Chapter 4
Crafting a Strategy
Screen graphics created by:
Jana F. Kuzmicki, PhD
Troy University - Florida and Western Region
Quote . . .
“Successful business strategy is
about actively shaping the game
you play, not just playing the
game you find.”
Adam M. Brandenburger and Barry J. Nalebuff
Chapter Outline
 Five Generic Competitive Strategies
 Collaborative Strategies: Strategic Alliances and
Partnerships
 Merger and Acquisition Strategies
 Vertical Integration Strategies
 Outsourcing Strategies
 Offensive Strategies
 Defensive Strategies
 Web Site Strategies
 Choosing Appropriate Functional-Area Strategies
 First-Mover Advantages and Disadvantages
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Fig. 4.2: The Five Generic Competitive Strategies
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Collaborative Strategies: Strategic
Alliances and Partnerships
Companies sometimes use
collaborative partnerships to
complement their own strategic
initiatives and strengthen their
competitiveness. Such
cooperative strategies go beyond
normal company-to-company
dealings but fall short of merger
or formal joint venture.
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Merger and Acquisition Strategies
 Merger – Involves a pooling of equals, with newly created
firm often taking on a new name
 Acquisition – One firm, the acquirer, purchases
and absorbs operations of another, the acquired
 Characteristics of mergers and acquisitions
 Much-used strategic option
 Especially suited for situations where alliances do not provide a
firm with needed capabilities or cost-reducing opportunities
 Ownership allows for tightly integrated operations, creating more
control and autonomy than alliances
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Vertical Integration Strategies
 Extend a firm’s competitive scope within
same industry
 Backward into sources of supply
 Forward toward end-users of final product
 Can aim at either full or partial integration
Activities,
Costs, &
Margins of
Suppliers
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Activities, Costs,
& Margins of
Forward Channel
Allies &
Strategic Partners
Internally
Performed
Activities,
Costs, &
Margins
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Buyer/User
Value
Chains
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Outsourcing Strategies
Concept
Involves withdrawing from certain value chain
activities and relying on outsiders to supply needed
products, support services, or functional activities
Internally
Performed
Activities
Suppliers
Support
Services
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Functional
Activities
Distributors or
Retailers
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Offensive Strategies
 Purposes of offensive strategies
 Improve market position
 Build a competitive advantage or widen an existing one
 Whittle away at a strong rival’s competitive advantage
 Gain profitable market share at the expense of rivals despite
their resource strengths and capabilities
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Defensive Strategies
 Purposes of defensive strategies
 Lesson risk of being attacked
 Blunt impact of any attack that occurs
 Influence challengers to aim attacks at other rivals
 Defend a firm’s competitive position / advantage
 Protect valuable resources and capabilities from imitation
 Types of defensive strategies
 Block avenues open to challengers
 Signal challengers vigorous retaliation is likely
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Web Site Strategies:
Which One to Employ?
 Strategic Issue – What role should a firm’s Web
site play in its competitive strategy?
 Approaches to using the Internet
 Solely as a vehicle to disseminate product information
 Minor distribution channel
 One of several important
distribution channels
 Primary distribution channel
 Exclusive distribution channel
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Choosing Appropriate
Functional-Area Strategies
 Involves strategic choices about how functional areas
are managed to support competitive strategy and additional
strategic moves
 Functional strategies include
 Research and development
 Production
 Human resources
 Sales and marketing
 Finance
Tailoring functional-area strategies to support
key business-level strategies is critical!
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First-Mover Advantages
 When to make a strategic move is often as crucial
as what move to make
 First-mover advantages arise when
 Pioneering helps build firm’s image and reputation
 Early commitments to new technologies,
new-style components, and distribution
channels can produce cost advantage
 Loyalty of first time buyers is high
 Moving first can be a preemptive strike
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First-Mover Disadvantages
 Moving early can be a disadvantage (or fail to
produce an advantage) when
 Costs of pioneering are sizable and loyalty of first time
buyers is weak
 Innovator’s products are primitive, not
living up to buyer expectations
 Rapid technological change
allows followers to leapfrog pioneers
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