One book which you will find in many a marketing manager’s office is the Art of War by Sun Tze. This short text is compiled from terracotta plates which were marked with advice as to the correct strategy and tactics of battle for Bronze Age Chinese warlords. For example, one states:
“First on the battlefield waits for the enemy fresh. Last on the battlefield charges into the field exhausted”.
The message from this segment is clear, a business who is first into a market has time to build up resources and can get prepared to defend its position. A firm late into the market may have to rush, expending scarce resources, and in that state, cannot depose the earlier market entrant from their prepared position.
Many marketing texts compare marketing strategy with military strategy they look at the market as a battlefield and the companies who trade in that market the opposing forces. Depending on your position in the market, your strategic options differ.
Market leaders can:
- Expand their market – through finding new users for their products or new uses. Take Listerine, the mouth wash, it started life as a household detergent used to clean floors.
- Take an offensive strategy; aggressively pursuing the market share of competitors
- Take a defensive strategy – by protecting and nurturing their existing customer base.
Market challengers (those fighting for market leadership) can:
- use offensive strategies, targeting the market share of market leaders and others. They can take out smaller and weaker competitors or they attack the leader using a war of attrition to gradually erode the leader’s market share.
Market followers (those competing but not willing to depose the market leader) can:
- Duplicate the efforts of market leaders (as far as intellectual property law allows); a strategy used by Aldi and Lidl
- Carry out adaption – changing the product to attract a different market segment. For example a firm may increase the level of after-sales service. For example, Kia offer a longer warranty than many other car manufacturers.
Niche marketers can:
- Add value for specific market groups
- Target specific geographic areas, different end user segments or make specialised products.
All of these marketing strategies can be expressed in military terms.
For example, a market leader can decide to attack a competitor head on, possibly using price as a weapon. This approach can be a battle of attrition and significant reserves are required for success. Such an approach was used by Napoleon who would march his guard directly at the opposition and try to use force of numbers to sweep the opposition from the battlefield. Firms with dominant market positions, such as Microsoft can use the head on attack to knock smaller firms from the market.
A market challenger, may want to outflank the market leader by attacking segments where the leader appears weakest. This is how the Japanese took Singapore in World War Two. Britain defended the port city by placing naval guns on the shore. The Japanese landed further up the peninsula on which Singapore sits, outflanking the guns and hitting where the city’s defences were weak. The demise of Kodak in the photography sector is an example of competitors outflanking the market leader. Whilst Kodak concentrated on it strength, photographic film, challengers such as Sony outflanked them with digital cameras.
Some firms may want to try an encircling attack. This is how Caesar finally defeated the Gauls. He built walls around their base and waited for the Gauls to either attack of starve. In the soap powder industry a firm may wish to produce several brands each of which focuses on one particular product characteristic, e.g. cleaning power, green credentials or price point. These specialist brands encircle a competitor’s product and pick of market share by targeting customers looking for those specific attributes.
Firms may wish to try a bypass attack. This is deliberately avoiding confrontation with competitors by picking segments where they are not active. For example, the North Vietnamese avoided direct confrontation with US forces by building the Ho Chi Min trail through Laos and Cambodia. This allowed them to slip back into Vietnam behind the American defensive line. Dell had a great deal of success by using mail order and direct sales to sell computers when most of their competitors were using the more traditional wholesale and retail supply channels.
Finally there is Guerrilla attack. This approach is to use short-term tactics to keep your opponents guessing. This could be bursts of promotional activity, use of special offers or trying different promotional channels such as social media pages. Again, the North Vietnamese would use ambushes on US patrols, terrorist bombs and surprise charges to keep the US and South Vietnamese armies guessing as to what would happen next.
A small enterprise will usually lack the resources to attack a larger competitor head on. So tactics such as Guerrilla marketing, flank attacks and bypassing market leaders are more likely to succeed.
As well as attacking competitors, most firms also need to defend their market position.
Wellington preferred a defensive strategy. At Waterloo he hid troops behind a low ridge so that they could not be easily targeted by French Artillery. He also garrisoned two defendable farms which acted like break waters and which made it difficult for French columns to build their attack. His strategy was to defend his position on the ridge and wait either for the French attacks to weaken or for the Prussian army to attack the French flank.
So you can defend a position by making it difficult for your competitors to take it. Dyson does this through the application of intellectual property rights such as patents and trademarks. Dyson tries to build an unassailable position by building distinct competencies into his firm.
You can defend a position by making it impossible for your competitors to flank you. Henry V at Agincourt picked the battlefield. It was a narrow valley with forest on either side. The French could only attack his army head on and by placing his archers on either side of his main force. The French charge was forced into the funnel of the valley and the English archers could easily target the closely bunched French charges. A business can use a flank defence by using loss leaders in their weaker segments to prevent new entrants. Other firms, such as Bosch use challenger brands to stop competitors undercutting their prestige position.
You can defend through pre-emptive attack. This was the Japanese strategy at Pearl Harbour. The Japanese wanted to expand their empire into the pacific but the US pacific fleet was a major threat to this ambition. The Japanese launched a pre-emptive strike on the US Navy in Hawaii to knock that threat out. A recent example is the Saudi government’s decision not to decrease oil production despite falling oil prices. This was a deliberate attempt to bankrupt the American shale oil industry, knocking that competition out of the market. the Saudi strategy has worked and shale oil production in certain parts of the USA have all but ceased.
A counter defence can be used to react to competitors actions. In the music industry, if one label has a boy band, it competitors will then try to develop a similar band. This can mean letting your opponent take the risk whilst you reap the reward. Atari were the first firm to develop the games console. Sony and Microsoft let Atari take risks in building the market but then launched better consoles to take over the market.
A mobile defence can be used. This means moving to new sectors as opportunities arrive or threats materialise. So British Gas began to offer services such as insurance, electricity and white goods servicing when the gas supply market was opened to competition.
Finally, there is a contraction defence. This is moving away from a segment where competition is too fierce and reinvesting resources in core activities. Such a strategy was carried out by John Menzies, the Scottish newsagent. Menzies withdrew from the retail market, selling stores to WH Smith. They reinvested the funds from the sale of the retail business into their newspaper wholesale distribution business, their growing PC consumable business and into air transport.
For small businesses being mobile and by focusing on core activities, their market position can be defended.