Defensive Strategy

Protect profit streams against competitor attacks

The objective of defensive business strategy is to fend off competitive attacks. As part of the regular course of business, new threats emerge all the time as challengers try to take a piece of the action. Even when the firm is in a strong competitive position with stable cash flows, it can become exposed to new threats and vulnerabilities. For these reasons, defensive strategy is vital to the competitive standing of the firm.

Are you experiencing these issues?

Customer defections

Market share erosion

Business disrupted by competitor

Robust markets shrinking

Business disrupted by technology

Compromised business performance

Any of these issues indicate that your business is coming under attack. Two things need to happen quickly back to back: (1) focus your defensive strategy on the critical strategic control points in your market, and (2) execute your defensive strategy rapidly. Fail either one, and your business becomes at risk.

Our Approach

Our first step is to look at the threat from the “outside-in” to reach a robust understanding of the company’s situation, including competitors, customers, and market forces. Next, we identify the strategic control point in question and formulate a strategy to reinforce it. As a result, the response is precise and highly targeted to the threat.

The second step is to help the company execute its defense rapidly, i.e., organize, perform, and track. The ultimate objective is a response that is swift and coordinated companywide in counteracting the threat.

How We Help

Build robust defensive strategies around strategic control points in your industry.

Understand and manage the effects of an attack

Nature of the threat vs.barriers to entry, including

  • Economies of scale
  • Product differences
  • Brand identity
  • Switching costs
  • Capital requirements
  • Access to distribution
  • Cost advantages
  • Favorable access to raw materials
  • Favorable locations
  • Experience curve effects
  • Government subsidies

Form of competitive attack and intensity of rivalry, including

  • Industry growth
  • Competitor concentration
  • Commoditization
  • Profit model
  • Fixed cost vs value added
  • Competitive advantage
  • Capacity added in large chunks
  • Product differentiation
  • Brand strength
  • Switching costs
  • Business complexity
  • Exit barriers
Intellectual Property
IP protection with patents
Example: Biotech, pharmaceuticals, media franchises
Proprietary Knowledge
Trade secrets or unique expertise gained by working smarter, difficult to replicate
Example: Coke, Airbus, Space X
Economies of scale, scope, experience
Example: TSMC, Intel - microchip manufacturing
Lock Access To Raw Materials
Lock access to raw materials and input resources
Example: Rio Tinto, Anglo American, Alcoa - mining rights
Established tradition, connotation
Example: Rolex, BMW, Mercedes - icons
Ownership of exclusive proprietary data
Example: Pandora customizes radio stations to individual users’ preferences. Facebook tracks user behavior for online advertisers
Increased value of product or service with use
Example: eBay, Amazon, Google Maps, Twitter
Market Share Leadership
Example: Lockheed Martin, Cargill, Fidelity - largest in class
Lock Distribution Channels
Lock access to market channels
Example: Walmart, Target - retail locations
Trusted connection built on positive experience
Example: Apple, Costco - repeat buyers

We provide the appropriate defensive strategies as dictated by the threat.

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Pre-entry defensive strategy

We assist clients in building a pre-entry defensive strategy that discourages a challenger from entering the market, making the entry too difficult or too costly to pursue ...

Pre-entry defensive strategy

The objective of a pre-entry defensive strategy is to discourage a challenger from entering the market by making the entry too difficult or too costly.

Pre-entry threats are staged by new entrants. Usually, it is much easier to fend off challengers before they enter the market than once they make significant investments. For this reason, the firm needs to take timely action.

The type of response depends on the strategic position of the company and the relevant strategic control points in its industry. Typical actions include locking up delivery systems, blocking access to suppliers, expanding capacity, and much more.

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Post-entry defensive strategy

We help clients bolster a post-entry defensive strategy that keeps the competition from building a strong market position or gain share with new forms of participation ...

Post-entry defensive strategy

The objective of a post-entry defensive strategy is to keep the new entrant from building a strong market position.

Post-entry threats come from firms that have already entered the market or from incumbents that are threatening to gain market share with new forms of participation. By this stage, new entrants or incumbents will have made investments, so the stakes are high.

Frequent actions involve introducing “firewall” brands, widening product lines, adopting continuous improvement to outdistance competitors, cross-parrying on a specific market segment, and much more. The logic is to defend one’s market position when the rival is small and weak before it becomes a serious threat.

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Defense Against Substitutes

The objective of defending against a substitute is to preclude the substitute product from taking hold. Factors that determine a higher threat of substitutes in the industry include ...

Defense Against Substitutes

The objective of defending against a substitute is to preclude the substitute product from taking hold. Factors that determine a higher threat of substitutes in the industry include the following:

  • Customer can easily switch between existing products and new substitutes
  • Substitutes are readily available
  • They have better features, quality or value comparable to products in the market
  • They have a lower cost

Examples of defensive actions against substitutes include the following:

  • Increase product differentiation by innovating. improving product features and engaging in tactical pricing
  • Develop, maintain, and re-enforce a strong brand and image to preclude switchovers
  • Re-frame your market focus to a profitable niche
  • Adopt special offers, including discounts, trials, gifts, special packages
  • Recognize evolving key customer expectations and improve satisfaction
  • Improve customer relations through the acquisition of customer data and proper communication
  • Research customer needs and wants and competitive threats from substitute products early on in their development

The end game is to focus on the right strategic control points to block substitutes early on.

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Business Model Design Stabilization

We help stabilize companies whose business model has come under severe competitive attack, including disruption, industry-wide value shifts, or stalemate competition. We help redesign the business model ...

Business Model Design Stabilization

A company may come under attack due to disruption, industry-wide value shifts, or stalemate competition. In each of these cases, management may need to redesign the business model to defend the business and stabilize the competitive position of the firm.

We assist clients to improve business designs, including relationships between buyers and suppliers, distributors and manufacturers, subcontractors and outsourcers. Our approach examines fundamental assumptions of the business, including the following:

  • Emphasis on analyzing the underpinnings of the destabilizing factors, including disruption, flat markets, or stalemate competition
  • Focus on examining the value shift in the industry, how and where value is migrating across the value chain
  • Identification of new forms of competition originating from outer regions of the industry, including new technologies, new capabilities, and new cost structures
  • Questioning fundamental assumptions about how customers are changing, what they value, their priorities
  • Examining the profit drivers of the business
  • Deciding how to differentiate, which customers to target, what products and services to sell
  • Designing the company’s value capture mechanism
  • Securing the relevant strategic control points in the industry to build a fortress

The Results You Can Expect

  • Secured relevant strategic control point(s)
  • Targeted measured response
  • Protection of your cash flow stream
  • Sustained defensible position

How We Have Helped Clients

Scooter Manufacturer

Strengthened the company’s distribution channels to preclude competitors from entering its home market.

Automotive Retail

Digitized customer-facing processes being disrupted by the competition.

Jet Engine Service Provider

Stemmed defection of airline customers and reversed deteriorating profitability.