Competitve Position

Strategic offensives are called for when a company spots opportunities to gain profitable market share at the expense of rivals or when a company has no choice but to try to whittle away at a strong rival’s competitive advantage. The best offensives use a company’s most competitively potent resources to attack rivals in those competitive areas where they are weakest. Managers understand when to pursue offensive or defensive strategic moves to improve a company’s market position.

The scope of the firm refers to the range of activities the firm performs internally, the breadth of its product and service offerings, the extent of its geographic market presence, and its mix of businesses. Strategic managers apply effective understanding of scope of operations in the development and execution of organizational strategy.

A merger is the combining of two or more companies into a single corporate entity, with the newly created company often taking on a new name. An acquisition is a combination in which one company, the acquirer, purchases and absorbs the operations of another, the acquired. Combining the operations of two companies, via merger or acquisition, is an attractive strategic option for achieving operating economies, strengthening the resulting company’s competencies and competitiveness, and opening avenues of new market opportunity.

A vertically integrated firm is one that performs value chain activities along more than one stage of an industry’s overall value chain. A vertical integration strategy has appeal only if it significantly strengthens a firm’s competitive position and/or boosts its profitability.

Outsourcing involves contracting out certain value chain activities to outside specialists and strategic allies. A company should guard against outsourcing activities that hollow out the resources and capabilities that it needs to be a master of its own destiny.

A strategic alliance is a formal agreement between two or more companies to work cooperatively toward some common objective. Experience indicates that alliances stand a reasonable chance of helping a company reduce competitive disadvantage, but very rarely have they proved a strategic option for gaining a durable competitive edge over rivals.