Market – challenger strategies

by admin on October 10, 2006

MARKET- CHALLENGER STRATEGIES

Many market challengers have gained ground or even overtaken the leader. Toyota today produces more cars than General Motors and British Airways flies more international passengers than the former leader, Pan Am, did in its heyday. Air bus delivers more aircraft than Boeing.

Boeing and Airbus

When it closed the books on December 31, 2003, Airbus, the company that began in 1970 as an unwieldy confederation of European aerospace firms, had replaced 89-year-old Boeing as the world’s largest manufacturer of commercial aircraft. Airbus was on course to deliver 300 new airplanes in 2003 versus 280 from Boeing —just five years earlier in 1998 Boeing delivered twice as many as Airbus. What happened? Challenger Airbus began with a clean slate. It created an innovative new product line equipped with modern features— the massive A380 designed to carry 555 passengers at only 2.5 cents per seat mile. In contrast,

Boeing had an arcane production system developed in World War II, and it couldn’t match Airbus’s advance without redesigning aircraft at prohibitive costs. Once considered as the manufacturing marvel of the world Boeing fell behind in both technology and manufacturing efficiency during the 1990s. A new player that’s aggressive and focused will almost always gain ground on an established player. In the aircraft business, when it can take nearly a decade to go from design to launch, lost ground can be incredibly difficult to regain.

Challengers like Airbus set high aspirations, leveraging their resources while the market leader often runs the business as usual. That’s why the CEO of Airbus, Noel Foregard, vows to keep what he calls the “mentality of a challenger.� Now let’s examine the competitive attack strategies available to market challengers.

Defining the strategic objective and opponent(s)

A market challenger must first define its strategic objective. Most aim to increase market share. The challenger must decide whom to attack.

Ø It can attack the market leader: This is a high-risk but potentially high-payoff strategy and makes good sense if the leader is not serving the market well. The alternative strategy is to out-innovate the leader across the whole segment. Xerox wrested the copy market from 3M by developing a better copying process. Later, Canon grabbed a large chunk of Xerox’s market by introducing desk copiers.

Ø It can attack firms of its own size that are not doing the job and are underfinanced: These firms have aging products, are charging excessive prices, or are not satisfying customers in other ways.

Ø It can attack small local and regional firms: Several major banks grew to their present size by gobbling up smaller regional banks.

If the attacking company goes after the market leader, its objective might be to gain a certain share. Miller Brewing is under no illusion that it can topple Anheuser-Busch’s in the domestic premium beer market—it is simply seeking a larger share. If the attacking company goes after a small local company, its objective might be to drive that company out of existence.





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