Competitor Analysis

Question

Explain using examples, some defense and attack strategies that can be used by a market leader and a market challenger. Discuss why each strategy would be effective for each company.

Answer 1

Market Leader Defense Strategies:

1. Increase Market Penetration: A market leader can use a penetration pricing strategy to lower the price of its products to capture a larger market share. For example, when Coca-Cola lowered its prices in response to Pepsi's market share gains, it was able to regain its position as the market leader.
2. Diversification: A market leader can diversify its product offerings to minimize the impact of a competitor's entry into the market. For example, Amazon has diversified its product offerings to include everything from books to groceries, which makes it difficult for competitors to match its breadth of offerings.
3. Branding: A market leader can strengthen its brand to make it difficult for competitors to challenge its position. For example, Nike has built a strong brand identity that is recognized around the world, making it difficult for competitors to compete with its brand recognition.

Market Leader Attack Strategies:

1. Price Skimming: A market leader can use price skimming to introduce a new product at a high price to maximize profits before competitors enter the market. For example, Apple uses this strategy when it launches a new iPhone, charging a premium price before competitors release similar products.
2. Product Development: A market leader can develop new products that meet the needs of its customers better than its competitors. For example, Tesla has developed electric cars that are more efficient and have a longer range than its competitors, giving it a competitive advantage in the market.
3. Promotions: A market leader can use promotional strategies to increase sales and take market share from its competitors. For example, Samsung uses promotional campaigns to attract customers away from Apple's iPhone, offering free accessories or discounts to customers who purchase their latest smartphone.

Market Challenger Defense Strategies:

1. Niche Marketing: A market challenger can focus on a specific niche market to differentiate itself from the market leader. For example, T-Mobile has targeted younger consumers with its "Un-carrier" campaign, offering unlimited data plans and other benefits that differentiate it from other mobile carriers.
2. Customer Service: A market challenger can differentiate itself from the market leader by providing superior customer service. For example, Zappos has built a reputation for exceptional customer service, which has helped it to challenge established retailers like Amazon.
3. Distribution Channels: A market challenger can develop alternative distribution channels to reach customers in new ways. For example, Dollar Shave Club challenged Gillette's market position by selling its razors through a subscription service that delivered razors directly to customers' homes.

Market Challenger Attack Strategies:

1. Price Discounting: A market challenger can use price discounting to undercut the market leader's prices and attract customers. For example, Walmart has used price discounting to challenge established retailers like Target and Kmart.
2. Advertising: A market challenger can use advertising to challenge the market leader's brand recognition. For example, Pepsi has used advertising campaigns to challenge Coca-Cola's dominance in the soft drink market.
3. Product Innovation: A market challenger can develop innovative products that meet the needs of customers better than the market leader. For example, Airbnb challenged the hotel industry by developing a new platform that allowed homeowners to rent out their properties to travelers, offering an alternative to traditional hotels.

In conclusion, both market leaders and market challengers can use a variety of strategies to defend and attack their positions in the market. The effectiveness of each strategy depends on the company's specific goals and competitive landscape, but by using a combination of these strategies, companies can increase their chances of success in a competitive market.