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MBA Class of 2011(2009-11)/ Semester-II

Corporate Appreciation
Who are your main competitors? What is the market share of each of them in the market overall? Which are growing and which are declining? Why? What is their share in each market segment (geography, customer type etc.)? Are they broad based across the whole market, or do they derive their overall share by domination of one or more segments? Does the share come from one dominant product/service, or a wide range? Which segment does each of them avoid? Why? What is unattractive to them about it?

Corporate Appreciation

What is the strategy of each? How could you turn their strengths and weakness? Are there any major companies that do not operate in your market but could do so in the near future? What are the main substitutes in your market? Which are growing and which are declining? What are the substitutes? main companies that provide these

Three Lessons Underpinning Success in Warfare are Directly Transferable to obtaining Competitive Advantage
Superior (SWAT). Weapons (Technology) and Tactics

Low cost leadership. Differentiation. Focus.

Possessing a High Force: Space Ratio.


What is crucial is not just numbers per se, but the concentration of force to dominate and produce a high force: space ratio. All things being equal, the biggest company or brand will win because:
Both customers and consumers believe that the biggest must automatically be the best.

Three Lessons Underpinning Success in Warfare are Directly Transferable to obtaining Competitive Advantage
Bigger companies have deeper pockets. Law of increasing returns, in which size in some industries builds an unstoppable momentum. Big gets bigger. Economies of scale the main key to profitability in some industries. Hence, aim for significant market share as a key objective. Concentrate resources on one particular segment of the market and dominate it with high force: space ratio. Thus, SME can be the biggest in their chosen part of the market, even if not the biggest overall.

Possessing a strong defensive position.


Invincibility lies in the defence, the possibility of victory in the attack. Companies and brands that are strong are difficult to dislodge.

Head to Head Strategies


Head to Head Combat.
When two or more companies decide to slug it out in the market place like two boxers. Direct competition with other companies in the market place for the same product or service, customers and business.

Head to Head Logistics.


Aimed at wholesale destruction or capture of enemy resources, thus preventing them from being available to the enemy and hastening the end of hostilities. Defensively, it involves a scorched earth policy.

Offensively, this strategy involves piece meal conquest of territory, area by area, gradually capturing land, food, population, troops, tax revenue and other supplies thus diminishing the opponents resources and capacity to fight. Conquest of a market or market sector region by region. The most important resource is customers.

Raiding Strategies
Numerical disadvantage, lack of competitive SWAT or, lack of sufficient force : space ratio. Raiding Combat (small businesses).
Raids , harassment, minor encounters and the specific avoidance of a pitched battle. Compete directly with large competitors, but do so with specific customers rather than across the board. Price reduction, personalisation of service etc. (Guerilla warfare).

Raiding Logistics (smaller companies).


Raids and harassment, aimed at opponents resources. Identifying and concentrating on a group of customers with a special need that it can satisfy better than the competition. Complete conquest of a sector of a large market whose needs are unmet.

Corporate Warfare Matrix


HEAD TO HEAD
Napoleon German invasion of France 1940 Kargil (India) Coke vs Pepsi TOI versus HT Microsoft Vs Netscape Alexander the Great Russia vs France 1812

RAIDING
Shivaji Vietminh vs France Vietcong vs US

COMBAT

Interski Local specialist shops Shivaji Vietcong vs US Kargil (Pak) Aldi and Netto Amazon

LOGISTICS

Walmart Canon Copiers Honda vs Harley Davidson

Four Types of Corporate Warfare


The Strategic Square
DEFENSIVE WARFARE Strategy for market leaders Market leaders only should consider playing defence Courage to attack themselves with new ideas Strong competitive moves should always be blocked OFFENSIVE WARFARE Strategy for No.2 or No.3 Avoiding the strengths of a leaders position. Attacking the leaders weaknesses Launching the attack on as narrow a front as possible

FLANKING WARFARE Strategy for new players Moving into an uncontested area Tactical surprise ought to be an important part of the plan

GUERILLA WARFARE Strategy for small players Finding a segment of the market small enough to defend No matter how successful you

Hypercompetition
Four arenas of competition
Cost & Quality (C-Q) Timing and know-how (T-K) Strongholds (S) Deep pockets (D)

Coke vs. Pepsi


Coke: 1886; Pepsi: 1893 1933: Pepsi struggling to stave off bankruptcy. Dropped price of its 10c, 12 oz. bottle to 5c, making it a better value. Ad jingle of Pepsi twice as much for a nickel better known in the US than the Star Spangled Banner.

Coke

Price / Ounce

Price / Ounce

Pepsi

Pepsi

Coke

Perceived Quality

Perceived Quality

Coke vs. Pepsi, Contd.


Pepsi keeps price advantage through 60s and 70s, when Pepsi charged its bottlers 20% less for its concentrate. With rising ingredient costs, Pepsi could no longer offer twice as much for the same price. So it raised price to Cokes level giving it a war chest to fuel an aggressive ad campaign. Battle shifted from Price to Quality, with Pepsi targeting the youth. What followed was the Pepsi Challenge & Real Thing Coke ads.

Pepsi

Coke

Price / Ounce

Youth & Middle Class Segments

Price / Ounce

First move Pepsi Challenge

2nd move: Cokes Ad war Perceived Quality

Perceived Quality

Coke vs. Pepsi, Contd.


Perceived quality caught up. Deeper pocketed and lower cost Coke initiated a price war in selective markets where Pepsi was weak in the 70s. Pepsi responded with its discounts and by the end of the 80s, 50% of food store sales were on discount. Other companies moved into the lower left quadrant of the market. But the two major players forced price down to ultimate value. To break price spiral, Coke launched New Coke to keep Coke loyals and induce switching among Pepsi buyers. Rejected by market. Attempts to move to next arena via niches in caffeine and sugar substitutes.

Price / Ounce

Price / Ounce

Generics RC Cola

Coke & Pepsi Price Spiral

New Coke Actual

Classic Coke & Pepsi New Coke Intended

Perceived Quality

Perceived Quality

The Cycle of Price - Quality Competition - Moving Up the Escalation Ladder


Move to the next Arena Return to Price Wars Commodity like Market for age gps Attempt to redefine Quality Move to Ultimate Value Niching & Outflanking : young pop Full line Producer : all products Price-Quality Maneuvers Price War