Defensive Strategies

1
Defensive Strategies

• Mktg 485
• June 2, 2004

2
Defensive Strategies Ch. 13

• Protect Market Position
• Protect Market Share
• Build Customer Retention
• Reduced Focus
• Exit Market Position
• Harvest Price Strategy
• Harvest Resource Strategy
• Divest Market Position

3
Problems at Campbell Soup

• No so Hmm, hmm Good
• Canned soup sales are down 8
• Losing share to General Mills Progresso whose
  ad campaign equates Campbells soups to kids food
• Gotten nowhere in the dry soup category competing
  against Lipton

4
Hope for Campbell

• Pepperidge Farms is 3 in cookie/cracker category
• Nabisco (Kraft Foods)
• Keebler (Kelloggs)
• But sales are up 8 (counting Godiva chocolates)

5
Focus for Growth Profitability

• Campbells Pepperidge Farms saw declining sales
  for its Goldfish crackers
• Decided to refocus from adults to children
• In 1997, revised the product advertising
• Stamped a smiling face on every cracker
• the healthy snack that smiles back
• Sales doubled to 250 milllion

6
Portfolio Analysis
VeryAttractive
Defense Defense
Defense Defense Defense
Defense Defense Defense
Market Attractiveness
VeryUnattractive
Very Weak
Very Strong
Competitive Advantage
7
Portfolio Analysis
VeryAttractive
Protect Protect
Protect or Harvest Protect Defense Protect or Focus
Harvest or Divest Harvest or Divest Protect or Harvest
Market Attractiveness
VeryUnattractive
Very Weak
Very Strong
Competitive Advantage
8
Protect Market Position
Protect Market Share Importance? Depends on growth How? Depends on share
Build Customer Retention
Reduced Focus
9
Fords Drive for Profitability

• Improved quality
• Dropped slow sellers (e.g., Mercury Cougar)
• Reduced sales to rental companies
• Results
• ? Market Share 22 to 20.2
• ? Margins 5.6 to 8.4
• 2 billion profit in 1st quarter

10
Fast versus Slow Growth(text, p. 310)

• Fast Growth Markets
• .4 share loss for every 1 annual market
  increase every year.
• Loss 40 x Growth x Share
• If Growth 5
• Loss 40 x 5 x Share
• Loss 2 x Share
• If Share 20, share loss .4

11
Market Share Erosion(for industry with 5 share)
Year Share Industry Firm
0 20 100 20
1
2
3
4
5
12
Market Share Erosion(for industry with 5 share)
Year Share Industry Firm
0 20 100.0 20.0
1 19.6 105.0 20.6
2 19.2 110.3 21.2
3 18.8 115.8 21.8
4 18.4 121.6 22.4
5 18.1 127.6 23.1
13
Market Share Erosion(for business with 20 share)
Year 5 10 15
1 19.6 19.2 18.8
2 19.2 18.4 17.7
3 18.8 17.7 16.6
4 18.4 17.0 15.6
5 18.1 16.3 14.7
Erosion .4 of growth rate
14
Effect of Market Growth on Share when Not
Protected
15
Protect Market Share
Protect High Share Maintain new product development Improve product service quality Support marketing budgets
Protect Follower Share Match leader Defend against growth-oriented nichers
Protect Niche Share Focus to keep expenses low Customize products
16
Protect Market Share - Leader
Maintain new product development Intel Microsoft
Improve product service quality Amazon, eBay
Support marketing budgets Coca Cola
17
Protect Market Share - Challenger
Match leader Barnes Noble free shipping FedEx open retail sites
Defend against growth-oriented nichers Miller beer - microbrews

18
Protect Market Share - Flanker
Focus to keep expenses low
Customize products
19
Build Customer Retention
Loyalty Programs
Know Customers

20
Reduced Market Focus
Cutter Buck
Sears
Amazon
21
Exit Market Strategies
Harvest Pricing
Harvest Resources
Divest
22
Yahoos Failure to Defend

• Once, the leading internet site
• First place that individuals went to for
  information.
• AOL MSN dominate as portals
• Google dominates for searches
• Amazon dominates for shopping
• eBay dominates for auctions
• News, Sports, Finance
• eMail Communities

23
Web Traffic February 2004
Site Visitors Time / Visit
MSN 94.0 129
Time Warner 81.1 348
Yahoo! 81.0 153
Google 49.6 018
eBay 37.5 129
US Gov 33.3 017
Interactive 23.8 018
Amazon 23.8 013
Real Networks 22.7 036