This is the extract from "Competition - Challenging and Defending", a vital part of the ebook itself.

INTRODUCTION:

The concepts of challenging leaders and defending against competition has to be addressed by most business operators at some stage and both represent high risk stages of the business cycle if not handled correctly.

One of the key issues is should you challenge a leader or apply the resources to defend your position. Both can take considerable financial resources and be very disruptive to the production process. They may however be essential for business survival.

Challenging is often risky because of the advantages the leaders have developed in the market. These advantages that can be production efficiencies or simply an extensive range of contacts allow an easy and formidable defence barrier for existing business.

Defending a position has at its core an appropriate offensive strategy that concentrates on higher level differentiation, cost leadership or market focus. If an existing business continually invests in these areas it creates a barrier that makes a challenge less likely.

In defending it is essential to demonstrate to a challenger that the strategy they are pursuing is unattractive and likely to fail. In fact it can be easier for an established business to convey their strength as challengers grapple with basic structural issues within the industry.

If however the defender does not invest in defensive positioning or if the challenger can see a weakness in the management strategies of a leader then a challenge may succeed.

CHALLENGING.

As mentioned above challenging can be very risky unless tangible deficiencies or opportunities are present in the market and the leader is not addressing the issues.

Fundamental requirements for a challenge also include:

• A strong resource base
• The ability to differentiate from the leader
• The ability to withstand a parallel challenge
• The ability to reduce the leaders advantage in the market
• Be able to neutralize or reduce the leaders retaliation response

There are three basic forms of challenge and these include:

• A financial challenge
• More efficient production
• Capacity to vary scope while retaining similar production methods to the leader

The financial challenge can be made by being prepared to run in a loss situation for a period of time until the leader is financially under threat. This means that the challenger must be prepared to invest more in the industry than the leader and be able to sustain the effort.

A challenger can improve efficiency via new technology, a different and improved distribution system, better after sales service, better relationships with suppliers and different marketing methods.

The focus on scope can be achieved by trying to coordinate all business units and resources to enhance one component of the challenging business.

Another method is to capture a niche’ in the market by using a narrow focus to establish the niche’ and then broadening the scope. If the niche’ has been very well serviced and a solid reputation is in place then the broadening can bring forward a profound business growth that can swamp a leader.

Another scope adjustment is to use vertical integration to achieve control over production and the quality of output. This is usually reserved for larger business that has the ability to vertically integrate.

Some opportunities may exist for challengers where there is a very well serviced market and the leader is locked into a high cost structure. A cheaper more relevant alternative would have a good chance of success.

Hope you enjoyed reading the extract. Please get the ebook so that you can put all its contents into practice and see the results for yourself.

Copyright 2001 Winn Stone, All Rights Reserved.