Competitive strategies depending on the role played by the firm in the industry
Many modern industries are oligopolies in which the forces of competitors are not equal, and their mutual adaptation occurs in the form of “following the leader”. There are four typical roles of oligopolists: a leader with a significant market share (40% or more); a contender for leadership (30%); followers of the leader or followers (up to 20%); oligopolists occupying a small market niche (up to 10%) or “newcomers” to the market (up to 10%).
Such a distribution of roles, for example, has long been observed in the American automotive market. Until Japanese and European firms entered this market, it was divided between four American companies. Since the 30s, Ford has lost its leadership, and it has been firmly held by General Motors. Ford and Chrysler have been the wingmen, and a small market niche was occupied by American Motors. In the 60s and 70s, Ford occupied a solid second place in the market and declared itself, as a contender for leadership. Several times this company tried to bypass the leader and capture a larger share of the market, but these attempts were not crowned with success [14].
Leaders tend to pursue a variety of defensive, defensive strategies. These strategies can be more passive if the leader’s positions are robust, or even active if the leader fears for his position, but not offensive. The leader may be the first, defending his position, to introduce new prices or new goods.
Since the word “strategy” came to the economy from the military lexicon, this was reflected in the names of competitive strategies. Leader strategies, for example, include:
“defense of the position” is a strategy in which various licensing, price, and other barriers are created; “flank defense” – a strategy in which separate areas of the company’s activity are allocated for strengthening and possible counterattack during the offensive actions of the enemy; “mobile defense” is a strategy that involves expanding its area of action through diversification of production; “Contracting defense” is a strategy of ceding weak territories of the market while strengthening the most promising ones.
Contenders for leadership usually choose active, attacking strategies. They can launch a “frontal attack” in all or many areas of competition, but more often they choose a “flank attack” in certain market segments or a “bypass” – the transition to the production of fundamentally new products or the development of new markets. Strategy researchers also distinguish such a form of strategy of the contender for leadership as a “gorilla attack” (guerillas, translated from English as guerrillas), which consists in using not always correct methods, impetuous attacks in order to demoralize the competitor. Contenders for leadership usually compete with a stronger opponent and pay little attention to other competitors until the popularity of these competitors begins to grow significantly. So, the company “Ford” almost did not notice the existence of “Chrysler”. “Its products were not even listed in the monthly sales reports showing the place of our cars in competition with models of other companies”
[20 c.172]. But after Chrysler had an emblem – a star on a blue background – and this emblem gained wide popularity throughout the country, Ford could not ignore it and responded in kind. It has its own trademark in the form of a blue oval.
Followers or followers of the leader choose “cautious” strategies, the goals of which are: to maintain their market share and profits, to adapt to the price and standards of the leader’s products. But periodically they introduce innovations that can strengthen their position. Thus, Chrysler was the first to extend the warranty period for car maintenance to five years, which significantly increased its market share and forced competitors to do the same.
Beginners usually start by looking for a market niche that has not been able to attract a leader or other firms in the industry, but is quite profitable and has opportunities for growth [2 pp.91–93].