122Chapter 6 Supplementing the Chosen Competitive Strategy— O
1. 122Chapter 6 Supplementing the Chosen Competitive
Strategy— Other Important Strategy Choices 122
Strategy: Core Concepts and Analytical Approaches
Arthur A. Thompson, The University of Alabama 6th
Edition, 2020-2021
An e-book published by McGraw-Hill Education
122
chapter 6
Supplementing the Chosen
Competitive Strategy—
Other Important Strategy Choices
Winners in business play rough and don’t apologize for it. The
nicest part of playing hardball is watching your
competitors squirm.
—George Stalk, Jr. and Rob Lachenauer
Whenever you look at any potential merger or acquisi tion, you
look at the potential to create value for your
shareholders.
—Dilip Shanghvi, Founder and managing director of Sun
Pharmaceuticals
Don’t form an alliance to correct a weakness and don’t ally with
a partner that is trying to correct a weakness
of its own. The only result from a marriage of weaknesses is the
creation of even more weaknesses.
—Michel Robert
4. Differentiation?
Focused
Low Cost?
Focused
Differentiation?
Best-Cost
Provider?
Complementary Strategy Options
(A company’s second set of strategic choices)
Initiate offensive
strategic moves?
What type of website
strategy to employ?
Employ backward or forward
vertical integration strategies?
Employ defensive
strategic moves?
Whether to outsource selected
value chain activities?
Enter into strategic alliances
and partnerships?
Use merger and acquisition strategies
to strengthen competitiveness?
Functional Area Strategies to Support the Above Strategic
6. sense for a company to go on the offensive to improve its
market position and business performance. Strategic
offensives are called for when a company sees opportunities
to gain profitable market share at rivals’ expense, when a
company should strive to whittle away at a strong rival’s
competitive advantage, and when a company opts to
pursue newly emerging market opportunities. Companies
like Google, Amazon, Apple, and Facebook play hardball,
aggressively pursuing competitive advantage and trying
to reap the benefits a competitive edge offers—a leading
market share, excellent profit margins, rapid growth (as
compared to rivals), and the reputational rewards of being
known as a company on the move.1 The best offensives tend
to incorporate several behaviors and principles: (1) focusing
relentlessly on building competitive advantage and
then striving to convert competitive advantage into decisive
advantage, (2) employing the element of surprise
as opposed to doing what rivals expect and are prepared for, (3)
utilizing some of the company's competitively
potent resources and capabilities to attack rivals where they are
least able to defend themselves, and (4) being
impatient with the status quo and displaying a strong bias for
swift and decisive actions to overwhelm rivals.2
CORE CONCEPT
Sometimes a company’s best strategic option
is to seize the initiative, go on the attack, and
launch a strategic offensive to improve its
market position. It takes successful offensive
strategies to build competitive advantage, widen
an existing advantage, or narrow the advantage
held by a strong competitor.
Choosing the Basis for Competitive Attack
As a rule, challenging rivals on competitive grounds where they
are strong is an uphill struggle.3
7. Offensive initiatives that exploit competitor weaknesses stand a
better chance of succeeding than do those
that challenge competitor strengths, especially if the
weaknesses represent important vulnerabilities and
weak rivals can be caught by surprise with no ready defense.4
A company’s strategic offensives should be powered by
competitively powerful resources and capabilities—
such as a better-known brand name, lower production and/or
distribution costs, better technological
capability, or a core or distinctive competence in designing and
producing
superior performing products. Designing a strategic
offensive spearheaded by relatively weak company
resources and capabilities is like marching into battle with a
popgun—the prospects for success are dim. For instance, it
is foolish for a company with relatively high costs to employ
a price-cutting offensive. Price-cutting offensives are best
left to financially strong companies whose costs are relatively
low in comparison to those of the companies being
attacked. Likewise, it is ill-advised to pursue a product
innovation offensive without proven expertise in R&D,
new product development, and speeding new or improved
products to market.
CORE CONCEPT
The best offensives use a company’s most
potent resources and capabilities to attack
rivals where they are competitively weakest.
The principal offensive strategy options include the following:
n Offering an equally good or better product at a lower price.
Lower prices can produce market share
gains if competitors don’t respond with price cuts of their ow n
and if the challenger convinces buyers
9. market share away from rivals with
comparatively weak product innovation capabilities. Ongoing
introductions of new/improved products
can put rivals with deficient product innovation capabilities
under tremendous competitive pressure. But
such offensives can be sustained only if a company can keep its
product development pipeline full of
new and improved products that spark buyer enthusiasm.6
n Pursuing disruptive product innovation to create new markets.
While this strategy can be riskier and
more costly than continuous product innovation, “big bang”
disruptive product innovation can be a
game changer if successful.7 Disruptive innovation involves
perfecting a new product with a few trial
users, then quickly rolling it out to the whole market in an
attempt to get many buyers to embrace an
altogether new and better value proposition quickly. Examples
include online degree programs, self-
driving capabilities for motor vehicles, Apple Music, and
Amazon’s Kindle (which undercut the sales of
hardcopy fiction and non-fiction books).
n Adopting and improving on the good ideas of other companies
(rivals or otherwise).8 The idea of
warehouse home improvement centers did not originate with
The Home Depot cofounders Arthur Blank
and Bernie Marcus. They got the “big box” concept from their
former employer Handy Dan Home
Improvement. But they were quick to improve on Handy Dan’s
business model and strategy and take
The Home Depot to the next plateau in terms of product line
breadth and customer service. Offense-
minded companies are often quick to adopt any good idea (not
nailed down by a patent or other legal
protection) in an effort to create competitive advantage for
10. themselves.9
n Deliberately attacking those market segments where a key
rival makes big profits.10 Long a dominant
force in small automobiles, Toyota launched a hardball attack
on General Motors, Ford, and Chrysler
in the U.S. market for light trucks and SUVs, the very market
segments where the Detroit automakers
historically earned big profits (roughly $10,000 to $15,000 per
vehicle). Toyota now offers equivalent
vehicles, earns handsome profits of its own in these two market
segments, and has stolen sales and
market share from its U.S.-based rivals. Dell opted to introduce
its own brand of printers and printing
supplies in the 1990s because its principal rival in desktop and
laptop computers was Hewlett-Packard,
which made its biggest profits in printing and printing supplies;
by attacking H-P in the market for
printers, Dell sought to force H-P to devote management
attention and resources to defending its printing
business and distract its attention away from trying to wrest
market leadership away from Dell in the PC
market.
n Attacking the competitive weaknesses of rivals. Such
offensives present many options. One is to go
after the customers of those rivals whose products lag on
quality, features, or product performance. If
a company has especially good customer service capabilities, it
can make special sales pitches to the
customers of those rivals who provide subpar customer service.
Aggressors with a recognized brand
name and strong marketing skills can launch efforts to win
customers away from rivals with weak brand
recognition. There is considerable appeal in emphasizing sales
to buyers in geographic regions where
12. occasional low-balling on price (to win
a big order or steal a key account from a rival); surprising key
rivals with sporadic but intense bursts
of promotional activity (offering a 20 percent discount for one
week to draw customers away from
rival brands); or undertaking special campaigns to attract buyers
away from rivals plagued with a
strike or problems in meeting buyer demand.11 Guerrilla
offensives are particularly well suited to small
challengers who have neither the resources nor the market
visibility to mount a full-fledged attack on
industry leaders.
n Launching a preemptive strike to secure an advantageous
position that rivals are prevented or
discouraged from duplicating.12 What makes a move
preemptive is its one-of-a-kind nature—
whoever strikes first stands to acquire competitive assets that
rivals can’t readily match. Examples of
preemptive moves include (1) securing the best distributors in a
particular geographic region or country;
(2) obtaining the most favorable site along a heavily traveled
thoroughfare, at a new interchange or
intersection, in a new shopping mall, in a natural beauty spot,
close to cheap transportation or raw
material supplies or market outlets, and so on; (3) tying up the
most reliable, high-quality suppliers via
exclusive partnerships, long-term contracts, or even acquisition;
and (4) moving swiftly to acquire the
assets of distressed rivals at bargain prices. To be successful, a
preemptive move doesn’t have to totally
block rivals from following or copying; it merely needs to give
a firm a prime position that is not easily
circumvented.
How long it takes for an offensive to yield good results varies
13. with the competitive circumstances.13 It can be
short if buyers respond immediately (as can occur with a
dramatic price cut, an imaginative ad campaign, or
an especially appealing new product). Securing a competitive
edge can take much longer if winning consumer
acceptance of the company’s product will take some time or if
the firm may need several years to debug a new
technology or put new production capacity in place. But how
long it takes for an offensive move to improve a
company’s market standing—and whether the move will prove
successful—depends in part on whether and how
quickly rivals recognize the threat and begin a counter-
response. And any responses on the part of rivals hinge
on whether (1) they have effective countermoves in their arsenal
of strategic options and (2) they believe that a
counterattack is worth the expense and the distraction.14
Blue Ocean Strategy—A Special Kind of Offensive
A blue ocean strategy seeks to gain a dramatic and durable
competitive advantage by abandoning efforts to
beat out competitors in existing markets and, instead, inventing
a new industry or distinctive market segment
that renders existing competitors largely irrelevant and allows a
company to create and capture altogether new
demand.14 This strategy views the business universe as
consisting of two distinct types of market space. One is
where industry boundaries are defined and accepted, the
competitive rules of the game are well understood and
accepted by all industry members, and companies use their
resources and capabilities to compete against rivals
and achieve satisfactory or better performance. In such markets,
lively competition constrains a company’s
prospects for rapid growth and superior profitability since rivals
move quickly to either imitate or counter the
successes of competitors. The second type of market space is a
“blue ocean” where the industry does not really
15. than the price of a conventional circus ticket to have an
“entertainment experience” featuring sophisticated
clowns and star-quality acrobatic acts in a comfortable
atmosphere.
Choosing Which Rivals to Attack
Offensive-minded firms need to analyze which of their rivals to
challenge as well as how to mount that challenge.
The following are the best targets for offensive attacks:15
n Market leaders that are vulnerable. Offensive attacks make
good sense when a company that leads
in size and market share is not a true leader in serving the
market well. Signs of leader vulnerability
include unhappy buyers, an inferior product line, a weak
competitive strategy with regard to low-cost
leadership or differentiation, strong emotional commitment to
an aging technology the leader has
pioneered, outdated plants and equipment, a preoccupation with
diversification into other industries,
and mediocre or declining profitability. Offensives to erode the
positions of market leaders have real
promise when the challenger is able to revamp its value chain or
innovate to gain a fresh cost-based or
differentiation-based competitive advantage.16 To be judged
successful, attacks on leaders don’t have to
result in making the aggressor the new leader; a challenger may
“win” by simply becoming a stronger
runner-up. Caution is well advised in challenging strong market
leaders—there is a significant risk of
squandering valuable resources in a futile effort or precipitating
a fierce and profitless industry-wide
battle for market share.
n Runner-up firms with weaknesses in areas where the
challenger is strong. Runner-up firms are an
17. strategies are to lower the risk of being attacked,
weaken the impact of any attack that occurs, and induce
challengers to aim their offensive initiatives at other rivals.
While defensive strategies usually don’t enhance a firm’s
competitive advantage, they can definitely help fortify its
competitive position, protect its most valuable resources
and capabilities from imitation, and defend whatever
competitive advantage it might have. Defensive strategies can
take either of two forms: actions to block
challengers and actions to signal the likelihood of strong
retaliation.
CORE CONCEPT
Good defensive strategies can help protect
competitive advantage but rarely are the basis
for creating it.
Blocking the Avenues Open to Challengers The most frequently
employed approach to defending a
company’s present position involves actions that restrict a
challenger’s options for initiating competitive
attack. There are any number of obstacles that can be put in the
path of would-be challengers.17 A defender
can participate in alternative technologies as a hedge
against rivals attacking with a new or better technology. A
defender can introduce new features, add new models, or
broaden its product line to close off gaps and vacant niches
to opportunity-seeking challengers. It can thwart rivals’ efforts
to attack with a lower price by maintaining
a lineup of product selections that includes economy-priced
options for price-sensitive buyers. It can try to
discourage buyers from trying competitors’ brands by
lengthening warranties, offering free training and support
18. services, developing the capability to deliver spare parts to
users faster than rivals can, providing coupons and
sample giveaways to buyers most prone to experiment, and
making early announcements about impending new
products or probable price cuts to induce potential buyers to
postpone switching. It can challenge the quality or
safety of rivals’ products. Finally, a defender can grant volume
discounts or better financing terms to dealers and
distributors to discourage them from experimenting with other
suppliers, or it can convince them to handle its
product line exclusively and force competitors to use other
distribution outlets.
There are many ways to throw obstacles in the
path of would-be challengers.
Signaling Challengers that Retaliation Is Likely The goal of
signaling challengers that strong retaliation
is likely in the event of an attack is either to dissuade
challengers from attacking at all or to divert them to less-
threatening options. Either goal can be achieved by letting
challengers know the battle will cost more than it is
worth. Would-be challengers can be signaled by:18
n Publicly announcing management’s commitment to maintain
the firm’s present market share.
n Publicly committing the company to a policy of matching
competitors’ prices and terms of sale.
n Maintaining a war chest of cash and marketable securities.
n Making an occasional strong counter-response to the moves of
weak competitors to enhance the firm’s
image as a tough defender.
20. Product Information–Only Strategies—Avoiding Channel
Conflict
Operating a website that contains extensive product information
but relies on click-throughs to the websites of
distribution channel partners for sales transactions (or that
informs site visitors where nearby retail stores are
located) is an attractive option for manufacturers and/or
wholesalers that have invested heavily in building and
cultivating retail dealer networks to access end users. A
company vigorously pursuing online sales to consumers
at the same time it is also heavily promoting sales to consumers
through its network of wholesalers and retailers is
competing directly against its distribution allies. Such actions
constitute channel conflict and are a tricky road to
negotiate. A company actively trying to grow online sales is
signaling a weak strategic commitment to its dealers
and a willingness to cannibalize dealers’ sales and growth
potential. The likely result is angry dealers and loss
of dealer goodwill. Some or many of the company’s dealers may
opt to put more effort into marketing the brands
of rival manufacturers who don’t sell online or whose online
sales effort is passive and nonthreatening. Quite
possibly, a company may lose more sales by offending its
dealers than it gains from its own online sales effort.
Consequently, in industries where the strong support and
goodwill of dealer networks is essential, companies
may conclude that it is important to avoid channel conflict and
their website should be designed to partner with
dealers rather than compete with them.
Website Sales as a Minor Distribution Channel
A second strategic option is to use online sales as a relatively
minor distribution channel for achieving incremental
sales, gaining online sales experience, and doing marketing
research. If channel conflict poses a big obstacle to
22. n When profit margins from online sales are bigger than those
earned from selling to wholesale/retail
customers.
n When encouraging buyers to visit the company’s website
helps educate them about the ease and
convenience of purchasing online and, over time, prompts more
and more buyers to purchase online
(where company profit margins are greater)—which makes
incurring channel conflict in the short term
and competing against traditional distribution allies potentially
worthwhile.
n When selling directly to end users allows a manufacturer to
make greater use of build-to-order
manufacturing and assembly, which if met with growing buyer
approval would increase the rate at
which sales migrate from distribution allies to the company’s
website; such migration could lead to
streamlining the company’s value chain and boosting its profit
margins.
Brick-and-Click Strategies
Some companies employ brick-and-click strategies, whereby
they sell to consumers both at their own websites
and at their own company-owned retail stores (or the stores of
independent retailers). Brick-and-click strategies
have two big appeals: They are an economic means of
expanding a company’s geographic reach, and they give
both existing and potential customers another choice of how to
communicate with the company, shop for product
information, make purchases, or resolve customer service
problems. Software developers, for example, have
come to rely on the Internet as a highly effective distribution
channel to complement sales at brick-and-mortar
23. retailers. Allowing end users to make an online purchase and
download it immediately has the big advantage
of eliminating the costs of producing and packaging CDs and
cutting out the costs and margins of software
wholesalers and retailers (often 35 to 50 percent of the retail
price). Chain retailers like Walmart and Best Buy
operate online stores for their products primarily as a
convenience to customers who prefer to buy online and
have the items shipped or available for pickup at nearby stores.
Many brick-and-mortar retailers can enter online retailing at
relatively low cost—all they need is a web store for
displaying products, accepting customer orders, and systems for
filling and delivering orders. Brick-and-mortar
retailers (as well as manufacturers with company-owned retail
stores) can use personnel at their distribution
centers and/or retail stores to fill and ship the orders of online
buyers, and they can allow online buyers to pick
up their orders at the nearest local retail store. Walgreens, a
leading drugstore chain, lets customers order a
prescription online and then pick it up at the drive-through
window or inside counter of a local store—allowing
customers to order online and then pick up their orders at local
stores has become a popular strategy for many
retailers because it enables them to better compete with
Amazon. In banking, a brick-and-click strategy allows
customers to use local branches and ATMs for depositing
checks and getting cash while using online systems to
pay bills, monitor account balances, and transfer funds. Bed
Bath & Beyond uses its web store to display and sell
the items stocked in its stores but also to display and sell a
wider number of brands, colors, and selections in the
same product categories that, for reasons of limited shelf space,
are not available in its stores—such a strategy
gives customers a much wider selection and boosts its online
sales.
25. n Whether it will have a broad or a narrow product offering. A
one-stop shopping strategy like that
employed by Amazon.com (which offers “Earth’s Biggest
Selection” of items for sale at 13 international
websites) has the appealing economics of helping spread fixed
operating costs over a wide number of
items and a large customer base. Online sellers like Quicken
Loans (the largest online provider of home
mortgages), and Hotels.com have adopted classic focus
strategies and cater to a sharply defined target
audience shopping for a particular product or product category.
n Whether to outsource order fulfillment activities or perform
them internally. Most online sellers find
it more economical to outsource order fulfillment activities to
specialists who make a business of
providing warehouse space, stocking inventories, and installing
the capabilities to pick, pack, and ship
orders cost-efficiently for a number of different online retailers.
Only very high-volume online retailers
can develop and install the capabilities to perform order
fulfillment activities internally at costs below
those of outside specialists. Buy.com, an online superstore with
some 30,000 items, obtains products
from name brand manufacturers and uses outsiders to stock and
ship those products—thus, its focus is
not on manufacturing or order fulfillment but rather on online
sales.
n How it will draw traffic to its website and then convert page
views into revenues. Websites must be
cleverly marketed. Unless web surfers hear about the site, like
what they see on their first visit (and
perhaps make a purchase), and are intrigued enough to return
again and again to both view information
27. products but they outsource all fabric manufacture and garment-
making activities to contract manufacturers in
low-wage countries. Starbucks finds purchasing coffee beans
from independent growers in most of the world’s
coffee-growing regions far more advantageous than having its
own coffee-growing operation.
Outsourcing certain value chain activities can be strategically
advantageous whenever:
n An activity can be performed better or more cheaply by
outside specialists. A company should generally
not perform any value chain activity internally that outsiders
can perform more efficiently or effectively.
The chief exception is when a particular activity is strategically
crucial and internal control over that
activity is deemed essential. Dolce and Gabbana, for example,
outsources manufacture of its brand of
sunglasses to Luxottica—a company considered to be the
world’s best producer of top-quality fashion
sunglasses and high-tech prescription eyewear, known for its
Ray-Ban, Oakley, and Oliver Peoples
brands.
n The activity is not crucial to the firm’s ability to achieve
sustainable competitive advantage.
Outsourcing of maintenance services, data processing and data
storage, fringe benefit management,
website operations, call center operations, and similar
administrative support activities to specialists
is commonplace. Colgate has reduced its information systems
costs by more than 10 percent annually
through an outsourcing agreement with IBM.
n It streamlines company operations in ways that improve
organizational flexibility or speeds the time to
28. get new products to market. Outsourcing gives a company the
flexibility to switch suppliers in the event
one or more of its present suppliers fall behind competing
suppliers. To the extent that its suppliers can
speedily get next-generation parts and components into
production, a company can get its own next-
generation product offerings into the marketplace quicker.
Moreover, seeking new suppliers with the
needed capabilities already in place is frequently quicker,
easier, less risky, and cheaper—firms that
internally produce the parts and components they need are
periodically confronted with sometimes
formidable costs to update obsolete parts-making capabilities or
to install and master new parts-making
technologies.
n It reduces the company’s risk exposure to changing
technology or shifting buyer preferences. When
a company outsources certain parts, components, and services,
its suppliers must bear the burden of
incorporating state-of-the-art technologies and/or undertaking
redesigns and upgrades to accommodate
a company’s plans to introduce next-generation products. If
what a supplier provides is designed out of
next-generation products or rendered unnecessary by
technological change, it is the supplier’s business
that suffers rather than the company’s.
n It improves a company’s ability to innovate. Collaborative
partnerships with world-class suppliers who
have cutting-edge intellectual capital and are early adopters of
the latest technology give a company
access to ever better parts and components —such supplier-
driven innovations, when incorporated into
a company’s own product offering, fuel a company’s ability to
introduce its own new and improved
30. outsiders and contracted to repurchase the output from the new
owners.
The Big Risk of Outsourcing Value Chain Activities
The biggest danger of outsourcing is that a company will farm
out too many or the wrong types of activities, thereby
unduly narrowing the scope of its capabilities in ways that
unwittingly reduce its long-term competitiveness.21
For example, in recent years, companies anxious to reduce
operating costs have opted to outsource such strategically
important activities as product development, engineering
design, and sophisticated manufacturing tasks—the very
capabilities that underpin a company’s ability to lead
sustained product innovation. While these companies have
apparently been able to lower their operating costs by
outsourcing these functions to outsiders, their ability to
lead the development of innovative new products is weakened
because so many of the cutting-edge ideas and
technologies for next-generation products come from outsiders.
For example, most U.S. brands of laptops and cell
phones are now not only manufactured but also designed in
Asia.22 It is strategically dangerous for a company to
be dependent on outsiders to provide it with the skills,
knowledge, and capabilities that over the long run heavily
influence its competitiveness and market success. Companies
like Cisco are alert to the danger of farming out the
performance of strategy-critical value chain activities and take
actions to protect against being held hostage by
outside suppliers. Cisco guards against loss of control and
protects its manufacturing expertise by designing the
production methods its contract manufacturers must use. Cisco
keeps the source code for its designs proprietary,
thereby controlling the initiation of all improvements and
safeguarding its innovations from imitation. Further,
Cisco has developed online systems to monitor the factory
operations of contract manufacturers around the
31. clock, so that it knows immediately when problems arise and
can decide whether to get involved.
A company must guard against outsourcing
activities that can unwittingly degrade its
capabilities to be a master of its own destiny.
Vertical Integration Strategies: Operating Across More Stages
of the Industry Value Chain
Vertical integration extends a firm’s competitive and operating
scope within the same industry. It involves
expanding the firm’s range of activities backward into sources
of supply and/or forward toward end users. Thus,
if a manufacturer invests in facilities to produce certain
component parts that it formerly purchased from outside
suppliers, it has engaged in backward vertical integration
and extended its competitive scope backward into the
production of component parts, but its business remains
in the same industry as before. The only change is that it
has operations in two stages of the industry value chain.
Similarly, if a paint manufacturer—Sherwin-Williams, for
example—elects to integrate forward by opening 500
retail stores to market its paint products directly to consumers,
its entire business is still in the paint industry even
though its competitive scope extends from manufacturing to
retailing.
CORE CONCEPT
A vertically integrated firm is one whose business
activities extend across several portions or stages
of an industry’s overall value chain.
A firm can pursue vertical integration by starting its own
operations in other stages in the industry’s activity
chain or by acquiring a company already performing the
33. drop-off in quality. Neither outcome is a slam dunk. To
begin with, a company’s in-house requirements are often
too small to reach the optimum size for low-cost operation—for
instance, if it takes a minimum production
volume of one million units to achieve mass production
economies and a company’s in-house requirements
are just 250,000 units, then it falls way short of being able to
capture the scale economies of outside suppliers
(who may readily find buyers for one million or more units).
Furthermore, matching the production efficiency
of suppliers is fraught with problems when suppliers have high-
caliber production capabilities of their own,
when the technology they employ has elements that are hard to
master, and/or when substantial R&D expertise
is required to develop next-version parts and components, or
keep pace with advances in parts/components
manufacturing processes.
CORE CONCEPT
Backward vertical integration involves entry
into activities performed by suppliers or other
enterprises positioned in earlier stages of an
industry’s overall value chain.
That said, occasions still arise when a company can improve its
cost position and competitiveness by performing
a broader range of value chain activities internally rather than
having some of these activities performed by
outside suppliers. The best potential for being able to reduce
costs via a backward integration strategy exists in
situations where a company must deal with a few suppliers with
substantial bargaining power, where suppliers
have outsized profit margins, where the item being supplied is a
major cost component, and where the requisite
technological/production capabilities are easily mastered or can
be gained by acquiring a supplier with most or
34. all of the needed capabilities. Situations also arise when
integrating backward can enable a company to reduce
costs by facilitating the coordination of production flows from
one stage to the next and avoiding bottlenecks
and delays that disrupt production schedules. Furthermore, if a
company has proprietary know-how that it wants
to keep from rivals, then in-house performance of value chain
activities related to this know-how is beneficial
even if outsiders can perform such activities. Backward
integration also spares a company the risk of being
heavily dependent on suppliers for crucial components or
support services and reduces exposure to supplier
price increases.
Apple decided to backward into the production of chips and
other electronic components and hardware used in
its iPhone and computers because they were major cost
components, suppliers had bargaining power, and in-
house production would help coordinate design tasks and
protect Apple’s proprietary technology. International
Paper Company backward integrated into pulp mills and located
them adjacent to its paper plants to reap the
benefits of coordinated production flows, reduced energy usage,
and negligible costs of transporting freshly-
produced paper pulp directly to the production line in its paper
plants.
Backward vertical integration can produce a differentiation-
based competitive advantage when a company, by
performing activities internally, ends up with a better-quality or
better-performing product, improved customer
service capabilities, or in other ways is able to deliver added
value to customers. On occasion, integrating into
more stages along the industry value chain can add to a
company’s differentiation capabilities by allowing it to
36. Consequently, insurers like State Farm and Allstate have
integrated forward and set up local sales offices with
local agents to exclusively market and service their insurance
policies. Likewise, it can be advantageous for a
manufacturer to integrate forward into wholesaling or retailing
via company-owned distributorships or a chain of
retail stores rather than depend on the marketing and sales
efforts of independent distributors/retailers that stock
multiple brands and steer customers to those brands earning
them the highest profits. To avoid dependence on
distributors/dealers with divided loyalties, Goodyear has
integrated forward into company-owned and franchised
retail tire stores. Consumer-goods companies like Coach, Under
Armour, Nike, Tommy Hilfiger, Pepperidge
Farm, Samsonite, Ann Taylor, and Polo Ralph Lauren have
integrated forward and operate company-operated
retail stores as well as their own branded stores in factory outlet
malls that enable them to move overstocked
items, slow-selling items, and seconds. Growing numbers of
producers have integrated forward and begun
selling directly to end-users at company websites, thus reducing
dependence on traditional wholesale and retail
channels.
CORE CONCEPT
Forward vertical integration involves entering
into the performance of industry value chain
activities located closer to end users.
The Disadvantages of a Vertical Integration Strategy
Vertical integration has some important drawbacks, however.
The biggest of these include the following:24
37. n Vertical integration boosts a firm’s capital investment in the
industry, thereby increasing business risk
(what if industry growth and profitability unexpectedly go
sour?).
n Integrating backward or forward creates a vested interest for a
firm to continue performing the integrated
system of value chain activities it has invested money and effort
into establishing (even if internal
performance of certain of these value chain activities later
becomes suboptimal). Why? Because there
are barriers to quickly or easily exiting the performance of
value chain activities spanning two or more
stages of the industry’s value chain, including facilities
shutdowns, costly write-offs of undepreciated
assets, employee layoffs, and disrupted performance of related
value chain activities. However, a
company that obtains parts and components from outside
suppliers can always shop the market for
the newest, best, or cheapest parts and components. A company
that does not have its own network of
company-owned distributorships and retail stores can switch
distributors and/or distribution channel
emphasis whenever it is advantageous to do so.
n Some vertically integrated companies are slow to adopt new
technologies or production methods because
of reluctance to write off undepreciated assets or because they
assign higher priority to spending capital
for other company projects or because they see benefits in
sticking with the present technology or
Chapter 6 • Supplementing the Chosen Competitive Strategy—
Other Important Strategy Choices 136
39. n Vertical integration poses all kinds of capacity-matching
problems. In motor vehicle manufacturing,
for example, the most efficient scale of operation for making
axles is different from the most economic
volume for radiators, and different yet again for both engines
and transmissions. Building the capacity to
produce just the right number of axles, radiators, engines, and
transmissions in-house—and doing so at
the lowest unit costs for each—poses significant challenges in
cost-effectively producing each different
part/component.
n Integrating forward or backward typically requires new or
different skills and business capabilities.
Parts and components manufacturing, assembly operations,
wholesale distribution, retailing, and
direct sales via the Internet involve using different know -how,
resources, and capabilities to master the
performance of different value chain activities. A manufacturer
that integrates backward into parts and
components production has to become proficient in different
technologies and production methods and
very likely source needed materials from different suppliers. A
manufacturing company contemplating
forward integration needs to consider carefully whether it
makes good business sense to invest time
and money in developing the expertise and merchandising skills
to be successful in wholesaling and/
or retailing. Many manufacturers learn the hard way that
company-owned wholesale/retail networks
present many headaches, fit poorly with what they do best, and
don’t always add the kind of value to
their core business as originally planned. Selling to customers
via the Internet poses still another set of
problems when aiming to achieve proficient performance of
strikingly different value chain activities.
40. In today’s world of close working relationships with suppliers
and efficient supply chain management systems,
relatively few companies can make a strong economic case for
integrating backward into the business of suppliers.
The best materials and components suppliers stay abreast of
advancing technology and best practices and are
adept in making good quality items, delivering them on time,
and keeping their costs and prices competitive.
Weighing the Pros and Cons of Vertical Integration All in all,
therefore, a strategy of vertical integration
can have both important strengths and weaknesses. The tip of
the scales depends on (1) the difficulties and costs
of acquiring or developing the resources and capabilities needed
to operate in another stage of the industry value
chain, (2) the size of the benefits vertical integration offers in
terms of lowering costs or enhancing differentiation
and the value delivered to customers; (3) the impact of vertical
integration on investment costs, flexibility,
and response times, (4) the administrative costs of coordinating
operations across more value chain activities;
and (5) whether the integration substantially enhances a
company’s competitiveness and profitability. Vertical
integration strategies have merit according to which capabilities
and value chain activities truly need to be
performed in-house and which can be performed better or
cheaper by outsiders. Absent solid benefits in relation
to the associated costs and risks, integrating forward or
backward is not likely to be an attractive strategy option.
Chapter 6 • Supplementing the Chosen Competitive Strategy—
Other Important Strategy Choices 137
42. expenses, and profits (losses) of the venture according to their
ownership percentages. In many joint ventures,
it is formally agreed that one of the owners (typically a majority
owner) will exercise operating control over the
venture. Because a joint venture involves mutual ownership, it
tends to be more durable than an alliance where a
partner can just abruptly decide to abandon the alliance. A joint
venture owner who wants out of the venture must
negotiate arrangements to be bought out or else get the other
owners to agree to dissolve the venture.
An alliance or joint venture becomes “strategic”—as opposed to
just a useful collaborative arrangement—when
it serves any of the following purposes or intended outcomes:25
n It facilitates achievement of an important business objective
(like reducing risk to a company’s business,
lowering costs, or delivering more value to customers in the
form of better quality, extra features, and
greater durability).
n It helps build or strengthen a company’s competitively
valuable resources and capabilities.
n It helps remedy an important resource deficiency or
competitive weakness.
n It speeds the development of competitively important new
technologies and/or product innovations.
n It facilitates entry into new geographic markets or pursuit of
important market opportunities.
n It helps block or defend against a competitive threat or
mitigate a significant risk to a company’s
business.
44. The most common reasons why companies enter into strategic
alliances are to expedite the development of
promising new technologies or products, to overcome deficits in
their own expertise and capabilities, to bring
together the personnel and expertise needed to create desirable
new skill sets and capabilities, to improve supply
chain efficiency, to gain economies of scale in production
and/or marketing, and to acquire or improve market access
through joint marketing agreements.26 When a company
needs to correct particular resource/capability gaps or
deficiencies, it may be faster and cheaper to partner with
other enterprises that have the missing resources and
capabilities. Moreover, partnering offers greater flexibil ity
should a company’s competitive requirements later change.
Manufacturers frequently pursue alliances with parts
and components suppliers to wring cost savings out of supply
chain activities, to improve the quality of parts and
components, to better assure reliable supplies and on-time
deliveries, and to speed new products to market. In
industries where technology is advancing rapidly, alliances are
all about fast cycles of learning, staying abreast of
the latest developments, and gaining quick access to the latest
round of technological know-how and capability.
In bringing together firms with different skills and intellectual
capital, alliances open up learning opportunities
that help partner firms strengthen their own portfolios of
resources, core competences, and capabilities and
thereby become more competitive.27
The best strategic alliances are highly selective,
45. focusing on particular value chain activities and on
obtaining a specific competitive benefit. They tend
to enable a firm to build on its strengths and learn.
Companies find strategic alliances particularly valuable in
several other instances. A company racing for global
market leadership needs alliances to:28
n Get into critical country markets quickly and accelerate the
process of building a potent global market
presence.
n Gain inside knowledge from local partners about unfamiliar
markets and cultures. For example, U.S.,
European, and Japanese companies wanting to build market
footholds in China and other fast-growing
Asian markets have pursued local partnership arrangements to
help guide them through the maze of
government regulations, to supply knowledge of local markets,
to provide guidance on adapting their
products to better match local buying preferences, to set up
local manufacturing capabilities, and/or to
assist in distribution, marketing, and promotional activities.
n Access valuable skills and competences that are concentrated
in particular geographic locations
(such as software design competences in the United States,
fashion design skills in Italy, and efficient
manufacturing skills in Japan, Taiwan, China, and other
Southeast Asian countries).
A company that is racing to stake out a strong position in an
industry of the future needs alliances to:29
n Establish a stronger beachhead for participating in the target
industry.
47. redirect the collaborative effort.30
Many Alliances Are Short-Lived or Break Apart Most alliances
that aim at technology-sharing or
providing market access turn out to be temporary, fulfilling
their purpose after a few years because the benefits
of mutual learning have occurred and because both partners’
businesses have developed to the point where
they are ready to go their own ways. The likelihood that such
alliances will be temporary makes it important
for each partner to learn thoroughly and rapidly about the other
partner’s technology, business practices, and
organizational capabilities and then promptly transfer valuable
ideas and practices into its own value chain
activities. Alliances tend to be longer lasting when (1) they
involve collaboration with suppliers or distribution
allies, (2) each party’s contribution involves activities in
different portions of the industry value chain, or (3) both
parties conclude that continued collaboration is in their mutual
interest.
Most alliance partners don’t hesitate to terminate their
collaboration when the payoffs run out or when alliance
members conclude the expected benefits are unlikely to
materialize. A 1999 study by Accenture, a global
business consulting organization, revealed that 61 percent of
alliances were either outright failures or “limping
along.” In 2004, McKinsey & Company estimated that the
overall success rate of alliances was around 50
percent, based on whether the alliance achieved the stated
objectives.31 A 2007 study found that, even though
the number of strategic alliances was increasing about
25 percent annually, the failure rate of alliances hovered
between 60 to 70 percent.32 The high “divorce rate” among
strategic allies has several causes—an inability to work
well together, tendencies among alliance members to share
48. only limited information about their valuable skills and
expertise (which prevented other members from learning
much of value), changing conditions that render the purpose of
the alliance obsolete, growing disagreement
among alliance members about the purpose, priorities, and/or
targeted benefits of the alliance, the emergence
of more attractive paths to capture the intended benefits, and
emerging marketplace rivalry between certain
alliance members.33 Experience indicates that alliances stand a
reasonable chance of helping a company reduce
competitive disadvantage but rarely can entering into an
alliance enable a company to boost the competitive
power of its resources and capabilities by enough to outcompete
rivals or gain a competitive advantage.
Large numbers of strategic alliances fail to live
up to expectations and are dissolved after a
few years.
The Strategic Dangers of Relying Heavily on Alliances and
Cooperative Partnerships. The
Achilles heel of alliances and strategic cooperation is becoming
dependent on other companies for essential
expertise and capabilities. To be a market leader (and perhaps
even a serious market contender), a company
must ultimately develop its own capabilities in areas where
internal strategic control is pivotal to protecting its
competitiveness and building competitive advantage. Moreover,
some alliances and cooperative arrangements
hold only limited potential when a partner maintains full control
over its most valuable skills and expertise and
is unwilling to give other alliance members much access to
these capabilities. As a consequence, acquiring or
merging with a company possessing the needed resources and
capabilities is a better solution.
50. usually has a different name. An acquisition
is a combination in which one company, the
acquirer, purchases and absorbs the operations
of another, the acquired.
The main impetus for merger and acquisition strategies is to
fundamentally alter a company’s trajectory and
improve its business outlook. Such strategies typically aim at
achieving any of four objectives:35
1. Creating a more cost-efficient operation out of the combined
companies. Many mergers and acquisitions
are undertaken with the objective of transforming two or more
otherwise high-cost companies into one
lean competitor with average or below-average costs. When a
company acquires another company in
the same industry, there’s usually enough overlap
in operations that certain inefficient plants can be
closed or distribution activities partly combined and
downsized (when nearby centers serve some of the
same geographic areas) or sales force and marketing
activities can be combined and downsized (when
each company has salespeople calling on the same
customer). The combined companies may also be
able to reduce supply chain costs because of buying
in greater volume from common suppliers and from
closer collaboration with supply chain partners. Likewise, it is
usually feasible to squeeze out cost savings
in administrative activities, again by combining and downsizing
such administrative activities as finance
and accounting, information technology, human resources, and
so on.
Combining the operations of two companies, via
merger or acquisition, is an attractive strategic
option for fundamentally altering a company’s
51. trajectory—achieving operating economies,
strengthening the resulting company’s
resources, capabilities, and competitiveness in
important ways, and opening up avenues of new
market opportunity.
2. Strengthening the resulting company’s resources,
capabilities, and competitiveness in important ways.
Combining the operations of two or more companies, via merger
and/or acquisition, is often aimed
at significantly bolstering the competitive power of the
resulting company’s resources, know-how,
skills and expertise—and doing so quickly (as compared to
undertaking a time-consuming and perhaps
expensive internal effort to accomplish the same result). From
2000 through February 2019, Cisco
Systems purchased 128 companies to give it more technological
reach and product breadth, thereby
enhancing its standing as the world’s biggest provider of
hardware, software, and services for building
and operating Internet networks.
3. Expanding a company’s geographic coverage. One of the best
and quickest ways to expand a company’s
geographic coverage is to acquire rivals with operations in the
desired locations. And if there is some
geographic overlap, then a side benefit is being able to reduce
costs by eliminating duplicate facilities in
those geographic areas where undesirable overlap exists. Banks
like Wells Fargo and Bank of America
have pursued geographic expansion by making a series of
acquisitions over the years, enabling them to
establish a market presence in an ever-growing number of states
and localities. Food products companies
53. beverage lineup by introducing its own new products (like
Powerade and Dasani), it has also expanded
its lineup by acquiring Minute Maid (juices and juice drinks),
Odwalla (juices), Hi-C (ready-to-drink
fruit beverages), and dozens of other brands of beverages.
Going into 2019, Coca-Cola had a portfolio
of over 500 brands and 3,900 choices of beverage products,
some internally developed and most the
result of an active and longstanding acquisition program.
Many companies have used mergers and acquisitions to catapult
themselves from the ranks of the unknown into
positions of market prominence. Clear Channel Communications
began operations as a single radio station in
Texas; after acquiring assorted media assets over four decades,
in 2019 Clear Channel (renamed iHeart Media in
2014) was operating 858 broadcast radio stations in the United
States with some 250 million monthly listeners,
plus it was one of the world’s largest outdoor advertising
companies with close to one million displays in over
30 countries.
Many Mergers and Acquisitions Are Not Successful Mergers
and acquisitions often do not result in the
hoped-for outcomes. The failure rate of mergers and
acquisitions is between 70 and 90 percent.37 The reasons are
numerous.38 The anticipated revenue growth may not occur.
Cost savings may prove smaller than expected. Gains
in competitive capabilities may take substantially longer to
realize, or worse, never materialize at all. Efforts
to mesh the cultures can be defeated by formidable resistance
from organizational members. Key employees
at the acquired company can become disenchanted with newly
instituted changes and leave. Differences in
management styles and operating procedures can prove hard to
resolve. Personnel at the acquired company may
54. stonewall changes, arguing forcefully for doing certain things
the way they were done prior to the acquisition.
Unsuccessful mergers and acquisitions can be costly. Ford
reportedly lost over $10 billion trying to make successes
of its $2.5 billion acquisition of Jaguar (1989) and $2.7 billion
acquisition of Land Rover (2000); frustrated by
poor results, Ford sold the operations of both brands to India’s
Tata Motors in 2008 for $2.3 billion.39 Bank of
America’s supposedly bargain-priced $2.5 billion acquisition of
ethically challenged and financially troubled
Countrywide Financial in January 2008 was, according to a
prominent banking and finance professor, “the worst
deal in the history of American finance. Hands down.”40
Countrywide, a big originator of questionable subprime
and adjustable-rate mortgages that helped trigger the Fall 2008
collapse of the housing market, cost Bank of
America almost $57 billion in real estate losses, settlements
with federal and state agencies for selling toxic
mortgage loans that were falsely represented as quality
investments, and payments for legal fees.41 Google’s
$12.5 billion acquisition of struggling smartphone manufacturer
Motorola Mobility in 2012 turned out to be
minimally beneficial in helping to “supercharge Google’s
Android ecosystem” (Google’s stated reason for
making the acquisition). When Google’s efforts to rejuvenate
Motorola’s smartphone business by spending over
$1.3 billion on new product R&D and revamping Motorola’s
product line resulted in disappointing sales and
huge operating losses, Google sold Motorola Mobility to China-
based PC maker, Lenovo, for $2.9 billion in
2014 (however, Google retained ownership of Motorola’s
extensive patent portfolio).
56. needs a production strategy geared to top-notch
quality and product performance, and a marketing strategy
aimed at touting differentiating features and using
advertising and a trusted brand name to “pull” sales through the
chosen distribution channels.
Beyond general prescriptions, it is difficult to say just what the
content of the different functional-area strategies
should be without first knowing what higher-level strategic
choices a company has made, the industry environment
in which it operates, the valuable resources and capabilities that
can be leveraged, and so on. Suffice it to say here
that lower-ranking company personnel who have strategy-
making responsibilities must be clear about which
higher-level strategies top executives have chosen and then
must tailor the company’s functional-area strategies
accordingly.
Timing a Company’s Strategic Moves
When to make a strategic move is often as crucial as what move
to make. Timing is especially important when
first-mover advantages or disadvantages exist.42 Being first to
initiate a strategic move can have a high payoff
when:
n Pioneering helps build a firm’s image and reputation with
buyers and creates strong brand loyalty.
n An early lead enables a first mover to move down
the learning curve ahead of rivals and gain an
absolute cost advantage over rivals because
of greater experience in working with new
technologies or because it captures economies
of scale sooner and enjoys volume-based cost
advantages.
58. pioneer may be able to reap temporary monopoly
benefits—such as faster recovery of its initial investment and
good profits—until rivals are able to enter the same
market space. The bigger the first-mover advantages, the more
attractive making the first move becomes and the
more difficult it becomes for later movers to dislodge the
advantages.43
To sustain any advantage that may initially accrue to a pioneer,
a first mover must be a fast learner and continue
to move aggressively to capitalize on any initial pioneering
advantage. It helps immensely if the first mover
has deep financial pockets, important competences and
competitive capabilities, and astute managers. If a first-
mover’s skills, know-how, and actions are easily copied or even
surpassed, then followers and even late movers
can catch or overtake the first mover in a relatively short
period. What makes being a first mover strategically
important is not being the first company to do something but
rather being the first competitor to put together
the precise combination of features, customer value, and sound
revenue/cost/profit economics that gives it an
edge over rivals in battling for market leadership.44 If the
marketplace quickly takes to a first mover’s innovative
product offering, a first mover must have large-scale
production, marketing, and distribution capabilities if it is to
stave off fast followers who possess competitively valuable
resources and capabilities. In cases where technology
advances at a torrid pace, a first mover cannot hope to sustain
an early lead without having strong capabilities in
R&D, design, and new product development, along with the
financial strength to fund these activities.
Sometimes, though, markets are slow to accept the innovative
product offering of a first mover, in which case
a fast follower with substantial resources and marketing muscle
59. can overtake a first mover (as Fox News has
done in competing against CNN to become the leading cable
news network). Sometimes furious technological
change or product innovation makes a first mover vulnerable to
quickly appearing next-generation technology
or products. For instance, former market leaders in cell phones
Nokia and BlackBerry have been victimized
by Apple’s far more innovative iPhone models and new
Samsung smart phones based on Google’s Android
operating system. Hence, there are no guarantees that a first
mover can sustain an early competitive advantage.45
The Potential for Late-Mover Advantages or First-Mover
Disadvantages
There are times, however, when being an adept follower rather
than a first mover actually has its advantages.
Such late-mover advantages (or first-mover disadvantages) arise
in five instances:
n When pioneering leadership is more costly than imitating
followership, and only negligible experience
or learning-curve benefits accrue to the leader—a condition that
allows imitative followers to (1) quickly
catch up to a first mover by learning from its experience and
avoiding its mistakes and (2) achieve lower
costs than the first mover.
n When an innovator’s products are somewhat primitive and do
not live up to buyer expectations, thus
allowing a clever follower with better-performing “next-
generation” products to win disenchanted
buyers away from the leader.
n When buyers are skeptical about the benefits of a new
technology or product being pioneered by a first
mover, thus allowing late movers to wait until the needs of
61. the-world markets are almost never the pioneers
that gave birth to brand-new markets—first-mover advantages
are fleeting and there is time for resourceful fast
followers and sometimes even late movers to overtake the early
leaders.46
The first lesson here is that there is a market-penetration curve
for every emerging opportunity; typically, the
curve has an inflection point at which all pieces of the business
model fall into place, buyer demand explodes,
and the market takes off. The inflection point can come early on
a fast-rising curve (like use of e-mail and
watching movies streamed over the Internet) or further on up a
slow-rising curve (as with battery-powered motor
vehicles, solar and wind power, and digital textbooks for
college students). The second lesson is that the timing
of strategic moves matters, which makes it important for
company strategists to be aware of the nature of first-
mover advantages and disadvantages and the conditions
favoring each type of move.
Key Points
Once a company has selected which of the five basic
competitive strategies to employ in its quest for competitive
advantage, it must decide whether and how to supplement its
choice of a basic competitive strategy approach,
as shown in Figure 6.1.
Companies have a number of offensive strategy options for
improving their market positions and trying to
secure a competitive advantage: offering an equal or better
product at a lower price, leapfrogging competitors by
being the first to adopt next-generation technologies or the first
to introduce next-generation products, pursuing
sustained product innovation, attacking competitors’
63. company’s exclusive channel for accessing customers.
Outsourcing pieces of the value chain formerly performed in-
house can enhance a company’s competitiveness
whenever (1) an activity can be performed better or more
cheaply by outside specialists; (2) the activity is not
crucial to the firm’s ability to achieve sustainable competitive
advantage and won’t weaken its ability to be a
master of its own destiny by hollowing out the competitive
power of its internal resources and capabilities;
(3) it reduces the company’s risk exposure to changing
technology and/or changing buyer preferences; (4) it
streamlines company operations in ways that improve
organizational flexibility, cut cycle time, speed decision
making, and reduce coordination costs; and/or (5) it allows a
company to concentrate on its core business and
do what it does best.
Vertically integrating forward or backward makes strategic
sense only if it strengthens a company’s position via
either cost reduction or creation of a value-enhancing,
differentiation-based advantage. Otherwise, the drawbacks
of vertical integration (increased investment, greater business
risk, increased vulnerability to technological
changes, and less flexibility in making product changes in
response to shifting buyer preferences) are likely to
outweigh any advantages.
Many companies are using strategic alliances, collaborative
partnerships, and joint ventures to help them in
the race to build a global market presence or be a leader in the
industries of the future. These forms of strategic
cooperation with other companies can be an attractive, flexible,
and often cost-effective means by which
companies can gain access to missing technology, expertise, and
business capabilities.
64. Mergers and acquisitions are another attractive strategic option
for strengthening a firm’s competitiveness. When
the operations of two companies are combined via merger or
acquisition, the new company’s competitiveness
can be enhanced in any of several ways: lower costs; stronger
technological skills; more or better competitive
capabilities; a more attractive lineup of products and services;
wider geographic coverage; and/or greater
financial resources with which to invest in R&D, add capacity,
or expand into new areas.
Once all the higher-level strategic choices have been made,
company managers can turn to the task of crafting
functional and operating-level strategies to flesh out the details
of the company’s overall business and competitive
strategy.
The timing of strategic moves also has relevance in the quest
for competitive advantage. Company managers are
obligated to carefully consider the advantages or disadvantages
that attach to being a first mover versus a fast
follower versus a wait-and-see late mover.
chapter 6Supplementing the Chosen Competitive Strategy—
Other Important Strategy ChoicesGoing on the Offensive—
Strategic Options to Improve a Company’s Market
PositionCORE CONCEPTChoosing the Basis for Competitive
AttackCORE CONCEPTBlue Ocean Strategy—A Special Kind
of OffensiveChoosing Which Rivals to AttackDefensive
Strategies—Protecting Market Position and Competitive
AdvantageCORE CONCEPTWebsite StrategiesProduct
Information–Only Strategies—Avoiding Channel
ConflictWebsite Sales as a Minor Distribution ChannelBrick-
and-Click StrategiesStrategies for Online
EnterprisesOutsourcing StrategiesCORE CONCEPTThe Big
Risk of Outsourcing Value Chain ActivitiesVertical Integration
