Strategy Moves: 14 Complete Attack and Defence Strategies for Competitive Advantage

Strategy Moves

14 Complete Attack and Defense Strategies for Competitive Advantage

Author: Jorge Vasconcellos e Sá Publisher: Prentice Hall Date of Publication: 2005 ISBN: 0-273-70167-3 Number of Pages: 212 pages About the Author

Jorge Vasconcellos e Sá

The Big Idea This book lays down 14 strategies for competitive advantage - 6 attacks and 8 defenses, the success of which depends on mastering the rules of timing (when to perform each type of strategy); method (how to implement it); and alliances (whether to do it alone or in alliance).

Jorge Vasconcellos e Sá is a Portuguese citizen of Brasilian and French ascendents. He has two undergraduate degrees one in Economics (Technical University) and one in Business Administration (Catholic University). He also has a graduate degree in Macroeconomics from Gulbenkian Foundation and a masters degree from The Peter F. Drucker Graduate School of Management in California. He has a doctorate (PhD) in Business Administration from Columbia University, in New York. He was awarded the Jean Monnet Chair in 1997, the highest European academic award, and has in the past received several distinctions including Fulbright, and Beta, Gamma and Sigma fellowships. In January 2004 he was nominated to the five member commitee reporting directly to the Prime Minister on the Portuguese economic strategic development. On this subject, but as an independent scholar, he has been asked to address the Portuguese Parliament (special economics commission). He has written numerous articles and published thirteen books, among which are Practical Management and The Neglected Firm. Published by BusinessSummaries, Building 3005 Unit 258, 4440 NW 73rd Ave, Miami, Florida 33166 ©2006 BusinessSummaries All rights reserved. No part of this summary may be reproduced or transmitted in any form or by any means, electronic, photocopying, or otherwise, without prior notice of BusinessSummaries.com

Defense Strategy by Jorge Vasconcellos e Sá

Chapter 1 - You can win with ten or lose with a hundred: two examples from the field of war On January 22, 1879, 5,000 British forces stationed at Isandlwana were massacred by 24,000 Zulu army warriors. In the afternoon of the same day in Rorke's drift, 100 British army men had defeated 4,000 Zulu warriors. The British forces were established at a camp at Natal, and an officer, Major Dartwell, left the camp and hunted Zulus. Along the way he encountered a Zulu army of 1,000. The British army sent the company of Chelmsford to help the forces engaged in the on-going battle, but little did they know that the 1,000-man Zulu army was just a pawn of the Zulu to divert their attention away from their real target, Isandlwana. While the concentration of the British was the on-going battle, The Zulu attacked the British camp and massacred everything in it.

Chapter 2 - The reason for victory and defeat - and the lessons for business What happened at Isandlwana and Rorke's Drift was to be expected. The factors that led to the triumph of the Zulus over the British can be summarized in four variables: · · · ·

Knowledge of the enemy Focus Choice of terrain Surprise

Knowledge of the enemy’s characteristics and plans War guru Zun Tsu, states: Know the enemy and know yourself and you do not have to fear a hundred battles. Focus In every endeavor, whether in business and war, there must be focus. Without it, a company or army will be easily dissuaded and lose sight of their primary objective. Take the case of IBM. Originally IBM manufactured typewriters and supercomputers. However, as time went by it expanded its business ventures and started producing mainframes and mini-computers, even providing information processing and ancillary business, losing its focus and wasting billions and billions of dollars for nothing. Choice of terrain In the art of war, Zun Tsu recommends to always choose the higher ground when going into battle, to be able to see oncoming enemies.

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Defense Strategy by Jorge Vasconcellos e Sá

When the Zulus attacked Rorke's drift, they were in a bad position because the environmental elements were not in their favor. When they attacked Isandlwana, however, the opposite was true. The same principle can be applied in business. A good example of choosing a terrain is Federal Express (FedEx). Established in 1973, FedEx had its own plane and trucks and a unique hub-and-spoke distribution system in Memphis, Tennessee. Its main competitor was Emery Air Freight. Because Fedex did not have the financial capacity to offer cheaper prices, it specialized instead in delivering packages faster than its rivals. Fedex chose a terrain where it had the advantage: delivery speed and reliability. Fight where it suits you. Choose the terms of engagement. Be the company in control and not being controlled. Choose the nature of the battleground and the kind of terrain in which to hold a fight. Surprise In battle, the enemy must not have information about one's plan of action. The key in winning battle is to catch the enemy in the open and unaware. In business, if a company is caught unawares by a new and timely strategy implemented by its rival, it will take time for them to react and recover, and it demoralizes competition. Take the case of Johnson and Johnson and Bristol-Meyers. Bristol launched Datril, which was meant to challenge Johnson and Johnson's Tylenol. Datril's edge based on the fact that it was 10% cheaper than Tylenol. However, on the eve of Datril's launch date, Johnson & Johnson sent a credit note to all its retailers for 10% of Tylenols value, and instructed them to reduce the retail price of the product accordingly. The effect of this on Datril's sales was immense. Why change from Tylenol, which was already a trusted product, to a newcomer that claimed to be its equal, consumers reasoned. Datril was dead in the water.

Chapter 3 - Attack: the six strategic movements A move can be called an attack if someone enters a new geographical area, a new industry, and/or new segment within the same industry and geographical area (Entry), and this movement occurs with an initiative to gain profits or synergy (Unprovoked). ATTACK = (1) Entry + (2) Unprovoked There are six possible ways to attack an opponent: 1. Guerilla

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Defense Strategy by Jorge Vasconcellos e Sá

2. 3. 4. 5. 6.

Bypass Flanking Frontal attack Undifferentiated circle Differentiated circle

The first four types are concerned with entry into a single segment, while the remaining two refer to entry into two or more segments. To further understand this, let us take Pizza hut, the leader in pizza industry, as an example. We all know that in the pizza service industry there are four segments that have to be considered: · High quality/service restaurants with an excellent menu · Sit-in with enhanced price and speed of service · Takeaways · Home deliveries Assume that Pizza hut scores 0% in high quality/service, 80% in low-price and fast serve, 20% in takeaways and 0% in home delivery. Given the leader's market position, there are four ways to attack it: 1. If one opens a sit-in restaurant with low prices and fast service it is a frontal attack, because Pizza Hut is already in this segment and it represents 80% of its turnover. 2. If we open a small restaurant with a counter and specialized in takeaway it is a flanking attack, because Pizza Hut is already in that segment but is not a leader (representing only 20% of its turnover) 3. If we open a high quality restaurant it will be a bypass, because Pizza hut is not in that segment and one may steal some customers. 4. Finally, if one opens a restaurant that specializes in home deliveries but is not limited to pizza, it will be a guerilla attack because Pizza hut is not in that segment and the business is not stealing any of its customers, because its products is a complement of theirs. 5. If one opens a restaurant entering two segments - takeaway and home deliveries, this would be an undifferentiated attack. 6. Finally, if we open a high price restaurant with a side counter for takeaways, the strategy would be differentiated circle.

Chapter 4 Defense : the eight strategic movements Essentially, there are eight (8) defensive strategies: 1. Signaling 2. Creating entry barriers (fixed and mobile) 3. Global service 4. Pre-emptive strike 5. Blocking

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Defense Strategy by Jorge Vasconcellos e Sá Mr. Shmooze by Richard Abraham

6. 7. 8.

Counter-attack Holding the ground Withdrawal

Signaling The main objective is to verbally warn the enemy/competitor attempting to enter the market. This can be done through advertisement and media mileage. The main idea of this strategy is to discourage industry neophytes from engaging in their segment. Barriers to entry Is the second type of defense which involves, literally, creating obstacles that are difficult to overcome and discourages competitor's entry into the market segment. An example of such is introducing new products on a yearly basis that offer higher returns and benefits to its consumers. Global service This concept is distinct from globalization, it means enlarging the product portfolio of a company. Global service is a defense strategy and not an attack for the sole reason that the company enters a new segment in order to protect the position of the product. Pre-emptive strike There are two (2) major characteristics of Pre-emptive strike: · There is entry into new market, which differentiates it from defenses where no movement is involved · The movement occurs before the competitor's move Pre-emptive strike is of two (2) kinds: the product and client. An example of a product pre-emptive strike is when Fedex immediately entered its rival's test markets in Cleveland, Philadelphia and Harford with its own product. A client pre-emptive strike can be seen in American Broadcasting Corporation (ABC) allotment their daytime TV serials and dramas for women. Blocking Blocking is different from signaling and holding the ground because there is movement. It is also different from a pre-emptive strike, counter-attack and strategic withdrawal because the movement is towards the segment which the competitor has entered. The essence of blocking is to enter a given segment where a company is not present in order to protect the said company. Counter-attack Counter-attack is distinct from blocking because it means entry into a different segment from that which the competitor has attacked. The segment can be one in which the competitor is present or absent - as long as one's presence there threatens the competitor.

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The four (4) important ingredients of counter-attack success are: · It can involve one or several segments · It can be performed alone or with other strategies · The objective is not to harvest the profit potential of the segment but to weaken the competitor in its new segment · The product must have a competitive advantage Holding the ground The strategic position is to stay put. Defend the ground by: · Reducing cost to strengthen competitiveness · Marketing · Financing Withdrawal It is a defense with negative movement. It increases market distance from a competitor, but is not the same as giving up. According to Sun Tzu, “victory goes to he who knows when to fight and when not to.”

Chapter 5 - When to follow each strategic movement In business, war and real life, timing is of the essence. One must know when to attack and when not to, when to stand still and to retreat. It must be clear that defense is easier and better than attack for six reasons: 1) the company may have first move advantage, 2) knowledge of the industry, 3) experience, 4) market share, 5) scale advantages, and 6) client risk aversion. When in doubt, do not attack. A company should launch an attack on its competitors only if: 1) there is movement on their part: new geographical area, new industry and/or new segment within the same industry and geographical area, 2) the attack does not create risk by weakening the company's center, and 3) there is less to gain to gain from increasing market share than from entering a new market segment. After deciding to launch an attack, the following questions must be addressed: 1. Are the defenses organized in such a way that the threat of a new entrant is negligible? 2. Are there spare resources after the attack, so that it won't endanger the present market share position? 3. Is it more attractive to invest in the new segments than in increasing the share of the old one?

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