Aggressiveness strategies (business)
Encyclopedia
Business strategies can be categorized in many ways. One popular method is to assess strategies based on their degree of aggressiveness. Aggressiveness strategies are rated according to their marketing assertiveness, their risk propensity, financial leverage, product innovation, speed of decision making, and other measures of business aggressiveness. Typically the range of aggressiveness strategies is classified into four categories: prospector, defender, analyzer, and reactor.
is vigorously pursued and attacks on competitors
are a common way of obtaining additional market share
. They respond quickly to any signs of market opportunity, and do so with little research
or analysis. A large proportion of their revenue comes from new products or new markets. They are often highly leveraged
, sometimes with a substantial equity position held by venture capitalists. The risk of product failure or market rejection is high. Their market domain is constantly in flux as new opportunities arise and past product
offerings atrophy. They value being the first in an industry, thinking that their “first mover advantage” will provide them with premium pricing opportunities and high margins. Price skimming
is a common way of recapturing the cost of development. They can be opportunistic in headhunting
key employees, both technical and managerial. Advertising
, sales promotion
, and personal selling
costs are a high percentage of sales. Typically the firm will be structured with each strategic business unit having considerable autonomy. The industry that they operate in tends to be in the introduction or growth stage of its life cycle with few competitors and evolving technology
, offer a limited range of products or offer better quality or service
. They tend to be slower in making decisions and will only commit to a change after extensive research and analysis. Their goals tend to be efficiency oriented rather than effectiveness oriented. The industry tends to be mature with well defined technology, products, and market segment
s. Most sales tend to be repeat or replacement purchases. Individual strategic business units typically have moderate to low levels of autonomy.
. Rather than develop wholly new products, they make incremental improvements in existing products. Rather than expand into wholly new markets, they gradually expand existing markets. They try to maintain a balanced portfolio of products with some stable income generators and some potential winners. They watch closely the developments in their industry but don’t act until they are sure that the time is right.
. This is the least effective of the four strategies. It is without direction or focus.
Miles, Snow et al. (1978) have identified three reasons why organizations become Reactors:
Prospector strategy
This is the most aggressive of the four strategies. It typically involves active programs to expand into new markets and stimulate new opportunities. New product developmentNew product development
In business and engineering, new product development is the term used to describe the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible or intangible...
is vigorously pursued and attacks on competitors
Offensive marketing warfare strategies
In marketing and strategic management, marketing warfare strategies are a type of marketing strategy that uses military metaphor to craft a businesses strategy. See marketing warfare strategies for background and an overview. Offensive marketing warfare strategies are a type of marketing warfare...
are a common way of obtaining additional market share
Market share
Market share is the percentage of a market accounted for by a specific entity. In a survey of nearly 200 senior marketing managers, 67 percent responded that they found the "dollar market share" metric very useful, while 61% found "unit market share" very useful.Marketers need to be able to...
. They respond quickly to any signs of market opportunity, and do so with little research
Marketing research
Marketing research is "the function that links the consumer, customer, and public to the marketer through information — information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve...
or analysis. A large proportion of their revenue comes from new products or new markets. They are often highly leveraged
Leverage (finance)
In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:* A public corporation may leverage its equity by borrowing money...
, sometimes with a substantial equity position held by venture capitalists. The risk of product failure or market rejection is high. Their market domain is constantly in flux as new opportunities arise and past product
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
offerings atrophy. They value being the first in an industry, thinking that their “first mover advantage” will provide them with premium pricing opportunities and high margins. Price skimming
Price skimming
Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time. It is a temporal version of price discrimination/yield management...
is a common way of recapturing the cost of development. They can be opportunistic in headhunting
Recruiter
A recruiter is someone engaging in recruitment, or the solicitation of individuals to fill jobs or positions within a corporation, nonprofit organization, sports team, the military, etc. Recruiters may work within an organization's human resources department or on an outsourced basis...
key employees, both technical and managerial. Advertising
Advertising
Advertising is a form of communication used to persuade an audience to take some action with respect to products, ideas, or services. Most commonly, the desired result is to drive consumer behavior with respect to a commercial offering, although political and ideological advertising is also common...
, sales promotion
Sales promotion
Sales promotion is one of the four aspects of promotional mix. Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability...
, and personal selling
Sales
A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
costs are a high percentage of sales. Typically the firm will be structured with each strategic business unit having considerable autonomy. The industry that they operate in tends to be in the introduction or growth stage of its life cycle with few competitors and evolving technology
Defender strategy
This strategy entails a decision not to aggressively pursue markets. As a result, they tend to do none of the things prospectors do. A defender strategy entails finding, and maintaining a secure and relatively stable market. Rather than being on the cutting edge of technological innovation, product development, and market dynamics, a defender tries to insulate themselves from changes wherever possible. In their attempt to secure this stable market they either keep prices low, keep advertising and other promotional costs low, engage in vertical integrationVertical integration
In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to...
, offer a limited range of products or offer better quality or service
Customer service
Customer service is the provision of service to customers before, during and after a purchase.According to Turban et al. , “Customer service is a series of activities designed to enhance the level of customer satisfaction – that is, the feeling that a product or service has met the customer...
. They tend to be slower in making decisions and will only commit to a change after extensive research and analysis. Their goals tend to be efficiency oriented rather than effectiveness oriented. The industry tends to be mature with well defined technology, products, and market segment
Market segment
Market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function...
s. Most sales tend to be repeat or replacement purchases. Individual strategic business units typically have moderate to low levels of autonomy.
Analyzer
The analyzer is in between the defender and prospector. They take less risk and make less mistakes than a prospector, but are less committed to stability than defenders. Most firms are analyzers. They are seldom a first mover in an industry but are often second or third place entrants. They tend to expand into areas close to their existing core competencyCore competency
A core competency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book writers. In their view a core competency is a specific factor that a business sees as being central to the way it, or its employees, works...
. Rather than develop wholly new products, they make incremental improvements in existing products. Rather than expand into wholly new markets, they gradually expand existing markets. They try to maintain a balanced portfolio of products with some stable income generators and some potential winners. They watch closely the developments in their industry but don’t act until they are sure that the time is right.
Reactor
A reactor has no proactive strategy. They react to events as they occur. They respond only when they are forced to by macroenvironmental pressuresEnvironmental scanning
Environmental scanning is one component of the global environmental analysis. Environmental monitoring, environmental forecasting and environmental assessment complete the global environmental analysis. Environmental scanning refers to the macro environment.The global environment refers to the...
. This is the least effective of the four strategies. It is without direction or focus.
Miles, Snow et al. (1978) have identified three reasons why organizations become Reactors:
- Top Management may not have clearly articulated the organization's strategy.
- Management does not fully shape the organization's structure and processes to fit a chosen strategy.
- Tendency for Management to maintain the organization's current strategy-structure relationship despite overwhelming changes in environmental conditions.
See also
- marketing strategies
- mark dominance strategies
- marketing warfare strategiesMarketing warfare strategiesMarketing warfare strategies are a type of strategies, used in business and marketing, that try to draw parallels between business and warfare, and then apply the principles of military strategy to business situations, with competing firms considered as analogous to sides in a military conflict,...
- strategic planningStrategic planningStrategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. In order to determine the direction of the organization, it is necessary to understand its current position and the possible avenues...
- strategic managementStrategic managementStrategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments...
- Porter generic strategiesPorter generic strategiesMichael Porter has described a category scheme consisting of three general types of strategies that are commonly used by businesses to achieve and maintain competitive advantage. These three generic strategies are defined along two dimensions: strategic scope and strategic strength. Strategic scope...
- innovation strategies
Finding related topics
- list of marketing topics
- list of management topics
- list of economics topics
- list of finance topics
- list of human resource management topics
- list of accounting topics
- list of information technology management topics
- list of business law topics
- list of production topics
- list of business ethics, political economy, and philosophy of business topics
- list of business theorists
- list of economists
- list of corporate leaders