Page 308 - DMGT408DMGT203_Marketing Management

Unit 13: Creating Competitive Advantage

Contraction or Withdrawal Strategy: If the market happens to be highly fragmented and new Notes
entrants have more resources than the leader, it might be difficult for a market leader to defend
properly in all market segments. The firm may not have enough resources and have no options
but to decrease or take no action in some market segments. The company focuses its efforts on
segments where it has maximum competitive advantages or highest segment attractiveness and
potential for growth.

13.4.2 Market Follower Strategies

Following pioneers in a product-market, there are late entrants. Of course, not all followers in
a growth market dream of becoming the market-share leader leaving behind the pioneer. Many
competing businesses enter the market, especially those with limited resources and competencies
and may decide to enter a distinct segment of the larger market, overlooked by other entrants,
and build a successful business. It resembles a kind of niche strategy that avoids head-on
competition with larger players and may have some degree of success.
Most market structures have share leaders, followers, and niche marketers. A firm that has
second largest share in a market and is a close follower has an interesting strategic choice
whether to challenge the leader with an offensive strategy. Another strategy option is to protect
its share position and maximise profitability. Much will depend on the competitive advantage
of the leader and its pledge to defend its position, follower’s resources, and the short-term profit
needs of the follower.

Market-share followers try to retain their customer base, try to acquire new customers but avoid
any moves that might attract retaliation from competitors. Some commonly adopted strategies
are:
Counterfeit Strategy: This type of follower makes duplicates of leader products and sells at very
low prices through grey market and dealers of doubtful integrity.

Example: Some operators in East Asian countries, duplicate/pirate software, music and
movie CDs, Apple Computer, top selling novels, and some brands of expensive watches etc.
Adapter Strategy: This business takes or copies a leader’s product, improves it and sells in
different markets. The differentiation is in terms of features, packaging, pricing, and distribution.
Some firms pick up product ideas from established leaders and implement them in a different
country with some modification.

Did u know? Research findings show that number one and two share-leaders earn the
maximum ROI, and others may run into negative ROI. This is the reason that P&G aims to
be either number one or two in a business otherwise the business is not worth being in.
13.4.3 Market Challenger Strategies

A challenger visualises capturing the market-share leadership in an industry. Many challengers
have successfully overtaken the leader and some others have gained share points.

Did u know? There was a time when GM was the largest producers of cars but today
Toyota leads the pack. Maruti Udyog was nowhere when Hindustan Motors and Premier
Auto (Fiat) were the largest share companies. Today, Maruti produces and sells more cars
than Hindustan Motors and Fiat in India.

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