What Is an Offensive Competitive Strategy?
An offensive competitive strategy is a type of corporate strategy that consists of actively trying to pursue changes within the industry. Companies that go on the offensive generally make acquisitions and invest heavily in research and development (R&D) and technology in an effort to stay ahead of the competition. They will also challenge competitors by cutting off new or under-served markets, or by going head-to-head with them.
Defensive competitive strategies, by contrast, are meant to counteract offensive competitive strategies.
- Offensive competitive strategies seek to shape an industry through first-mover and other aggressive moves.
- This can be an expensive strategy as it may include mergers & acquisitions, R&D investment, and intellectual property protection.
- Offensive strategies may be contrasted with defensive ones, which instead focus on establishing a wide moat through building brand loyalty, offering high quality goods, and customer service.
Understanding Offensive Competitive Strategies
Various techniques and strategies may be employed either alone or as part of a concerted effort to create an offensive competitive strategy. Companies may even employ entirely different strategies in different locales or marketplaces. For example, consider how a global soft drink company may react to a competitor in its mature home market compared to how it would react to a startup competitor in an emerging market. Such variability can lead to some complex offensive strategies, and even the incorporation of some defensive strategies as part of an offensive effort.
The most extreme offensive competitive strategy is when companies actively look to acquire other firms to fuel growth or limit competition. These firms are often regarded as higher risk than those that are defensive because they are more likely to be fully invested or leveraged, which could prove problematic in the event of a market slowdown or dislocation. A characteristic of all offensive strategies is that they tend to be expensive.
Offensive Competitive Strategy Types
There are several types of offensive competitive strategies, each with its own advantages and disadvantages.
- An "end run strategy" eschews direct competition and instead seeks to exploit untouched markets or neglected segments, demographic groups or areas.
- A "pre-emptive strategy" is simply the natural advantage a company has when it is the first to serve a particular marketplace or demographic. It can be exceptionally hard to unseat. Also known as "first-mover" advantage.
- A "direct attack strategy" is more aggressive than the end run or preemptive offensive competitive strategies. Such a strategy may entail comparisons to competing products or companies that are unflattering, a price war, or even a competition as to who can introduce new product features at a faster pace. The direct attack may also borrow tactics of the previously listed strategies, all with the goal of taking charge of the public conversation through marketing campaigns.
- An "acquisition strategy" seeks to remove a competitor by buying it. As such, it is a strategy employed by the wealthiest or best-capitalized competitor. Such a strategy offers the advantage of instantly incorporating new markets, customer bases, or corporate intelligence. Since it is such an expensive strategy, it must be used judiciously, and with the possibility of corporate antitrust rules or local competition laws in mind.
Some examples of defensive strategies include:
- A pricing war, in which a company commits to matching or beating a competitor on price.
- Adding more features to keep ahead of a competitor.
- Offering better service or warranties that speak to having better products.
- Advertising and marketing more to raise awareness of improved products or service.
- Partnering with suppliers or retailers to exclude or limit access to competitors.
- Countering a move by a competitor, such as when one moves into a company's home market by entering their own home market.
- Defensive strategies against a hostile takeover, of which there are several.