Market Challenger

a company holding a major market share and competing vigorously with the market leader for outright leadership.

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. !he fundamental principles involved are"

Assess the strength of the target competitor. Consider the amount of support that the target might muster from allies. Choose only one target at a time. #ind a weakness in the target$$s position. Attack at this point. Consider how long it will take for the target to realign their resources so as to reinforce this weak spot. %aunch the attack on as narrow a front as possible. &hereas a defender must defend all their borders, an attacker has the advantage of being able to concentrate their forces at one place. %aunch the attack 'uickly, then consolidate.

(ome of the options open to a market challenger are"

price discounts or price cutting line extensions introduce new products reduce product 'uality increase product 'uality improve service change distribution cost reductions intensify promotional activity

What are market challenger strategies?

1- Frontal attack when you attack the strength of another company's product. You need to have a product advantage, offer a better value to the marketplace and have lower production costs. i.e. : satellite vs cable companies 2- Flank attack when you attack the weakness of another company's product. You need to act on the geographic and market segment. i.e : micro breweries vs molson

Prof. U. S.

ishra, !"#S, S$% University, ""S&

3- Encirclement attack when you attack all sides i.e :seiko aggressively e'panded distribution on a world(wide basis offering over )*++ different models. 4- Bypass attack (develop new areas (new geographic markets (new technologies 5- Guerilla attack #onsists of fre,uents attacks in a variety of areas.
C !!"#$G % GE$E&%' %((%C) "(%&(EG* -iven clear opponents and ob.ectives, what attack options are available/ 0e can distinguish among five attack strategies: frontal, flank, and encirclement, bypass, and guerilla attacks. Frontal %ttack !n a pure frontal attack, the attacker matches its opponent1s product, advertising, price, and distribution. 2he principle of force says that the side with the greater manpower 3resources4 will win. % modified frontal attack, such as cutting price vis(5 (vis the opponent1s, can work if the market leader does not retaliate and if the competitor convinces the market that its product is e,ual to the leaders. 6elene #urtis is a master at convincing the market that its brands7 such as Suave and 8inesse9 are e,ual in ,uality but a better value than higher priced brands. Flank %ttack %n enemy1s weak spots are natural targets. % flank attack can be directed along two strategic dimensions9 geographic and segmental. !n a geographic attack, the challenge spots areas where the opponent is underperforming. 8or e'ample, some of !" 1s former mainframe rivals, such as 6oneywell, chose to set up strong sales branches in medium and smaller si:ed cities that were relatively neglected by !" . 2he other flanking strategy is to serve uncovered market needs, as ;apanese automakers did when they developed more fuel(efficient cars. % flanking strategy is another name for identifying shifts in market segments that are causing gaps to develop then rushing in to fill the gaps and develop them into strong segments. Encirclement %ttack 2he encirclement maneuver is an attempt to capture a wide slice of the enemy1s territory through a <=>blit:<=/. !t involves launching a grand offensive on several fronts. ?ncirclement makes sense when the challenger commands superior resources and believes a swift encirclement will break the opponent1s will. !n making a stand against arch rival icrosoft, Sun icrosystems licensed its ;ava software to hundreds of companies and millions of software developers for all sorts of consumer devices. %s consumer electronics products began to go digital, ;ava started appearing in a wide range of gadgets.

Prof. U. S.

ishra, !"#S, S$% University, ""S&

Bypass %ttack 2echnological leapfrogging is a bypass strategy practiced in high(tech industries. 2he challenger patiently researches and develops the ne't technology and launches an attack, shifting the battleground to its territory, where it has an advantage. @intendo<=As successful attack in the video(game market was precisely about wresting market share by introducing a superior technology and redefining the competitive space. 2hen SegaB-enesis did the same with more advanced technology, and now Sony1s PlayStation has grabbed the technological lead to gain almost C+D of the video(game market. #hallengers -oogle used technological leapfrogging to overtake YahooE and become the market leader in search. @ow another company is using the same tactic to try to become the -oogle of e(mail.

+arket 'ea,er
the company whose products hold the largest market share.

2he market leader is dominant in it1s industry. !t has substantial market share and often e'tensive distribution arrangements with retailers. !t typically is the industry leader in developing innovative new business models and new products 3although not always4. !t tends to be on the cutting edge of new technologies and new production processes. !t sometimes has some market power in determining either price or output. $f the four dominance strategies, it has the most fle'ibility in crafting strategy. 2here are few options not open to it. 6owever it is in a very visible position and can be the target of competitive threats and government anti(combines actions. &esearch in e'perience curve effects and the P! s study during the FGH+s concluded that market leadership was the most profitable strategy in most industries. !t was claimed that if you cannot get enough market share to be a ma.or player, you should get out of that business and concentrate your resources where you can take advantage of e'perience curve effects and economies of scale, and thereby gain dominant market share. 2oday we recogni:e that other less dominant strategies can also be effective. 2he main options available to market leaders are:
o o o o o o o o o

?'pand the total market by finding new users of the product new uses of the product more usage on each use occasion Protect your e'isting market share by: developing new product ideas improve customer service improve distribution effectiveness reduce costs ?'pand your market share: by targeting one or more competitor without being noticed by government regulators

Prof. U. S.

ishra, !"#S, S$% University, ""S&

+arket $icher
a company whose products serve segments too small to be of interest to firms with larger shares of the marketI also called market specialists, threshold firms or foothold firms.

!n this niche strategy the firm concentrates on a select few target markets. !t is also called a focus strategy. !t is hoped that by focusing ones marketing efforts on one or two narrow market segments and tailoring your marketing mi' to these speciali:ed markets, you can better meet the needs of that target market. 2he niche should be large enough to be profitable, but small enough to be ignored by the ma.or industry players. Profit margins are emphasi:ed rather than revenue or market share. 2he firm typically looks to gain a competitive advantage through effectiveness rather than efficiency. !t is most suitable for relatively small firms and has much in common with guerrilla marketing warfare strategies. 2he most successful nichers tend to have the following characteristics:

2hey tend to be in high value added industries and are able to obtain high margins. 2hey tend to be highly focussed on a specific market segment. 2hey tend to market high end products or services, and are able to use a premium pricing strategy. 2hey tend to keep their operating e'penses down by spending less on &JK, advertising, and personal selling.

Competitive Marketing Strategy

Strategic planning has different purposes at different levels of the organization. At the Corporate level, the central purpose is planning for growth. At the level of the Business Unit or ivision, the purpose of planning is to identify strategic opportunities for future investment. !nce those "usiness opportunities are identified in terms of the organization#s key product lines and markets served, the real planning for a sustaina"le competitive advantage can "egin. $arket %alue Solutions#s %alue&Based 'lanning 'rocess is designed to answer the key (uestion posed at each level of "usiness planning. At the Corporate level, the selected growth options are informed "y the tools of customer value analysis. At the Business Unit level, we work with the management team to develop a 'roduct)$arket $atri* in order to achieve strategic focus. And at the 'roduct)$arket level, we work with a cross&functional team to identify value&"ased, market& driven strategies for a sustaina"le competitive advantage.

Prof. U. S.

ishra, !"#S, S$% University, ""S&

+e engage a cross&functional team from the organization in development of the actual competitive marketing plans for two important reasons. ,irst, the value&"ased market opportunities typically re(uire changes to the product or service itself, new methods for marketing communications, changes in operations, and)or changes in pricing. $anagers from each of those functional areas need to "e directly involved with the development of strategies, o"jectives, and actions for which they will, ultimately, "e responsi"le. Second, the goal of $%S is to teach our way out of the consulting relationship. +e do that "y providing the planning tools and techni(ues, then teaching your organization#s managers how to use them so that they can develop future competitive marketing plans independently.

Prof. U. S.

ishra, !"#S, S$% University, ""S&