MARKET CHALLENGERS & STRATEGIES

By GROUP 8

A market challenger is a firm in a strong, but not dominant position that is following an aggressive strategy of trying to gain market share. It typically targets the industry leader ( for example, Pepsi targets Coke), but it could also target smaller, more vulnerable competitors.

The Fundamental Principles of Market ChallengersAssess the strength of the target competitor.

Find a weakness in the competitors strength and attack at that point.Choose only one target at a time.

Launch the attack on as narrow a front as possible. Whereas a defender must defend all their borders, an attacker has the advantage of being able to concentrate their forces at one place.Launch the attack quickly, then consolidate.

Defining Strategic Objective and OpponentsA market challenger must define its strategic objective. Most aim to increase market share. The challenger must decide whom to attack : It can attack the market leader. It can attack small local and regional firms. It can attack firms of its own size that are not doing the job & are underfinanced.

Given clear opponents an objective, what options are available in attacking an enemy? We can make progress by imaging at opponent who occupies a certain market territory. We distinguish among five attack strategies:

Frontal AttackWhen a company attacks the opponents strengths rather than its weaknesses. The outcome depends on who has the more strength and endurance. There are many types of frontal attacks including: A pure frontal attack: It involves matching a competitors product in allareas of marketing . Limited frontal attack: A limited frontal attack focuses on specific customers. Price based frontal attack: In priced based frontal attack, Every product characteristic is matched.

Research and development based frontal attack: Most difficult type. More creative ideas are implemented which allow for a better product.

Frontal AttackExample : Recently, The Hindu was using Frontal attack strategy against Times of India. They attacked the strength of Times of India through advertisement.

Flank AttackIn a flanking strategy, a company focuses it's forces on the weaker sides of it's competitor.

Three principles of Flank attack are: A good flanking move must be made in an uncontested area. Tactical surprise ought to be an important element of the plan. The pursuit is as critical as the attack itself. Usually this offensive strategy is used by a company that does not have overwhelming superiority, but may have an advantage in one particular area.

Flank AttackTwo types of flanking strategy: Geographical Flanking: Geographical flanking occurs when a firm attacks different areas within the world or country where competitors are nonexistent or not very strong. The Coca-Cola Company uses this type of marketing strategy. Segmented Flanking: Segmented flanking potentially can be more powerful than geographical flanking attacks because they satisfy market needs the competitor has ignored.

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Flank AttackExample:

In the mid 1970's Xerox owned eighty-eight percent of the plainpaper copier market however, almost ten years later the Japanese based Canon Copier took over half of Xerox's market. The main reason Canon took over such a large portion of Xerox's market was by use of the flanking strategy. Canon focused on the small size copier market that could not afford Xerox's larger copiers. This attack was successful because it put the attackers strength against the defenders weakness.

Encirclement Attack Encirclement is a third type of offensive strategy. The basic idea of encirclement is to force the competitor to protect their product from all sides. When using this type of strategy a company must have superiority in all areas. Encirclement attacks the competitor from all sides simultaneously. A ratio of ten to one is needed to employ this type of strategy.

The strategic objective of encirclement strategies is long-term market dominance. Encirclement essentially involves surrounding a competitor with several brands and forcing it to defend itself on many fronts at the same time. This way, the defenders attention and resources will be spread over many products and markets making it harder to defend all of them successfully at the same time.

Encirclement AttackThe encircling company also needs strong R&D and product development capabilities, and the power to influence channel intermediaries. It also requires continuous quality improvement, product proliferation, product line stretching and extension, and a large sales force.

There are two types of Encirclement strategy: Product encirclement Product encirclement introduces products with many different qualities, styles, and features that overwhelm the competition's product line.

Market EncirclementMarket encirclement goes beyond the end user, and focuses on the distribution channels.

Encirclement AttackExample:

Smirnoff Vodka used encirclement strategy when another product was introduced and positioned itself directly against Smirnoff, but at a lower price. Smirnoff counterattacked by first raising it's prices, which preserved their quality image. After raising their prices, they introduced another brand, marketed it at the same price as the competition, and introduced another brand at a lower price.

Bypass Attack A Fourth type of offensive strategy involves the bypass

It is an indirect attack strategy where the market challenger bypasses the leader and attacks easier markets to broaden its resource base. For example, if a company produces a new product, the company basically moves the new product to a new level within the same product market area. Moving into digital and electronic watches may bypass the mechanical watch market. However, the company is still fighting for a position within the watch industry.

Bypass AttackThere are three types of Bypass strategy: Develop new products. Developing new products is a fairly easily understood bypass method.

Diversify into unrelated products.Diversifying into unrelated products is a second type of bypass strategy. Expand into new geographical markets for existing products. Movement into an entirely new geographical market usually allows a company to bypass competitors completely.

Bypass AttackExample:When Colgate-Palmolive tried to enter the nonwoven textiles and health care business, it did not have to fight Procter and Gambles strengths because they used Bypass Strategy, as Procter and Gamble were not strong in that field.

Guerrilla WarfareGuerilla warfare basically involves winning small victories that can over time amount to a large gain in market share.

This attack works because it is very unconventional which makes it difficult for the defender to counter-attack, and because they are aimed at small, weak, and unprotected market positions.

Some of the principles that can be used when determining when to use guerrilla warfare are the following Guerrilla Warfare consists of waging small, intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds. The guerrilla challengers use both conventional and unconventional means of attack. These include selective price cuts, intense promotional blitzes, and occasional legal action. Example - Coca Cola and Pepsi made advertisements to harass each others products. Coca Cola was the official partner of the World Cup and Pepsi counter attacked by saying Nothing Official about It