limited strategic alternatives

Definition:
A concept proposed by Baker (Marketing New Industrial Products, 1975) based upon a military analogy, which argues that in competitive situation firms have only a very limited choice of broad strategic options open to them. In a war situation it is usual to assume that the basic purpose of the contestants is to overcome their opponent. Further, it is also assumed that in overcoming the enemy one will also occupy their territory, which in business terms may be likened to competitive actions designed to increase one's MARKET SHARE. If we consider two armies facing each other it is clear that only a few basic choices exist. First, one may attack the enemy head-on. In a business context the frontal assault may be likened to PRICE COMPETITION between undifferentiated products. This is a very crude form of competition for ultimately it must resolve itself into a war of attrition in which the party with the greater resources must eventually win. Because of the waste implicit in such a crude strategy a preferred alternative to the frontal assault is the flanking attack. Simplistically, the theory of the flanking attack is that one identifies a weakness in an opponent's defences and then concentrates the mass of one's own efforts against this weakness. In reality, of course, opponents are equally as sensitive to the potential of a flanking attack as are their adversaries and consequently they devote considerable effort to avoiding the development of weak points in their defences. For this reason it is frequently necessary for one party to have to make a diversionary manoeuvre or feint attack in an attempt to persuade the other party to concentrate an excessive amount of their resources at one point to the detriment of some other point. In a commercial context, the flanking attack or strategy may be likened to a policy of indirect competition based upon the creation and PROMOTION of product differences. Clearly such a strategy places considerable emphasis upon product development and may result in a strategy of PRODUCT DIFFERENTIATION which reflects a. product orientation, or a strategy of MARKET SEGMENTATION which reflects a MARKETING ORIENTATION. Essentially, the difference between the two approaches is that product differentiation tends to be an intuitive response of the producer faced with direct competition from an identical product. To avoid the inevitable price competition associated with a homogeneous supply the manufacturer seeks to differentiate his product in some way, although not necessarily with any clear idea of how the market will react to the differentiating factor. Therefore the emphasis tends to be on 'selling what we can make' in contrast to a policy of market segmentation which stresses 'making what we can sell'. Thus the firm pursuing a segmentation strategy starts from the premise that demand for a product is not the homogeneous entity it is frequently purported to be but rather an aggregation of lesser demands for a spectrum of different features with a common basis. Accordingly, one sets out to measure the nature and strength of demand for variants of the basic product in order to determine whether any segment of the market is of sufficient size to warrant the development and production of a differentiated good or service. As the history of World War I shows, frontal assaults and/or attempts to outflank the enemy frequently result in a stalemate between evenly matched opponents. Given such a situation a third alternative open to both parties is to lapse into a state of coexistence in which both cease to compete actively with one another so long as they feel that their territory (or market share) is not threatened by any activity of the other. Recognizing that such a strategy is essentially negative in character the military or business strategist may prefer to withdraw from a particular arena of operations. It must be emphasized that in the case of a withdrawal strategy one has control over the situation and therefore gets out with a minimum loss and on one's own terms. This is quite different from a retreat in which one is forced to retire as best one can and usually at the mercy of one's adversary. A final strategy, and one which has most frequently led to a decisive outcome in both military and business struggles, is a strategy of INNOVATION. In simple terms the result of innovation is so to change the competitive situation that one party is vested with complete superiority. Thus the invention of mechanical extensions to a man's reach, such as the long-bow, conveyed an enormous superiority upon the innovator, as did the invention of gunpowder and the concept of the Blitzkrieg based on mechanized armoured divisions. In the business context technological innovation results in the creation of a product so different from anything which has preceded it that it automatically creates a new market and endows the innovator with a monopoly of the supply to that market. Recent classic examples of this are provided by the Polaroid camera and the process of xerography.

Cross-References:
[innovation] [marketing orientation] [market segmentation] [product differentiation] [promotion] [price competition] [market share]

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