Page 302 - DMGT408DMGT203_Marketing Management

Unit 13: Creating Competitive Advantage

competitive advantage and market share when the company’s competitive advantage is either Notes
average or below average. The company may decide to gain competitive advantage and market
share in the existing product-markets and/or enter new markets with no recognised market
share. Another strategic objective favourable for offensive strategy might be when the marketer
aims at cultivating an emerging or underdeveloped market where it has established a strong
competitive advantage.

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Caution Using the market attractiveness and competitive advantage portfolio (Figure
13.5), a marketer can spot six positions where offensive strategy could be adopted. These
are cells 1, 2, 3, 4, 5, and 6. Four of the cells (3, 4, 5, and 6) with average market attractiveness
and one with highest attractiveness and highest competitive advantage could also use a
defensive strategy. A marketer could decide whether to use offensive or defensive strategy
based on more detailed information, such as an offensive strategy may be called for
depending on the company’s sources of relative competitive advantage. Alternatively, a
defensive strategy to protect the current business position may be a better choice for
accomplishing desired performance objective of the company. A defensive strategy is
sometimes more suitable in some cases when the company aims to gain optimum market
focus, minimise investment, and earn more profits.
The basic offensive strategies include investing for sales growth in existing markets, improving
competitive position or investing and entering new markets (Figure 13.6). Each of these strategies
will have a different set of objectives and sub-strategies to achieve the desired results.

Figure 13.6: Offensive Strategies
Strategy Basic Strategy Basic Strategy Basic Strategy
(A) (B) (C)
Invest to Grow Sales Invest to Improve Invest to Enter
in Existing Markets Competitive Position New Markets
Objective Grow in Existing Market Improve Revenues Diversify to Grow
Grow market share Improve customer loyalty Enter related new markets
Different and retention
Strategies to Grow revenue per Improve differential Enter unrelated new
Implement customer advantage markets
Central Enter new market Improve marketing Enter new emerging
Strategies segment productivity markets
Expand market demand Build marketing advantage Develop new markets

13.2.2 Defensive Strategies

Generally businesses with high market share in growing or mature markets opt to adopt defensive
strategies with the objective of maintaining cash flow and short-term profitability. Without
defending their position and profitability, companies would face short-term difficulties in terms
of profitability and lack resources to take advantage of opportunities by entering growing
markets with offensive strategies.
The fundamental aim of defensive strategy is to protect profit position of the business and
important share positions that justify investment. Defensive strategy is also appropriate for a
secondary objective, which is to manage profitability of the business that is losing the potential
for high growth profitability.

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