The main goal of the defensive strategy is to protect the competitive advantage and strengthen the position of companies
Any company can become an object of attack from competitors, from both newcomers who want to enter the market, and existing players seeking to strengthen their positions. The purpose of the defensive strategy is to reduce the risk of attack from competitors, to withstand the attack with minimal losses, to force the attackers to switch to fighting with other competitors. A defensive strategy does not enhance a company’s competitive advantage, but it does allow you to maintain it and protect its competitive position. There are two main types of defensive strategy – blocking possible ways of attack and demonstrating the ability to respond.
In the first case, a very common type of defensive strategy that prevents offensive actions on the part of competitors. To do this, various obstacles are erected in the way of a potential aggressor [42 pp.489-494]. For example, the company develops alternative technologies so that it is not taken by surprise by the appearance on the market of a competitor with more advanced technology. The development of new product models and the expansion of the range reduce the likelihood of penetration into the market of a competitor pursuing a differentiation strategy. The inclusion of inexpensive models in the range reduces the risk of attack based on price reductions. It is possible to improve the personnel policy, invite talented specialists who can expand the key competence or capabilities of the company – this will give an advantage over rivals who are trying to use their knowledge and experience as a tool of competition. Increased consumer commitment is facilitated by increasing warranty periods, offering free technical support, speeding up the delivery of spare parts, providing discounts or free samples of goods to consumers with a low level of brand adherence, notifying of the intention to reduce prices, offering a new product model. It is possible at the official level to demand verification of the quality and safety of competitors’ products – this is a favorite tactic of pharmaceutical companies seeking to slow down the spread of new types of drugs on the market. You can provide dealers and distributors with additional discounts for a large volume of orders or better payment terms to deter them from trying to enter into contracts with other suppliers. If the company achieves exclusive use of certain distribution channels, then competitors will have to look for alternative channels. These and other actions not only strengthen the company’s competitive position, but also force competitors to “shoot at a moving target.”
But the mere preservation of the status quo is not enough. A good defensive strategy involves a quick response to changes in the situation in the industry and proactive actions in relation to potential aggressors. An active defense is always preferable to a passive one.
In the second case, the purpose of such a demonstration is to prevent the active actions of competitors, instilling in them doubts about the effectiveness of the attack, and to show that the possible success is not worth the costs incurred, as well as to reorient them to less protected targets. The company notifies competitors about possible retaliatory actions in various ways [42 pp.495–497].
Another way to counter the active actions of competitors is to make them doubt the prospects for profitability. The high profitability of a company or industry serves as a bait for a large number of competitors and stimulates offensive actions, even if the entry barriers to the market are high. In this situation, the company can protect itself from competitors, especially from newcomers, by abandoning short-term profits and using financial reporting methods that allow to underestimate real profitability indicators.