Competitor's Tactics: Balance of Effective and Ineffective Approaches
In the competitive world of business, two distinct types of companies can be found: market followers and market challengers. While market followers prefer an accommodative strategy, seeking to effectively imitate market leaders while finding profitable opportunities, market challengers adopt an offensive approach, aiming to seize market dominance.
Market challengers, such as Pepsi in the soft drink industry, relentlessly target market leaders like Coca-Cola. Their offensive strategies are diverse and designed to disrupt the status quo.
One such strategy is the Dramatic Disruptor Strategy. By completely rethinking the category, challengers challenge the current market rules and offer a fundamentally better solution. Salesforce, for instance, proposed a cloud-based CRM as a radical shift from traditional models, with its "End of Software" campaign against Siebel.
Flanking Attacks are another tactic. Instead of attacking head-on, challengers focus on their competitors' weakest points or niches. This incremental approach allows them to gain market share without provoking full-scale retaliation.
Encirclement Attacks involve simultaneously challenging the dominant player on multiple fronts, increasing pressure and stretching their defensive capabilities. Ambush and Technological Surprise strategies aim to launch unexpected technological advances to gain sudden advantages, catching competitors off guard.
Market Fragmentation and Sapping strategies aim to erode a competitor’s hold by splintering their market segments or attacking from various sides simultaneously. Irreverent Maverick Positioning uses unconventional, often humorous or provocative messaging to shock the market leader and gain attention, challenging established norms and buyer complacency.
Talent Raids and Restricting Competitor Movement are more subtle strategies. Weakening competitors by recruiting their key people or strategically limiting their ability to adapt and respond effectively can give challengers a significant advantage.
These strategies are often complemented by leveraging innovative business models or novel partnerships. For example, the pharmaceutical industry's shift to consumer-led models and digital therapeutics partnerships demonstrates how challengers use market realities to pivot offensively and grow rapidly.
However, market challengers face potential disadvantages. Customers may be reluctant to switch to their products, perceiving them as inferior to market leaders or wanting completely new products rather than improvements to existing ones. Improving the market leader's product shortcomings may not appeal to these customers.
Moreover, market challengers must be at least as good as the market leader in terms of capability and resources. They may launch direct attacks on the market leader or take over other players with smaller market share, build market share, and then attack the market leader.
In a frontal attack, market challengers attack the main force of the leader by offering lower prices, higher quality products, aggressive advertising, or better quality service to customers. However, market challengers must be willing to be replaced by market followers if they fail to replace the market leader.
Flank attacks involve attacking the weak points of the market leader in a market with several target segments. Guerrilla attacks are small, random attacks aimed at destabilizing and demoralizing the market leader, using discounted prices, intensive short-term advertising, and public relations to undermine the market leader's position.
Encirclement attacks involve a combination of frontal and flank attacks, where market challengers initially establish dominance in weak market segments, then target other segments and spread attacks across the market. By-pass attacks are indirect attacks where market challengers build resources and capacity first, avoiding direct competition with market leaders, and then attack head-on by developing new products, targeting new markets, or enhancing existing products.
Market challengers may face challenges in winning business due to their perceived inferiority to market leaders. However, they must have a sustainable advantage, such as a low-cost structure or product differentiation, to be successful. They also face the risk of counterattack from market leaders, which could potentially hurt them more due to the leader's better resources.
In conclusion, market challengers are firms that aim to increase their market share and replace the market leader, typically being the second-largest dominant company in the market. They employ a variety of offensive strategies to disrupt the market and seize dominance, often leveraging innovative business models and partnerships to gain an edge. However, they must navigate potential disadvantages and the risk of counterattack to successfully dethrone market leaders.
Market challengers, like Pepsi in the soft drink industry or Salesforce in the CRM market, seek to outmaneuver market leaders by employing diverse offensive strategies aimed at disrupting the current market dominance. These strategies include the Dramatic Disruptor Strategy, Flanking Attacks, Encirclement Attacks, Market Fragmentation and Sapping, Irreverent Maverick Positioning, Talent Raids, Restricting Competitor Movement, and leveraging innovative business models and partnerships.
Successful market challengers, despite potential disadvantages such as customer resistance or resource disparities with market leaders, must have a sustainable advantage, such as a low-cost structure or product differentiation, to be successful and ultimately aim to replace the market leader in the industry.
