Attacking the leader

Almost every company strives to be number 1 company in its area. Everybody wants the bigger share of the pie. GE had a company policy to be number 1 or number 2 in every business area they operate in or exit that business. In this article we will discuss the approach company should adopt to attack the market leader and garner market share. There are broadly three strategies to attack market leader and companies can adopt anyone or combination of these.

Strategies

1. Open War: In open war strength of the market leader is attacked. There are ample examples of this kind of warfare. Some companies were able to succeed and some failed by adopting this strategy.

Virgin cola: Virgin openly attacked Cola giants by entering in their segment. Visuals shown make the strategy of Virgin loud and clear. This open war proved to be futile as Virgin cola was only able to reap 1% of the market share in fizzy drink segments even after 5 years of its launch.

Nirma: HUL left some gaps in the product line of washing powder by not having any product at the entry level. This innocuous folly was exploited by Nirma to the maximum which took the giant head on by launching detergent on national scale.

Ujalla: Ujalla was able to dislodge Robin blue from its market leader position in whitener segment by launching a better liquid version of the product. Robin blue reacted by launching liquid version but by then the damaged had been done.

Microsoft Xbox: Microsoft launched its Xbox against market leader play station Sony. It was priced lower than the Sony and Nintendo. This strategy to garner more market share by lowering price proved hazardous for all players in the market. Neither was Microsoft able to garner high market share and nor it was able to profit from this venture. At the same time Sony and Nintendo margins were also badly hit.

IE Explorer: Microsoft virtually cannibalized Netscape after launching its own browser, apparently by resorting to unfair practices. This is a classic case of a bog giant taking lesser mortal head on and finishing it.

Bingo: ITC launched its potato chip in a segment dominated by Pepsi’s lays. Through some innovative advertisement bingo was able to gain 15% market share in less than 3 years of its launch. In this case two giants confronted each other and eventually settled by sharing the pie with each other. ITC is also challenging big FMCG by launching products that directly compete with products of these MNCs.

2. Focus on Niche Areas: Instead of taking the market leader head on the company may decided to go the territories that are still unexplored. Market leader’s focus on these territories is low and risk on being swallowed by market leader is relatively less.

Red Bull: Instead of taking the cola giants head on Red Bull decided to focus on energy drink segment. By the time coke realized the potential of this segment and launched Vault against Red bull, it was already a big brand and market leader worldwide in this category. According to estimates Red Bull has more than 50% share in the energy drink market.

One important difference was also the way Red Bull went about its promotions. Instead of TVC it relied more on unconventional routes of advertisement like Bars, events etc. This strategy made sure that it is not attracting attention of big cola giants.

Skype: Skype is also into telephony like Vodafone and MTN, but it works on completely different technology. Due to this it virtually faced no competition from these big giants and carved a niche area for itself. It was acquired by Cisco for whopping amount.

3. Indirect attack (Guerilla warfare): This ploy was adopted by Ujalla to hold on to its share in the cloth whitener market. Jyoti laboratories figured out that Mortein is the cash cow of Reckitt & Benckiser. They hit them by launching low cost mosquito repellant products and reduced their focus on whitener market.

Choice of Strategy

Choice of strategy is a big question with no clear answer as it depends a lot on the management of the company and risk they can afford to take. Based on the examples given in the previous section following are broad parameters which can be looked upon by companies before taking decision.

1. Direct attack

a. Companies with deep pockets and good cash flow from other product lines can take the leader head on. For e.g. Reliance due to its sheer resources was able to make inroads in the mobile service market in India. It is a number 3 operator by number of user now.

b. Better product/huge price differentiation: The companies having product which gives much more value to the customer than the existing products at equal or lesser price can make an attempt to attack the leader head on. But these companies must keep one thing in mind that their offering cannot be imitated by market leader easily. Because if market leader is able to copy the offering than it the beat the small competitor because of its distribution network and brand equity. Nirma was able to challenge HUL on the basis of huge price differentiation.

2. Niche areas

a. Middle and small size companies: These companies do not have the deep pocket to compete with market leader unless they have much better offering than the existing offerings. These companies should look for new territories instead of taking on the leaders head on. Economies of scale are not too important in these areas as small companies will seldom achieve them.

b. Patented technology: Small companies with unique product offering can take the market leader head on. The unique product must be perceived by customer as something which adds more value as compared to existing products. This happens in Pharma space where even small companies because of the patented technology are able to compete with biggies and even beat them in their own turf.

3. Guerilla warfare: It basically involves hitting the enemy at some unanticipated area. This strategy can be adopted by any company depending on the object it wants to achieve.

Caveat: It is very important to anticipate the reaction of the market leader while adopting any of these strategies.