Write a 250-350 word reflective statement and how it has affected your thought process, development, and professional disposition. This statement should be an opportunity for you to reflect on your personal learning process—challenges, moments of discovery, life experiences, readings, and interactions. The reflection will be based on the readings the text books. Your reflection will be based on the assigned readings of the weeks. Reflections must meet the following criteria: – 250-350 word count – Describe your “take-away” from the assigned reading. This may relate to personal insights gained, parallels to past management experiences, or parallels to observations of past management you have experienced in other organizations.LO1 Learn whether and when to pursue offensive or
defensive strategic moves to improve a company’s
market position.
LO2 Recognize when being a first mover or a fast follower
or a late mover can lead to competitive advantage.
LO3 Become aware of the strategic benefits of expanding
a company’s horizontal scope through merger and
acquisitions.
LO5 Understand the conditions that favor farming out
certain value chain activities to outside parties.
LO6 Gain an understanding of how strategic alliances and
collaborative partnerships can bolster a company’s
collection of resources and capabilities.
6-2
Choosing Strategy Actions
that Complement a Firm’s
Competitive Approach
• Decisions regarding the firm’s operating scope and
how to best strengthen its market standing must be
made:
 Whether and when to go on the offensive and initiate aggressive
strategic moves to improve the firm’s market position.
 Whether and when to employ defensive strategies to protect the

firm’s market position.
 When to undertake strategic moves based upon whether it is
advantageous to be a first mover or a fast follower or a late
mover.
6-3
Choosing Strategy Actions
that Complement a Firm’s
Competitive Approach (cont’d)
• Decisions regarding the firm’s operating scope and
how to best strengthen its market standing must be
made:
 Whether to integrate backward or forward into more stages of
the industry value chain.
 Which value chain activities, if any, should be outsourced.
 Whether to enter into strategic alliances or partnership
arrangements with other enterprises.
 Whether to bolster the firm’s market position by merging with or
acquiring another company in the same industry.
6-4
Launching Strategic Offensives to
Improve a Company’s Market Position
• Aggressive strategic offensives are called for
when a firm:
 Spots opportunities to gain profitable market share at
the expense of rivals
 Has no choice but to try to whittle away at a strong
rival’s competitive advantage
 Can reap benefits of a competitive edge offers—a
leading market share, excellent profit margins, and
rapid growth.
• The best offensives use a firm’s resource
strengths to attack its rivals’ weaknesses.
6-5
Choosing the Basis for
Competitive Attack
Attack the competitive
weaknesses of rivals
Offer an equal or better
product at a lower price
Adopt and improving on
good ideas of other firms
Principal
Offensive
Strategy
Options
Attack profitable market
segments of key rivals
Pursue continuous
product innovation
Capture unoccupied or
less contested markets
Leapfrog competitors to
be the first to market
Use hit-and-run or guerrilla
marketing tactics
Launch a preemptive strike
on a market opportunity
6-6
Principal Offensive Strategy Options
• Attacking the competitive weaknesses of rivals
• Offering an equally good or better product at lower
price
• Pursuing continuous product innovation
• Leapfrogging competitors by being the first to
market with next generation technology or products
• Adopting and improving on the good ideas of other
companies (rivals or otherwise)
• Deliberately attacking those market segments where
a key rival makes big profits
• Maneuvering around competitors to capture
unoccupied or less contested market territory
6-7
Principal Offensive Strategy Options
• Using hit-and-run or guerilla warfare tactics to grab
sales and market share from complacent or
distracted rivals
• Launching a preemptive strike to capture a rare
opportunity or secure an industry’s limited
resources.
 Secure the best distributors in a particular geographic region or
country
 Secure the most favorable retail locations
 Tie up the most reliable, high-quality suppliers via exclusive
partnerships, long-term contracts, or even acquisition
6-8
Choosing Which Rivals to Attack
Market leaders that are vulnerable.
Best Targets
for Offensive
Attacks
Runner-up firms with weaknesses in
areas where the challenger is strong.
Struggling enterprises that are on
the verge of going under.
Small local and regional firms with
limited capabilities.
6-9
Blue Ocean Strategy—
A Special Kind of Offensive
• A firm seeks a large and lasting competitive
advantage by abandoning existing markets
and inventing an exclusive new industry or
market segment (open competitive space)
that makes former competitors irrelevant.
 By “reinventing the circus”, Cirque du Soleil annually
attracts an audience of millions of people who
typically do not attend circus events.
6-10
CORE CONCEPT
Blue ocean strategies offer growth in revenues
and profits by discovering or inventing new
industry segments that create altogether new
demand.
6-11
Concepts &
Connections 6.1
GILT GROUPE’S BLUE OCEAN STRATEGY
IN THE U.S. FLASH SALE INDUSTRY
6-12
Using Defensive Strategies to Protect
a Company’s Market Position and
Competitive Advantage
• Defensive strategies defend against
competitive challenges by:
 Lowering the risk of being attacked.
 Weakening the impact of any attack that occurs.
 Influencing challengers to aim their competitive efforts
towards other rivals.
• Good defensive strategies can help protect
competitive advantage but rarely are the
basis for creating it.
6-13
Blocking the Avenues
Open to Challengers
Maintain economypriced models
Introduce new
features
Add new models
Broaden product
line to fill vacant
niches
Defending a
Competitive
Position
Announce new
products or price
changes
Grant volume
discounts or better
financing terms
6-14
Blocking the Avenues
Open to Challengers
• Introduce new features
• Add new models
• Broaden product line to fill vacant niches
• Maintain economy-priced models
• Make early announcements about upcoming new
products or planned price changes
• Grant volume discounts or better financing terms to
dealers and distributors to discourage them from
experimenting with other suppliers
6-15
Signaling Challengers That
Retaliation Is Likely
Publicly announcing management’s
strong commitment to maintain the
firm’s present market share
Dissuading
or diverting
competitors
Publicly committing the firm to a
policy of matching competitors’
terms or prices
Maintaining a war chest of cash
and marketable securities
Making a strong counter response to
weak competitor moves to enhance
the firm’s image as a tough defender
6-16
Signaling Challengers That
Retaliation Is Likely
• Publicly announce management’s strong
commitment to maintain the firm’s present
market share.
• Publicly commit firm to policy of matching
rivals’ terms or prices.
• Maintain a war chest of cash reserves.
• Make occasional strong counter-response to
moves of weaker rivals.
6-17
Timing a Company’s Offensive
and Defensive Strategic Moves
• When to make a strategic move is often as
crucial as what move to make.
• First-movers can earn big payoffs when:
 Pioneering helps build a firm’s image and reputation
with buyers.
 Early commitments to new ways produce an absolute
cost advantage over rivals.
 First-time customers remain strongly loyal in making
repeat purchases.
 Moving first constitutes a preemptive strike, making
imitation extra hard or unlikely.
6-18
CORE CONCEPT
Because of first-mover advantages and
disadvantages, competitive advantage can
spring from when a move is made as well as from
what move is made.
6-19
The Potential for Late-Mover Advantages
or First-Mover Disadvantages
• Late-mover advantages (or first-mover
disadvantages) arise in four instances:
 When pioneering leadership is more costly than
imitation.
 When innovators’ products are primitive, and do not
living up to buyer expectations.
 When potential buyers are skeptical about the
benefits of a first-mover’s new technology/product.
 When rapid market and technology changes allow
fast followers and late movers to leapfrog pioneers.
6-20
Deciding Whether to Be an Early Mover
or Late Mover
• Key Issue:
 Is the race to market leadership a marathon or a sprint?
• The decision to seek first-mover competitive
advantage requires asking:
 Does market takeoff depend on development of complementary
products or services not currently available?
 Is new infrastructure required before buyer demand can surge?
 Will buyers need to learn new skills or adopt new behaviors? Will
buyers encounter high switching costs?
 Are there influential competitors in a position to delay or derail the
efforts of a first-mover?
6-21
Strengthening a Company’s Market
Position Via its Scope of Operations
• Scope of a Firm’s Operations
 Describes the breadth and strength of its activities
and the extent of its reach into geographic, product
and service market segments.
• Dimensions of a Firm’s Scope
 Breadth of its product and service offerings
 The range of activities it performs internally
 The extent of its geographic market presence
 Its mix of businesses
6-22
CORE CONCEPT
The scope of the firm refers to the range of
activities the firm performs internally, the breadth
of its product and service offerings, the extent of
its geographic market presence, and its mix of
businesses.
6-23
CORE CONCEPT
Horizontal scope is the range of product and
service segments that a firm serves within its
focal market.
Vertical scope is the extent to which a firm’s
internal activities encompass one, some, many,
or all of the activities that make up an industry’s
entire value chain system, ranging from rawmaterial production to final sales and service
activities.
6-24
Horizontal Merger and Acquisition
Strategies
• A strategic option that strengthens a firm’s
market position by achieving operating scale
and scope economies, gaining complementary
competencies, and extending current and new
market and product opportunities:
 Merger

The combining of two or more firms into a single entity,
with the newly created firm often taking on a new name
 Acquisition

The combination in which one firm, the acquirer, purchases
and absorbs the operations of another, the acquired firm
6-25
Strategic Objectives of Mergers
and Acquisitions
1. Extend the firm’s business into new product
categories.
2. Create a more cost-efficient operation out of the
combined firms.
3. Expand the firm’s geographic coverage.
4. Gain quick access to new technologies or
complementary resources and capabilities.
5. Lead the convergence of industries whose
boundaries are being blurred by changing
technologies and new market opportunities.
6-26
Concepts &
Connections 6.2
BRISTOL-MYERS SQUIBB’S “STRING-OF-PEARLS”
HORIZONTAL ACQUISITION STRATEGY
6-27
Why Mergers and Acquisitions May Fail
to Produce Anticipated Results
• Cost savings are smaller than expected.
• Gains in competitive capabilities take much longer
to realize or may never materialize.
• Efforts to mesh the corporate cultures stall because
of resistance from organization members.
• Managers and employees at the acquired continue to
do things as they were done prior to the acquisition.
• Dissatisfied key employees of the acquired firm leave.
• Mistakes are made in deciding which activities to
leave alone and which activities to meld into the
acquiring firm’s own operations and systems.
6-28
Vertical Integration Strategies
• Involve extending a firm’s competitive and
operating scope within the same industry
 Backward into sources of supply
 Forward toward end-users of final product
• Can aim at either full or partial integration
Suppliers
End-Users
6-29
CORE CONCEPT
A vertically integrated firm is one that performs
value chain activities along more than one stage
of an industry’s overall value chain.
A vertical integration strategy has appeal only
if it significantly strengthens a firm’s competitive
position and/or boosts its profitability
6-30
The Advantages of a Vertical
Integration Strategy
• The two best reasons for vertically
integrating into more value chain segments:
 Strengthen the firm’s competitive position
 Boost profitability
Suppliers
End-Users
Competitive Advantage
Profits
6-31
CORE CONCEPT
Backward integration involves performing
industry value chain activities previously
performed by suppliers or other enterprises
engaged in earlier stages of the industry value
chain; forward integration involves performing
industry value chain activities closer to the end
user.
6-32
Integrating Backward to Achieve
Greater Competitiveness
• For backward integration to boost
profitability a firm must be able to:
1. Achieve the same scale economies
as outside suppliers.
2. Match or beat suppliers’ production efficiency
with no decline in quality.
Suppliers
6-33
When Backward Vertical Integration
Becomes a Consideration
When suppliers have large
profit margins
Favorable
Backward Vertical
Integration
Situations
When the item being supplied
is a major cost component
When the requisite technological skills
are easily mastered or acquired
When powerful suppliers are inclined
to raise prices at every opportunity
6-34
When Backward Vertical Integration
Becomes a Consideration
• Potential situations that create opportunities
for cost reduction through backward vertical
integration:
 When suppliers have large profit margins
 Where the item being supplied is a major cost
component
 Where the requisite technological skills are easily
mastered or acquired
 When powerful suppliers are inclined to raise prices
at every opportunity
6-35
Integrating Forward to Enhance
Competitiveness
• Gain better access to end users
• Improve market visibility
• Include the purchasing experience
as a differentiating feature
End-Users
6-36
Forward Vertical Integration
and Internet Retailing
• Direct selling and Internet retailing is
appealing when:
 It lowers distribution costs
 It produces a relative cost advantage over rivals
 It produces higher profit margins
 It allows lower prices to be charged to end users.
 Numbers of buyers prefer to make online purchases
• However, competing against directly against
distribution allies can create channel conflict
and signal a weak commitment to dealers.
6-37
Disadvantages of a
Vertical Integration Strategy
• Increases a firm’s specialized capital investments in its industry.
• Increases a firm’s overall business risk if industry growth slows
and profitability declines.
• Increases resistance by vertically integrated firms using aging
technologies and facilities to technical advances and efficiencies
• Results in less flexibility in accommodating shifting buyer
preferences when a new product design doesn’t include parts
and components that the firm makes in-house.
• Creates capacity-matching problems among integrated
in-house component manufacturing units.
• May require development of new and different skills and
business capabilities.
6-38
Outsourcing Strategies:
Narrowing the Scope of Operations
• Outsourcing an activity should be considered when:
 It can be performed better or more cheaply by outside specialists.
 It is not crucial to achieving a sustainable competitive advantage
and won’t hollow out capabilities, core competencies, or technical
know-how of the firm.
 It improves organizational flexibility and speeds time to market.
 It reduces a firm’s risk exposure to changing technology and/or
buyer preferences.
 It allows a firm to concentrate on its core business, leverage its
key resources and core competencies, and do even better what it
already does best.
6-39
CORE CONCEPT
Outsourcing involves contracting out certain
value chain activities to outside specialists and
strategic allies.
6-40
Outsourcing Strategies: Narrowing
the Scope of Operations (cont’d)
• The Big Risk of Outsourcing:
 Farming out the wrong types of activities and thereby
hollowing out strategically-important capabilities that
ultimately leads to reduction of the firm’s strategic
competitiveness and long-run success in the
marketplace.
6-41
Concepts &
Connections 6.3
AMERICAN APPAREL’S VERTICAL
INTEGRATION STRATEGY
6-42
Strategic Alliances and Partnerships
• Strategic Alliance
 Is a formal contractual agreement in which two or
more firms collaborate to achieve mutually beneficial
strategic outcomes based on:





Strategically relevant collaboration
Joint contribution of resources
Shared risk
Shared control
Mutual dependence
 Allows firms to complementarily bundle resources and
competencies to increase their competitive effects
and value.
6-43
CORE CONCEPT
A strategic alliance is a formal agreement
between two or more companies to work
cooperatively toward some common objective.
A joint venture is a type of strategic alliance that
involves the establishment of an independent
corporate entity that is jointly owned and
controlled by the two partners.
6-44
Reasons for Firms to Enter
Into Strategic Alliances
Expedite development
of new technologies
or products
Overcome technical
or manufacturing
expertise deficits
Bring together personnel
to create new skill sets
and capabilities
Improve supply chain
efficiency
Reasons for
Alliances
Gain economies of
scale in production
and/or marketing
Acquire or improve
market access via joint
marketing agreements
6-45
Reasons for Firms to Enter
Into Strategic Alliances
• To expedite development of new technologies or
products
• To overcome deficits in technical or manufacturing
expertise
• To bring together personnel of each partner to
create new skill sets and capabilities
• To improve supply chain efficiency
• To gain economies of scale in production and/or
marketing
• To acquire or improve market access through joint
marketing agreements
6-46
Reasons for Firms to Continue
In Strategic Alliances
• Alliances are likely to be long-lasting when:
 They involve collaboration with partners that do not
compete directly.
 A trusting relationship has been established.
 Both parties conclude that continued collaboration is
in their mutual interest.
• Experience indicates that:
 Alliances may help in reducing a firm’s competitive
disadvantage but seldom result in a firm attaining a
durable competitive edge over its rivals.
6-47
Failed Strategic Alliances and
Cooperative Partnerships
• Common causes for the failure of 60–70%
of alliances each year:
 Diverging objectives and priorities.
 An inability to work well together.
 Changing conditions that make the purpose of the
alliance obsolete.
 The emergence of more attractive technological paths.
 Marketplace rivalry between one or more allies.
6-48
The Strategic Dangers of Relying on
Alliances for Essential Resources
And Capabilities
• The Achilles’ heel of alliances and
cooperative partnerships is becoming
dependent on other companies for
essential expertise and capabilities.
• Ultimately, a firm must develop its own
resources and capabilities to protect its
competitiveness and capabilities to build
and maintain its competitive advantage.
6-49

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