieve the goals and provides no sense as to whether achieving the goals will solve the core challenges. Five lessens of good strategy are:

  1. Strategy begins at determining what is going on to comprehensively assess the situation, and then taking action.
  2. Identifying the critical issues, developing pivot points to effect change, focusing on action and employing resources collectively provides the foundation of the plan.
  3. Avoiding “scope drift” and battle the never-ending organizational disarray must be exploited to keep the execution of the plan under control.
  4. The leader must dissect the complexity of the organization’s obstacles into simpler problems that can be understood and dealt with.
  5. Follow the three essential components: 1) a diagnosis of the environment, 2) the choice of an overall guiding policy, and 3) the design of coherent action.

Unfortunately, many attempts a instituting a strategy lack a good diagnosis. Step back. Analyze the situation. Comprehend the micro and macro picture. Then go forward with action.

 

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