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Chapter 6 Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 122
Strategy: Core Concepts and Analytical Approaches
Arthur A. Thompson, The University of Alabama 7th Edition, 2022-2023
An e-book marketed by mcgraw-hill Education

Chapter 6
Supplementing the Chosen
Competitive Strategy—
Other Important Strategy Choices
Winners in business play rough and don't apologize for it. The nicest part of playing hardball is watching your
competitors squirm.
—George Stalk, Jr. and Rob Lachenauer

Whenever you look at any potential merger or acquisition, you look at the potential to create value for your
shareholders.
—Dilip Shanghvi, Founder and managing director of Sun Pharmaceuticals

Don't form an alliance to correct a weakness and don't ally with a partner that is trying to correct a weakness of
its own. The only result of a marriage of weaknesses is the creation of even more weaknesses.
—Michel Robert

Think of your priorities not in terms of what activities you do, but when you do them. Timing is everything.
—Dan Millman

to what other strategic actions it can take to complement its competitive approach and maximize the
Once a company has
power of its settled
overall on which
strategy. of the decisions
Several five generic competitive
must be made:strategies to employ, attention turns

l Whether to go on the offensive and initiate aggressive strategic moves to improve the company's market
position.

l Whether to employ defensive strategies to protect the company's market position.

l What role the company's website should play in its overall strategy to be a successful performer.

l Whether to outsource certain value chain activities or perform them in-house.

l Whether to integrate backward or forward into more stages of the industry value chain.

l Whether to enter into strategic alliances or partnership arrangements with other enterprises.

l Whether to bolster the company's market position via mergers or acquisitions.

122

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 123

l When to undertake strategic moves—whether advantage or disadvantage lies in being a first mover, a
fast follower, or a late mover.

This chapter presents the pros and cons of each of these strategy-enhancing measures.

Figure 6.1 shows the menu of strategic options a company has in crafting a comprehensive set of strategic actions
and the order in which the choices should generally be made. The portion of Figure 6.1 below the five generic
competitive strategy options illustrates the structure of this chapter and the topics that will be covered.

FIGURE 6.1 A Company's Menu of Strategy Options

Generic Competitive Strategy Options

(A company's first strategic choice)

Low-Cost Broad
Provider? Differentiation?

Focused Focused Best Cost

Low Cost? Differentiation? Provider?

Complementary Strategy Options

(A company's second set of strategic choices)

Initiate offensive Employ defensive

strategic moves? strategic moves?

What type of website Whether to outsource selected

strategy to employ? value chain activities?

Employ backward or forward Enter into strategic alliances

vertical integration strategies? and partnerships?

Use merger and acquisition strategies

to strengthen competitiveness?

Functional Area Strategies to Support the Above Strategic Choices

R&D Marketing Human
Production Finance
engineering & You go out Resources

(A company's third set of strategic choices)

Timing a Company's Strategic Moves in the Marketplace

First Mover? Fast Follower? Late-Move?

(When to initiate actions to pursue or make adjustments

in any of the above strategic choices—timing matters!)

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 124

GOING ON THE OFFENSIVE—STRATEGIC OPTIONS

TO IMPROVE A COMPANY'S MARKET POSITION
No matter which of the five generic competitive strategies a company employs, there are times when it makes
sense for a company to go on the offensive to improve its market position and business performance. Strategic
offensives are called for when a company sees
opportunities to gain profitable market share at rivals' CORE CONCEPT
expense, when a company should strive to whittle away at
Sometimes a company's best strategic option is
a strong rival's competitive advantage, and when a
to seize the initiative, go on the attack, and
company opts to pursue newly emerging market
launch a strategic offensive to improve its market
opportunities. Companies like Google, Amazon, Apple,
position. It takes successful offensive strategies to
and Facebook play hardball, aggressively pursuing
competitive advantage and trying to reap the benefits a build competitive advantage, wide an existing
competitive edge offers—a leading market share, excellent advantage, or narrow the advantage held by a
profit margins, rapid growth (as compared to rivals), and strong competitor.
the reputational rewards of being known as a company on
the move.1 The best offensives tend to incorporate several behaviors and principles: (1) focusing relentlessly
on building competitive advantage and then striving to convert competitive advantage into decisive advantage,
(2) employing the element of surprise as opposed to doing what rivals expect and are prepared for, (3) using
competitively powerful resources to attack rivals where they are least able to defend themselves, and (4) being
impatient with the status quo and displaying a strong bias for swift and decisive actions to overwhelm rivals.2

Choosing the Basis for Competitive Attack

As a rule, challenging rivals on competitive grounds where they are strong is an uphill struggle.3 Offensive
initiatives that exploit competitor weaknesses stand a better chance of succeeding than do those that challenge
competitor strengths, especially if the weaknesses
represent important vulnerabilities and weak rivals can be CORE CONCEPT
caught by surprise with no ready defense.4 The best offensives use a company's most potent
resources and capabilities to attack rivals where
A company's strategic offensives should be powered by
competitively powerful resources and capabilities—such they are competitively weakest.
as a better-known brand name, lower production and/ or
distribution costs, better technological capability, or a core or distinctive competence in designing and producing
superior performing products. Designing a strategic offensive spearheaded by relatively weak company
resources and capabilities is like marching into battle with a popgun—the prospects for success are dim. For
instance, it is foolish for a company with relatively high costs to employ a price-cutting offensive. Price-cutting
offensives are best left to financially strong companies whose costs are relatively low in comparison to those of
the companies being attacked. Likewise, it is ill-advised to pursue a product innovation offensive without proven
expertise in R&D, new product development, and speeding new or improved products to market.

The main offensive strategy options include the following:

l Offering an equally good or better product at a lower price. Lower prices can produce market share gains
if competitors don't respond with price cuts of their own and if the challenger convinces buyers that its
product is just as good or better. However, such a strategy increases total profits only if the gains in
additional unit sales are enough to offset the impact of thinner margins per unit sold. Price-cutting
offensives generally work best when a company first achieves a cost advantage and then hits
competitors with a lower price.5

l Leapfrogging competitors by being the first adopter of next-generation technologies or being first to
market with next-generation products. In technology-based industries, the opportune time to launch an
offensive against rivals is by leading the way in introducing a next-generation technology or product.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 125

Amazon got its Alexa-enabled Amazon Echo into the smart-home controls market about two years
ahead of Google's Google Home device. But in 2019 both rivals were racing to introduce next-
generation versions with wider-ranging features and capabilities. Two other brands, the Sonos One
from Sonos, and Anker's Eufy Genie, were also trying to gain buyer favor. The pace at which next-
version products with ever more appealing capabilities and useful functions would be introduced was
expected to produce a formidable leapfrogging battle.

l Pursuing continuous product innovation to draw sales and market share away from rivals with
comparatively weak product innovation capabilities. Ongoing introductions of new/improved products
can put rivals with deficient product innovation capabilities under tremendous competitive pressure. But
such offensives can be sustained only if a company can keep its product development pipeline full of
new and improved products that spark buyer enthusiasm.6

l Pursuing disruptive product innovation to create new markets. While this strategy can be riskier and more
costly than continuous product innovation, “big bang” disruptive product innovation can be a game
changer if successful.7 Disruptive innovation involves perfecting a new product with a few trial users,
then quickly rolling it out to the whole market in an attempt to get many buyers to embrace an altogether
new and better value proposition quickly. Examples include online degree programs, self driving
capabilities for motor vehicles, Apple Music, and Amazon's Kindle (which undercuts the sales of
hardcopy fiction and non-fiction books).

l Adopting and improving on the good ideas of other companies (rivals or otherwise).8 The idea of
warehouse home improvement centers did not originate with The Home Depot cofounders Arthur Blank
and Bernie Marcus. They got the “big box” concept from their former employer Handy Dan Home
Improvement. But they were quick to improve on Handy Dan's business model and strategy and take
The Home Depot to the next plateau in terms of product line breadth and customer service. Offense
minded companies are often quick to adopt any good idea (not nailed down by a patent or other legal
protection) in an effort to create competitive advantage for themselves.9

l Deliberately attacking those market segments where a key rival makes big profits.10 Long a dominant
force in small automobiles, Toyota launched a hardball attack on General Motors, Ford, and Chrysler
in the US market for light trucks and SUVs, the very market segments where the Detroit automakers
historically earned big profits (roughly $10,000 to $15,000 per vehicle). Toyota now offers equivalent
vehicles, earns handsome profits of its own in these two market segments, and has stolen sales and
market share from its US-based rivals. Dell opted to introduce its own brand of printers and printing
supplies in the 1990s because its main rival in desktop and laptop computers was Hewlett-Packard,
which made its biggest profits in printing and printing supplies; By attacking HP in the market for
printers, Dell sought to force HP to devote management attention and resources to defending its
printing business and distracting its attention away from trying to wrest market leadership away from
Dell in the PC market.

l Attacking the competitive weaknesses of rivals. Such offensives present many options. One is to go after
the customers of those rivals whose products lag on quality, features, or product performance. If a
company has especially good customer service capabilities, it can make special sales pitches to the
customers of those rivals who provide subpar customer service. Aggressors with a recognized brand
name and strong marketing skills can launch efforts to win customers away from rivals with weak brand
recognition. There is considerable appeal in emphasizing sales to buyers in geographic regions where
several rivals have low market shares or are less well-equipped to serve. If the attacker's most powerful
resources and capabilities should prove powerful enough to outcompete the targeted rivals and result
in competitive advantage, so much the better.

l Maneuvering around competitors and concentrating on capturing unoccupied or less contested market
territory. Examples include launching initiatives to build strong positions in geographic areas or market
segments where close rivals have little or no market presence. Southwest Airlines became a major

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 126

carrier not by invading the turf where big airlines had their “hubs”—like Chicago O'Hare, Dallas-Fort
Worth, Los Angeles, and New York LaGuardia, but by scheduling point-to-point flights to lesser-sized
airports (Las Vegas, Baltimore-Washington, Chicago Midway, and Fort Lauderdale) where relatively
weak competition enabled it to gain the leading market share in a fairly short time. Going into 2016,
Southwest commanded the biggest share of passenger traffic in over 60 of the 84 airports it served in
the United States.

l Using hit-and-run or guerrilla warfare tactics to grab sales and market share from complacent or distracted
rivals. Options for "guerrilla offensives" include occasional low-balling on price (to win a big order or
steal a key account from a rival); surprising key rivals with sporadic but intense bursts of promotional
activity (offering a 20 percent discount for one week to draw customers away from rival brands); or
undertaking special campaigns to attract buyers away from rivals plagued with a strike or problems in
meeting buyer demand.11 Guerrilla offensives are particularly well suited to small challengers who
have neither the resources nor the market visibility to mount a full-fledged attack on industry leaders .

l Launching a preemptive strike to secure an advantageous position that rivals are prevented or discouraged
from duplicating.12 What makes a move preemptive is its one-of-a-kind nature—whoever strikes first
stands to acquire competitive assets that rivals can't readily match. Examples of preemptive moves
include (1) securing the best distributors in a particular geographic region or country; (2) obtaining the
most favorable site along a heavily traveled thoroughfare, at a new interchange or intersection, in a
new shopping development, in a natural beauty spot, close to cheap transportation or raw material
supplies or market outlets, and so on; (3) tying up the most reliable, high-quality suppliers via exclusive
partnerships, long-term contracts, or even acquisition; and (4) moving swiftly to acquire the assets of
distressed rivals at bargain prices. To be successful, a preemptive move doesn't have to totally block
rivals from following or copying; it merely needs to give a firm a prime position that is not easily
circumvented.

How long it takes for an offensive to yield good results varies with the competitive circumstances.13 It can be
short if buyers respond immediately (as can occur with a dramatic price cut, an imaginative ad campaign, or
an especially appealing new product). Securing a competitive edge can take much longer if winning consumer
acceptance of the company's product will take some time or if the firm may need several years to debug a new
technology or put new production capacity in place. But how long it takes for an offensive move to improve a
company's market standing—and whether the move will prove successful—depends in part on whether and
how quickly rivals recognize the threat and begin a counter-response. And any responses on the part of rivals
hinge on whether (1) they have effective countermoves in their arsenal of strategic options and (2) they believe
that a counterattack is worth the expense and the distraction.14

Blue Ocean Strategy—A Special Kind of Offensive

A blue ocean strategy seeks to gain a dramatic and durable competitive advantage by abandoning efforts to
beat out competitors in existing markets and, instead, inventing a new industry or distinctive market segment
that renders existing competitors largely irrelevant and allows a company to create and capture altogether new
demand.14 This strategy views the business universe as consisting of two distinct types of market space. One
is where industry boundaries are defined and accepted, the competitive rules of the game are well understood
and accepted by all industry members, and companies use their resources and capabilities to compete against
rivals and achieve satisfactory or better performance. In such markets, lively competition constrains a
company's prospects for rapid growth and superior profitability since rivals move quickly to either imitate or
counter the successes of competitors. The second type of market space is a “blue ocean” where the industry
does not really exist yet, is untainted by competition, and offers wide open opportunity for profitable and rapid
growth if a company can come up with an innovative new product offering and strategy that allows it to create
new demand rather than fight over existing demand. Companies that create blue ocean market spaces can often sustain their

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 127

initially won competitive advantage without encountering a major competitive challenge for 10 to 15 years provided
their blue ocean strategy translates into strong brand name awareness and there are other high barriers to imitating
its product offering.

A terrific example of blue ocean market creation is the online auction market that eBay created and now dominates.
Other examples of companies that have created blue ocean market spaces include Etsy in online retailing of
handmade crafts, Nano Dimension and Desktop Metal with their pioneering advances in 3D Printing technology,
Palentir in complex data analysis software, Beyond Meat and Impossible Foods in plant-based meat substitutes,
Drybar in hair blowouts, Uber and Lyft in ride-hailing services, and Cirque du Soleil in live entertainment.
Cirque du Soleil “reinvented the circus” by creating a distinctly different market space for its performances (Las
Vegas night clubs and theater settings) and pulling in a whole new group of customers—adults and corporate clients
—who not only were noncustomers of traditional circuses (like Ringling Brothers, the legendary industry leader),
but we were also willing to pay several times more than the price of a conventional circus ticket to have an
“entertainment experience” featuring sophisticated clowns and star-quality acrobatic acts in a comfortable
atmosphere.

Choosing Which Rivals to Attack

Offensive-minded firms need to analyze which of their rivals to challenge as well as how to mount that challenge.
The following are the best targets for offensive attacks: 15

l Market leaders that are vulnerable. Offensive attacks make good sense when a market-leading company has
some glaring weaknesses that are preventing it from delivering good value to its customers. Signs that
one of an industry's leading companies is competitively vulnerable include unhappy buyers, a loss of
several major customers, inferior product quality or performance, a limited product line, declining success
in introducing innovative new products, narrowing profit margins because of a failure to overcome Rising
cost pressures, strong emotional commitment to an aging technology the leader has pioneered, failure to
modernize plants and equipment, and a concern with diversification into other industries. Offensives to
attack important competitive weaknesses of market leaders have real promise when the challenger is able
to revamp its value chain or innovate to gain a fresh cost-based or differentiation-based competitive
advantage.16 To be judged successful, attacks on leaders don't have to result in making the aggressor
the new leader; a challenger may “win” by simply becoming a stronger runner-up. Caution is well advised
in challenging strong market leaders—there is a significant risk of squandering valuable resources in a
futile effort or precipitating a fierce and profitless industrywide battle for market share.

The Runner-up firms with weaknesses in areas where the challenger is strong. Runner-up firms are an
especially attractive target when a challenger's resource strengths and competitive capabilities are well
suited to exploiting their weaknesses.

l Struggling enterprises on the verge of going under. Challenging a hard-pressed rival in ways that further
deplete its financial strength and competitive position can weaken its resolve and hasten its exit from the
market. It often makes sense to attack a struggling enterprise in its most profitable market segments, since
this will threaten its survival the most.

l Small local and regional firms with limited resources and/ or capabilities. Because small firms typically have
limited expertise and resources, a challenger with broader and/or deeper resources and valuable
capabilities often has the competitive firepower to successfully win the business of some of their biggest
customers—particularly those customers that are growing rapidly, have increasingly sophisticated
requirements, and may already be thinking about switching to a supplier with more full-service capability.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 128

DEFENSIVE STRATEGIES—PROTECTING MARKETS

POSITION AND COMPETITIVE ADVANTAGE
In a competitive market, all firms are subject to offensive challenges from rivals. The purposes of defensive
strategies are to lower the risk of being attacked, weaken
the impact of any attack that occurs, and induce challengers CORE CONCEPT
to aim their offensive initiatives at other rivals.
Good defensive strategies can help protect
While defensive strategies usually don't enhance a firm's
competitive advantage but rarely are the basis for
competitive advantage, they can definitely help fortify its
creating it.
competitive position, protect its most valuable resources and
capabilities from imitation, and defend whatever competitive
advantage it might have. Defensive strategies can take either of two forms: actions to block challengers and
actions to signal the likelihood of strong retaliation.

Blocking the Avenues Open to Challengers The most frequently employed approach to defending a company's
present position involves actions that restrict a challenger's options for initiating competitive attack. There are any
number of obstacles that can be put in the path of would-be challengers.17 A defender can participate in alternative
technologies as a hedge against rivals attacking with a new or better technology. A defender can introduce new
features, add new models, or broaden its product line to
close off gaps and vacant niches to opportunity-seeking There are many ways to throw obstacles in the
challengers. It can thwart rivals' efforts to attack with a lower path of would-be challengers.
price by maintaining a lineup of product selections that
includes economy-priced options for price-sensitive buyers. It can try to discourage buyers from trying competitors'
brands by lengthening warranties, offering free training and support services, developing the ability to deliver spare
parts to users faster than rivals can, providing coupons and sample giveaways to buyers most prone to experiment,
and making early announcements about impending new products or probable price cuts to induce potential buyers
to postpone switching. It can challenge the quality or safety of rivals' products. Finally, to defend can grant volume
discounts or better financing terms to dealers and distributors to discourage them from experimenting with other
suppliers, or it can convince them to handle its product line exclusively and force competitors to use other
distribution outlets.

Signaling Challengers that Retaliation Is Likely The goal of signaling challengers that strong retaliation is likely
in the event of an attack is either to dissuade challengers from attacking at all or to divert them to less threatening
options. Either goal can be achieved by letting challengers know the battle will cost more than it is worth. Would-
be challengers can be signaled by:18

l Publicly announcing management's commitment to maintain the firm's present market share.

l Publicly committing the company to a policy of matching competitors' prices and terms of sale.

l Maintaining a war chest of cash and marketable securities to fund retaliatory countermeasures if
Challengers try to steal away some of its customers.

l Making an occasional strong counter-response to the moves of weak competitors to enhance the firm's
image as a tough defender.

For signaling to be effective, however, challengers must believe that the signaler has every intention of pursuing
retaliatory actions if attacked.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 129

WEBSITE STRATEGIES
Every company with a website has to address what role the site should play in the company's competitive strategy.
In particular, to what degree should a company use online
sales as a means for selling its products or services direct to Companies today must wrestle with whether to
users? Should a company use its website only as a means use their websites just as a means of
of disseminating information about the company and its disseminating information about the company and
products (relying exclusively on its wholesale and retail its product offerings or whether to operate an e-store
partners to make all sales to end users)? Or should online that sells direct to online shoppers.
sales at the company's website be (1) a secondary or minor
channel for accessing customers, (2) one of several important
distribution channels for accessing customers, (3) the primary distribution channel for accessing customers, or (4)
the exclusive channel for transacting sales with customers?19 Let's look at each of these strategic options in turn.

Product Information–Only Strategies—Avoiding Channel

conflict
Operating a website that contains extensive product information but relies on click-throughs to the websites of
distribution channel partners for sales transactions (or that informs site visitors where nearby retail stores are
located) is an attractive option for manufacturers and/or wholesalers that have invested heavily in building and
cultivating retail dealer networks to access end users. A company vigorously pursuing online sales to consumers
at the same time it is also heavily promoting sales to consumers through its network of wholesalers and retailers is
competing directly against its distribution allies. Such actions constitute channel conflict and are a tricky road to
negotiate. A company actively trying to grow online sales is signaling a weak strategic commitment to its dealers
and a willingness to cannibalize dealers' sales and growth potential. The likely result is angry dealers and loss of
dealer goodwill. Some or many of the company's dealers may opt to put more effort into marketing the brands of
rival manufacturers who don't sell online or whose online sales effort is passive and nonthreatening. Quite possibly,
a company may lose more sales by offending its dealers than it gains from its own online sales effort. Consequently,
in industries where the strong support and goodwill of dealer networks is essential, companies may conclude it is
important to avoid channel conflict and, consequently, that their website should be designed to partner with dealers
rather than compete with them.

Website Sales as a Minor Distribution Channel

A second strategic option is to use online sales as a relatively minor distribution channel for achieving incremental
sales, gaining online sales experience, and doing marketing research. If channel conflict poses a big obstacle to
online sales, or if only a small fraction of buyers can be attracted to make online purchases, then companies are
well advised to pursue online sales with the strategic intent of gaining experience, learning more about buyer
tastes and preferences, testing reaction to new products, creating added market buzz about their products, and
boosting overall sales volume a few percentage points. Sony and Nike, for example, sell most of their products at
their websites without provoking much resistance from their retail dealers—their website prices are the same
(sometimes higher) than the prices of their dealers, which gives buyers little incentive to buy online as compared
to shopping at the stores of local dealers. However, Nike does allow shoppers at its website to order custom
designed shoes, which gives Nike valuable insight into buyer fashion preferences and aids the company's new
product development personnel in deciding what new shoe designs, colors, and accents to introduce.

Sometimes, manufacturers are willing to accept the channel conflict problems that arise from selling online in head-
to-head competition with distribution channel allies because they expect that over the long term online sales at
their websites will become progressively larger and more profitable. A strategy to gradually grow online sales into
an important distribution channel can make sense in three instances:

l When profit margins from online sales are bigger than those earned from selling to wholesale/retail
customers.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 130

l When encouraging buyers to visit the company's website helps educate them about the ease and
convenience of purchasing online and, over time, prompts more and more buyers to purchase online
(where company profit margins are typically greater)—which can make incurring channel conflict in
the short term and competing against traditional distribution allies worth while.

l When selling directly to end users allows a manufacturer to make greater use of build-to-order
manufacturing and assembly, which if met with growing buyer approval would increase the rate at
which sales migrate from distribution allies to the company's website; Such migration could lead to
streamlining the company's value chain and boosting its profit margins.

Brick-and-Click Strategies
Some companies employ brick-and-click strategies, whereby they sell to consumers both at their own websites
and at their own company-owned retail stores (or the stores of independent retailers). Brick-and-click strategies
have two big appeals: They are an economic means of expanding a company's geographic reach, and they
give both existing and potential customers another choice of how to communicate with the company, shop for
product information, make purchases, or solve customer service problems. Software developers, for example,
have come to rely on the Internet as a highly effective distribution channel to complement sales at brick-and-
mortar retailers. Allowing end users to make an online purchase and download it immediately has the big
advantage of eliminating the costs of producing and packaging CDs and cutting out the costs and margins of
software wholesalers and retailers (often 35 to 50 percent of the retail price). Chain retailers like Walmart,
Costco, Kohl's, Wayfair, and Best Buy operate online stores for their products primarily as a convenience to
customers who prefer to buy online and have the items shipped or available for pickup at nearby stores.

Many brick-and-mortar retailers can enter online retailing at relatively low cost—all they need is a web store for
displaying products, accepting customer orders, and systems for filling and delivering orders. Brick-and-mortar
retailers (as well as manufacturers with company-owned retail stores) can use personnel at their distribution
centers and/or retail stores to fill and ship the orders of online buyers, and they can allow online buyers to pick
up their orders at the nearest local retail store. Walgreens, a leading drugstore chain, lets customers order a
prescription online and then pick it up at the drive-through window or inside counter of a local store. Allowing
customers to order online and then pick up their orders at local stores has become a popular strategy for many
retailers because it enables them to better compete with Amazon. In banking, a brick-and-click strategy allows
customers to use local branches and ATMs for depositing checks and getting cash while using online systems
to pay bills, monitor account balances, and transfer funds. Bed Bath & Beyond uses its web store to display
and sell the items stocked in its stores but also to display and sell a wider number of brands, colors, and
selections in the same product categories that, for reasons of limited shelf space, are not Available in its stores
—such a strategy gives customers a much wider selection and boosts its online sales.

Strategies for Online Enterprises

A company that elects to use its website as the exclusive channel for accessing buyers is essentially an online
business—all customer-related transactions occur at the company's website. Thousands of enterprises have
chosen this strategic approach, including Netflix, TripAdvisor, Quicken Loans, eBay, Booking.com, and Chewy,
an online pet products retailer. For a company to succeed in using online sales as its exclusive distribution
channel, its product or service must be one for which buying online holds strong appeal. The strategies adopted
by online enterprises must address several issues:

l How it will deliver unique value to buyers. Online businesses must usually attract buyers on the basis of
low price, convenience, superior product information, build-to-order options, or attentive online service.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 131

l Whether it will pursue competitive advantage based on lower costs, differentiation, or better value for the
money. For an online-only sales strategy to succeed in head-to-head competition with brick-and-mortar
and brick-and-click rivals, an online seller's value chain approach must hold potential for a low cost
advantage, competitively valuable differentiating attributes, or a best-cost provider advantage.

l Whether it will have a broad or a narrow product offering. A one-stop shopping strategy like that employed
by Amazon.com (which offers “Earth's Biggest Selection” of items for sale at 13 international websites)
has the appealing economics of helping spread fixed operating costs over a wide number of items and
a large customer base. Online sellers like Quicken Loans (the largest online provider of home
mortgages), which also markets under the Rocket Mortgage brand name, and Hotels.com have
adopted classic focus strategies and cater to a sharply defined target audience shopping for a particular
product or product category .

l Whether to outsource order fulfillment activities or perform them internally. Most online sellers find it more
economical to outsource order fulfillment activities to specialists who make a business of providing
warehouse space, stocking inventories, and installing the capabilities to pick, pack, and ship orders
cost-efficiently for a number of different online retailers. Only very high-volume online retailers, like
Wayfair, Chewy, and Overstock.com can develop and install the capabilities to perform order fulfillment
activities internally at costs below those of outside specialists. Amazon has over 3 million small- and
medium-sized selling partners that use its online store to market and sell their products; A big
percentage of these selling partners pay an order fulfillment fee to Amazon to stock their products and
ship them to buyers, allowing them to focus exclusively on online sales. However, in China, the vast
majority of small businesses that use Alibaba's online platforms to display and sell their products online
are responsible for handling their own order fulfillment activities.

l How it will draw traffic to its website and then convert page views into revenues. Websites must be cleverly
marketed. Unless web surfers hear about the site, like what they see on their first visit (and perhaps
make a purchase), and are intrigued enough to return again and again to both view information and
make purchases, the site is unlikely to generate adequate revenues. The best test of effective marketing
and the appeal of an online company's product offering is the ratio at which page views are converted
into revenues (the “look-to-buy” ratio). The difficulty small online enterprises have in drawing traffic to
their own websites is why so many have opted to utilize the high-traffic online platforms of Amazon and
Alibaba to conduct their sales activities.

OUTSOURCING STRATEGIES
Outsourcing strategies involve a conscious decision to abandon or forgo attempts to perform certain value
chain activities internally and to instead farm them out to outside specialists and strategic allies. 20 Many PC
makers, for example, have shifted from assembling units in-house to outsourcing the entire assembly process
to manufacturing specialists that assemble many brands of
PCs (and thus can capture all the available economies of CORE CONCEPT
scale), are better able to bargain down the prices of PC
Outsourcing involves farming out certain value
components (by buying in large volumes), and have
chain activities to outside vendors and narrowing
developed best practice capabilities in performing specific
the scope of its internal operations.
assembly tasks accurately and cheaply. Most all name
brand apparel firms have in-house capability to design,
market, and distribute their products but they outsource all fabric manufacture and garment-making activities to
contract manufacturers in low-wage countries. Starbucks finds purchasing coffee beans from independent
growers in most of the world's coffee-growing regions far more advantageous than having its own coffee-growing operation.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 132

Outsourcing certain value chain activities can be strategically advantageous whenever:

l An activity can be performed better or more cheaply by outside specialists. A company should generally
not perform any value chain activity internally that outsiders can perform more efficiently or effectively.
The chief exception is when a particular activity is strategically crucial and internal control over that
activity is deemed essential. Fashion retailer Dolce and Gabbana outsources manufacture of its brand
of sunglasses to Luxottica—a company considered to be the world's best producer of top-quality fashion
sunglasses and high-tech prescription eyewear; Luxottica is known for its Ray-Ban, Oakley, and Oliver
Peoples brands.

l The activity is not crucial to the firm's ability to achieve sustainable competitive advantage. Out sourcing
of maintenance services, data processing and data storage, fringe benefit management, website
operations, call center operations, and similar administrative support activities to specialists is
commonplace. Colgate has reduced its information systems costs by more than 10 percent annually
through an outsourcing agreement with IBM. Many small companies outsource such HR activities as
benefit administration, payroll activities, and training.

l It streamlines company operations in ways that improve organizational flexibility or speeds the time to get
new products to market. Outsourcing of parts and components gives a company the flexibility to switch
suppliers in the event one or more of its present suppliers fall behind competing suppliers.
To the extent that its suppliers can speedily get next-generation parts and components into production,
a company can get its own next-generation product offerings into the marketplace quicker. Furthermore,
seeking new suppliers with the needed capabilities already in place is frequently quicker, easier, less
risky, and cheaper. Firms that internally produce the parts and components they need are periodically
confronted with sometimes formidable costs to update obsolete parts-making capabilities or to install
and master new parts-making technologies.

l It reduces the company's risk exposure to changing technology or shifting buyer preferences. When a
company outsources certain parts, components, and services, its suppliers must bear the burden of
incorporating state-of-the-art technologies and/or undertaking redesigns and upgrades to accommodate
a company's plans to introduce next-generation products. If what a supplier provides is designed out of
next-generation products or rendered unnecessary by technological change, it is the supplier's business
that suffers rather than the company's business.

l It improves a company's ability to innovate. Collaborative partnerships with world-class suppliers who have
cutting-edge intellectual capital and are early adopters of the latest technology give a company access
to ever better parts and components—such supplier-driven innovations, when incorporated into a
company's own product offering, fuel a company's ability to introduce its own new and improved
products.

l It allows a company to assemble diverse kinds of expertise quickly and efficiently. A company can nearly
always gain quicker access to first-rate capabilities and expertise by partnering with suppliers who
already have them in place rather than trying to build them from scratch with their own company
personnel.

l It allows a company to concentrate on its core business, leverage its key resources, and do even better
what it already does best. A company is better able to build and develop its own competitively valuable
competencies and capabilities when it concentrates its full resources and energies on performing those
value chain activities that it can perform better than outsiders and/or that it needs to have under its
direct control. Nike, for example, devotes its energy to designing, marketing, and distributing athletic
footwear, sports apparel, and sports equipment, while outsourcing the manufacture of all its products
to contract factories. Apple outsources production of its iPod, iPhone, and iPad models to Chinese
contract manufacturer Foxconn. Hewlett-Packard and IBM have sold some of their manufacturing plants
to outsiders and contracted to repurchase the output from the new owners.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 133

The Big Risk of Outsourcing Value Chain Activities The biggest danger of outsourcing
is that a company will farm out too many or the wrong types of activities, thereby unduly narrowing the scope of
its capabilities in ways that unwittingly reduce its long-term competitiveness.21 For For example, in recent
years, companies anxious to reduce operating costs have opted to outsource such strategically important
activities as product development, engineering design, and
sophisticated manufacturing tasks—the very capabilities A company must guard against outsourcing
that underpin a company's ability to lead sustained product activities that can unwittingly degrade its
innovation. While these companies have apparently been
capabilities to be a master of its own destiny.
able to lower their operating costs by outsourcing these
functions to outsiders, their ability to lead the development
of innovative new products is weakened because so many of the cutting-edge ideas and technologies for next-
generation products come from outsiders. . For example, most US brands of laptops and cell phones are now
not only manufactured but also designed in Asia.22 It is strategically dangerous for a company to be dependent
on outsiders to provide it with the skills, knowledge, and capabilities that over the long run heavily influence its
competitiveness and market success. Companies like Cisco are alert to the danger of farming out the
performance of strategy-critical value chain activities and take actions to protect against being held hostage by
outside suppliers. Cisco guards against loss of control and protects its manufacturing expertise by designing
the production methods its contract manufacturers must use. Cisco keeps the source code for its designs
proprietary, thereby controlling the initiation of all improvements and safeguarding its innovations from imitation.
Furthermore, Cisco has developed online systems to monitor the factory operations of contract manufacturers
around the clock, so that it knows immediately when problems arise and can decide whether to get involved.

VERTICAL INTEGRATION STRATEGIES:

OPERATING ACROSS MORE STAGES
OF THE INDUSTRY VALUE CHAIN
Vertical integration extends a firm's competitive and operating scope within the same industry. It involves
expanding the firm's range of activities backward into sources of supply and/or forward toward end users. Thus,
if a manufacturer invests in facilities to produce certain
component parts that it formerly purchased from outside CORE CONCEPT
suppliers, it has engaged in backward vertical integration
A vertically integrated firm is one whose business
and extended its competitive scope backward into the
activities extend across several portions or stages of
production of component parts, but its business remains in
an industry's overall value chain.
the same industry as before. The only change is that it has
operations in two stages of the industry value chain.
Similarly, if a paint manufacturer—Sherwin-Williams, for example—elects to integrate forward by opening 500
retail stores to market its paint products directly to consumers, its entire business is still in the paint industry
even though its competitive scope extends from manufacturing to retailing.

A firm can pursue vertical integration by starting its own operations in other stages in the industry's activity chain
or by acquiring a company already performing the activities it wants to bring in-house. Vertical integration
strategies can aim at full integration (participating in all stages of the industry's value chain) or partial integration
(building positions in selected stages of the industry's total value chain).

The Advantages of a Vertical Integration Strategy The two best reasons for investing
company resources in vertical integration are to strengthen the firm's competitive position and/ or boost its
profitability.23 Vertical integration has no real payoff with respect to profits or strategy unless it produces
sufficient cost savings/profit increases to justify the extra investment, adds materially to a company's competitive
strengths, and/or helps differentiate the company's product offering in ways buyers deem valuable.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 134

Integrating Backward to Achieve Greater Competitiveness It is harder than one might think to generate
cost savings or boost profitability by integrating backward into activities such as parts and components
manufacture (which could otherwise be purchased from suppliers with specialized expertise in making these
parts and components). For backward integration to be a viable and profitable strategy, a company must be
able to (1) achieve the same scale economies as outside
suppliers and (2) match or beat suppliers' production CORE CONCEPT
efficiency with no drop-off in quality. Neither outcome is a
Backward vertical integration involves entry
slam dunk. To begin with, a company's in-house
into activities performed by suppliers or other
requirements are often too small to reach the optimum
enterprises positioned in earlier stages of an
size for low-cost operation—for instance, if it takes a
industry's overall value chain.
minimum production volume of one million units to achieve
mass production economies and a company's in-house
Requirements are just 250,000 units, then it falls way short of being able to capture the scale economies of
outside suppliers (who may readily find buyers for one million or more units). Furthermore, matching the
production efficiency of suppliers is fraught with problems when suppliers have high-caliber production
capabilities of their own, when the technology they employ has elements that are hard to master, and/or when
substantial R&D expertise is required to develop next version parts and components, or keep pace with advances in parts/comp

That said, occasions still arise when a company can improve its cost position and competitiveness by performing
a broader range of value chain activities internally rather than having some of these activities performed by
outside suppliers. The best potential for being able to reduce costs via a backward integration strategy exists in
situations where a company must deal with a few suppliers with substantial bargaining power, where suppliers
have outsized profit margins, where the item being supplied is a major cost component, and where the requisite
technological/production capabilities are easily mastered or can be gained by acquiring a supplier with most or
all of the needed capabilities. Situations also arise when integrating backward can enable a company to reduce
costs by facilitating the coordination of production flows from one stage to the next and avoiding bottlenecks and
delays that disrupt production schedules. Furthermore, if a company has proprietary know-how that it wants to
keep from rivals, then in-house performance of value chain activities related to this know-how is beneficial even
if outsiders can perform such activities. Backward integration also spares a company the risk of being heavily
dependent on suppliers for crucial components or support services and reduces exposure to supplier price
increases.

Apple decided to backward integrate into the production of chips, other electronic components, and hardware
used in its iPhone and computers because they were major cost components, suppliers had bargaining power,
and in-house production would help coordinate design tasks and protect Apple's proprietary technology .
International Paper Company backward integrated into pulp mills and located them adjacent to its paper plants
to reap the benefits of coordinated production flows, reduced energy usage, and negligible costs of transporting
freshly produced paper pulp directly to the production line in its paper plants.

Backward vertical integration can produce a differentiation-based competitive advantage when a company, by
performing activities internally, ends up with a better-quality or better-performing product, improved customer
service capabilities, or is able to deliver added value to customers in other ways . On occasion, integrating into
more stages along the industry value chain can add to a company's differentiation capabilities by allowing it to
build or strengthen its core competencies, better master strategy-critical capabilities, or add features that deliver
greater customer value. Panera Bread has been quite successful with a backward vertical integration strategy to
produce fresh dough that company-owned and franchised bakery-cafés use in making baguettes, pastries,
bagels, and other types of bread—not only does internally producing fresh dough promote consistent- quality
bakery products at Panera's 2,150 locations and lower store costs for baking, but it has also enhanced Panera's profitability.

Integrating Forward to Enhance Competitiveness The strategic impetus for forward integration is to gain
better access to end users, improve market visibility, and enhance brand name awareness. In many industries,
independent sales agents, wholesalers, and retailers handle competing brands of the same product.
Because they have no allegiance to any one company's brand, they concentrate their energies on pushing

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 135

whatever brand sells and earns them the biggest profits. Independent insurance agencies, for example,
represent a number of different insurance companies; In trying to find the best match between a customer's
insurance requirements and the policies of alternative insurance companies, they have the opportunity to
promote the policies of certain insurers and downplay the
policies of other insurers. Consequently, insurers like State CORE CONCEPT
Farm and Allstate have integrated forward and set up local
Forward vertical integration involves entering into
sales offices with local agents to exclusively market and
the performance of industry value chain activities
service their insurance policies. Likewise, it can be located closer to end users.
advantageous for a manufacturer to integrate forward into
wholesaler or retailing via company-owned distributorships
or a chain of retail stores rather than depend on the marketing and sales efforts of independent distributors/
retailers that stock multiple brands and steer customers to those brands earning them the highest profits. To
avoid dependence on distributors/dealers with divided loyalties, Goodyear has integrated forward into company-
owned and franchised retail tire stores. Consumer-goods companies like Restoration Hardware, Coach, Under
Armour, Nike, Tommy Hilfiger, Pepperidge Farm, Calvin Klein, Gap, Ann Taylor, and Polo Ralph Lauren have
integrated forward and operate company-operated retail stores as well as their own branded stores in factory
outlet malls that enable them to move overstocked items, slow-selling items, and items with minor production
flaws. Growing numbers of manufacturers have integrated forward and begun selling directly to end-users at
company websites, thus reducing dependency on traditional wholesale and retail channels and taking advantage
of the massive shift of consumers to shopping online.

The Disadvantages of a Vertical Integration Strategy

Vertical integration has some important drawbacks, however. The biggest of these include the following:24

l Vertical integration boosts a firm's capital investment in the industry, thereby increasing business risk
(what if industry growth and profitability unexpectedly go sour?).

l Integrating backward or forward creates a vested interest for a firm to continue performing the integrated
system of value chain activities it has invested money and effort into establishing (even if internal
performance of certain of these value chain activities later becomes suboptimal). why? Because there
are barriers to quickly or easily exiting the performance of value chain activities spanning two or more
stages on the industry's value chain, including facilities shutdowns, costly write-offs of undepreciated
assets, employee layoffs, and disrupted performance of related value chain activities. However, a
company that obtains parts and components from outside suppliers can always shop the market for the
newest, best, or cheapest parts and components. A company that does not have its own network of
company-owned distributorships and retail stores can switch distributors and/or distribution channel
emphasis whenever it is advantageous to do so.

l Some vertically integrated companies are slow to adopt new technologies or production methods because
of reluctance to write off undepreciated assets or because they assign higher priority to spending capital
for other company projects or because they see benefits in sticking with the present technology or
production methods a while longer. It is a constant struggle for manufacturers that have integrated
backward to keep up with all the ongoing advances in technology and best practice production
techniques for each of the many parts and components they make in-house. The faster the pace of
change in an industry's value chain, the bigger the risk of a vertical integration strategy.

l Integrating backward into parts and components manufacture reduces a company's flexibility to implement
a cheaper/ better product design or adjust its lineup of product offerings in response to shifting buyer
preferences. It is one thing to eliminate use of a component made by a supplier and another to stop
using a component being made in-house (which can mean laying off employees and writing off the
associated investment in equipment and facilities or else making new investments needed to produces the

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 136

new or cheaper or better part/component). It is more disruptive and costly to delete or add new products
when a company not only assembles its own products but also operates facilities to produce many of
the associated parts/components. Most of the world's automakers, despite their manufacturing expertise,
have concluded that purchasing a majority of their parts and components from best-in-class suppliers
results in greater design flexibility, higher quality, and lower costs than producing most of the needed
parts/components en casa.

l Vertical integration poses all kinds of capacity-matching problems. In motor vehicle manufacturing, for
example, the most efficient scale of operation for making axles is different from the most economic
volume for radiators, and different yet again for both engines and transmissions. Building the capacity
to produce just the right number of axles, radiators, engines, and transmissions in-house—and doing so
at the lowest unit cost for each—poses significant challenges in cost-effectively producing each different
part/component.

l Integrating forward or backward typically requires new or different skills and business capabilities.
Parts and components manufacturing, assembly operations, wholesale distribution, retailing, and direct
sales via the Internet involve using different know-how, resources, and capabilities to master the
performance of different value chain activities. A manufacturer that integrates backward into parts and
components production has to become proficient in different technologies and production methods and
very likely source needed materials from different suppliers. A manufacturing company contemplating
forward integration needs to consider carefully whether it makes good business sense to invest time
and money in developing the expertise and merchandising skills to be successful in wholesale and/or
retailing. Many manufacturers learn the hard way that company-owned wholesale/retail networks present
many headaches, fit poorly with what they do best, and don't always add the kind of value to their core
business as originally planned. Selling to customers online poses still another set of problems when
aiming to achieve proficient performance of strikingly different value chain activities.

In today's world of close working relationships with suppliers and efficient supply chain management systems,
relatively few companies can make a strong economic case for integrating backward into the business of suppliers.
The best materials and components suppliers stay abreast of advancing technology and best practices and are
adept in making good quality items, delivering them on time, and keeping their costs and prices competitive.

Weighing the Pros and Cons of Vertical Integration All in all, therefore, a strategy of vertical integration can
have both important strengths and weaknesses. The tip of the scales depends on (1) the difficulties and costs of
acquiring or developing the resources and capabilities needed to operate in another stage of the industry value
chain, (2) the size of the benefits vertical integration offers in terms of lowering costs or enhancing differentiation
and the value delivered to customers; (3) the impact of vertical integration on investment costs, flexibility, and
response times, (4) the administrative costs of coordinating operations across more value chain activities; and
(5) whether the integration substantially enhances a company's competitiveness and profitability. Vertical
integration strategies have merit according to which capabilities and value chain activities truly need to be
performed in-house and which can be performed better or cheaper by outsiders. Absent solid benefits in relation
to the associated costs and risks, integrating forward or backward is not likely to be an attractive strategy option.

STRATEGIC ALLIANCES AND PARTNERSHIPS

Companies in all types of industries and in all parts of the
world have been elected to form strategic alliances and CORE CONCEPT
partnerships to complement their own strategic initiatives Strategic alliances are collaborative arrangements
and strengthen their competitiveness in domestic and where two or more companies join forces to
international markets. A strategic alliance is a formal achieve mutually beneficial outcomes.
agreement between two or more separate companies in
which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared
control, and mutual dependence. Collaborative relationships between partners may entail a contractual

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 137

agreement but they commonly stop short of formal ownership ties (although sometimes an alliance member may
have minority ownership of another member).

When an alliance involves formal ownership ties, it is called a joint venture. A joint venture entails forming a new
corporate entity that is jointly owned by two or more companies that agree to share in the revenues, expenses, and
profits (losses) of the venture according to their ownership percentages. In many joint ventures, it is formally agreed
that one of the owners (typically a majority owner) will exercise operating control over the venture. Because a joint
venture involves mutual ownership, it tends to be more durable than an alliance where a partner can just abruptly
decide to abandon the alliance. A joint venture owner who wants out of the venture must negotiate arrangements
to be bought out or else get the other owners to agree to dissolve the venture.

An alliance or joint venture becomes “strategic”—as opposed to just a useful collaborative arrangement—when it
serves any of the following purposes or intended outcomes:25

l It facilitates achievement of an important business objective (like reducing risk to a company's business,
lowering costs, or delivering more value to customers in the form of better quality, extra features, and
greater durability).

l It helps build or strengthen a company's competitively valuable resources and capabilities.

l It helps remedy an important resource deficiency or competitive weakness.

l It speeds the development of competitively important new technologies and/or product innovations.

l It facilitates entry into new geographic markets or pursuit of important market opportunities.

l It helps block or defend against a competitive threat or mitigate a significant risk to a company's
business.

l It enhances a company's bargaining power versus suppliers or buyers.

Recent high interest in making strategic alliances a key component of a company's overall strategy is an about
face from times past, when the vast majority of companies confidently believed they already had or could
independently develop whatever resources and capabilities were needed to be successful in their markets . But in
today's world, large corporations—even those that are successful and financially strong—have concluded it doesn't
always make good strategic and economic sense to be totally independent and self-sufficient with regard to every
resource and capability it may need or every market opportunity it wants to pursue. Joint ventures are a favored
partnership arrangement where two or more companies conclude they each want to pursue an attractive business
opportunity but lack the resources and capabilities to do so independently. By joining forces and pooling their
resources and capabilities in a joint venture, the resource/capability deficiencies can be readily corrected and
overcome; joint pursuit of a mutually attractive business opportunity therefore becomes less risky and more likely
to succeed.

Why and How Strategic Alliances Are Advantageous

The most common reasons why companies enter into strategic alliances are to expedite the development of
promising new technologies or products, to overcome deficits in their own expertise and capabilities, to bring
together the personnel and expertise needed to create
desirable new skill sets and capabilities, to improve supply The best strategic alliances are highly selective,
chain efficiency, to gain economies of scale in production and/ focusing on particular value chain activities and on
or marketing, and to acquire or improve market access obtaining a specific competitive benefit. They tend to
through joint marketing agreements.26 When a company enable a firm to build on its strengths and learn.
needs to correct particular resource/capability gaps or
deficiencies, it may be faster and cheaper to partner with other enterprises that have the missing resources and
capabilities. Furthermore, partnering offers greater flexibility should a company's competitive requirements later

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 138

change. Manufacturers frequently pursue alliances with parts and components suppliers to wring cost savings
out of supply chain activities, to improve the quality of parts and components, to better ensure reliable supplies
and on-time deliveries, and to speed new products to market. In industries where technology is advancing
rapidly, alliances are all about fast cycles of learning, staying abreast of the latest developments, and gaining
quick access to the latest round of technological know-how and capability. In bringing together firms with different
skills and intellectual capital, alliances open up learning opportunities that help partner firms strengthen their
own portfolios of resources, core competencies, and capabilities and thereby become more competitive.27

Companies find strategic alliances particularly valuable in several other instances. A company racing for global
market leadership needs alliances to:28

l Get into critical country markets quickly and accelerate the process of building a competitively powerful
global market presence.

l Gain inside knowledge about unfamiliar markets and cultures through alliances with local partners. For
example, US, European, and Japanese companies wanting to build market footholds in China and other
fast-growing Asian markets have pursued local partnership arrangements to help guide them through
the maze of government regulations, to supply knowledge of local markets, to provide guidance on
adapting their products to better match local buying preferences, to set up local manufacturing
capabilities, and/or to assist in distribution, marketing, and promotional activities.

l Access valuable skills and competencies that are concentrated in particular geographic locations (such as
software design competencies in the United States, fashion design skills in Italy, and efficient
manufacturing skills in Japan, Taiwan, China, and other Southeast Asian countries).

A company that is racing to stake out a strong position in an industry of the future needs alliances to:29

l Establish a stronger beachhead for participating in the target industry.

l Master new technologies and build valuable expertise and capabilities faster than would be possible
through internal efforts alone.

l Open up broader opportunities in the target industry by melding the firm's own resources and capabilities
with the resources and capabilities of partners to create competitively effective resource/capability
bundles.

Because of the varied benefits of strategic alliances, many large corporations have become involved in 30 to 50
alliances, and a number have formed hundreds of alliances. Genentech, a leader in biotechnology and human
genetics, has formed R&D alliances with more than 30 companies to boost its prospects for developing new
cures for various diseases and treatments. Samsung Group, which includes Samsung Electronics, has an
ecosystem of over 1,000 alliance partners involving activities pertaining to R&D, global procurement, and local marketing.
Hoffman-La Roche, a multinational healthcare company, set up Roche Partnering to manage its more than 190
alliances. During the COVID-19 pandemic, dozens of pharmaceutical companies entered into strategic alliances
or partnerships to speed the development of COVID-19 treatments and vaccines. Increasing numbers of
companies with a host of alliances now manage their alliances like a portfolio—terminating those that no longer
serve a useful purpose or that have produced meager results, forming promising new alliances, and restructuring
certain existing alliances to correct performance problems and/or redirect the collaborative effort.30

Many Alliances Are Short-Lived or Break Apart Most alliances that aim at technology-sharing or providing
market access turn out to be temporary, fulfilling their purpose after a few years because the benefits of mutual
learning have occurred and because both partners' businesses have developed to the point where they are
ready to go their own ways. The likelihood that such alliances will be temporary makes it important for each
partner to learn thoroughly and rapidly about the other partner's technology, business practices, and
organizational capabilities and then promptly transfer valuable ideas and practices into its own value chain

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 139

activities. Alliances tend to be longer lasting when (1) they involve collaboration with suppliers or distribution
allies, (2) each party's contribution involves activities in different portions of the industry value chain, or (3) both
parties conclude that continued collaboration is in their mutual interest.

Most alliance partners don't hesitate to terminate their collaboration when the payoffs run out or when alliance
members conclude the expected benefits are unlikely to materialize. A 1999 study by Accenture, a global
business consulting organization, revealed that 61 percent of alliances were either outright failures or “limping along.”
In 2004, McKinsey & Company estimated that the overall
success rate of alliances was around 50 percent, based on Large numbers of strategic alliances fail to live up
whether the alliance achieved the stated objectives.31 A to expectations and are dissolved after a few
2007 study found that, even though the number of strategic years.
alliances was increasing about 25 percent annually, the
failure rate of alliances hovered between 60 to 70 percent.32 The high “divorce rate” among strategic allies has
several causes—an inability to work well together, trends among alliance members to share only limited
information about their valuable skills and expertise (which prevented other members from learning much of
value), changing conditions that render the purpose of the alliance obsolete, growing disagreement among
alliance members about the purpose, priorities, and/or targeted benefits of the alliance, the emergence of more
attractive paths to capture the intended benefits, and emerging marketplace rivalry between certain alliance
members.33 Experience indicates that alliances stand a reasonable chance of helping a company reduce
competitive disadvantage but rarely can entering into an alliance enable a company to boost the competitive
power of its resources and capabilities by enough to outcompete rivals or gain a competitive advantage.

The Strategic Dangers of Relying Heavily on Alliances and Cooperative Partnerships The Achilles heel
of alliances and strategic cooperation is becoming dependent on other companies for essential expertise and
capabilities. To be a market leader (and perhaps even a serious market contender), a company must ultimately
develop its own capabilities in areas where internal strategic control is pivotal to protecting its competitiveness
and building competitive advantage. Furthermore, some alliances and cooperative arrangements hold only
limited potential when a partner maintains full control over its most valuable skills and expertise and is unwilling
to give other alliance members much access to these capabilities. As a consequence, acquiring or merging
with a company possessing the needed resources and capabilities is often a better solution.

MERGER AND ACQUISITION STRATEGIES

Mergers and acquisitions are especially suited for situations in which strategic alliances or partnerships do not
go far enough in providing a company with access to needed resources and capabilities.34 Ownership ties are
more permanent than partnership ties, allowing the
operations of the merger/acquisition participants to be CORE CONCEPT
tightly integrated and creating more in-house control and A merger is the combining of two or more
autonomy. A merger is the combining of two or more
companies into a newly created company that
companies into a newly created company that usually takes on a new name.
usually has a different name. An acquisition
An acquisition is a combination in which one company,
is a combination in which one company, the
the acquirer, purchases and absorbs the operations of
acquirer, purchases and absorbs the operations of
another, the acquired. The difference between a merger
another, the acquired.
and an acquisition relates more to the details of ownership,
management control, and financial arrangements than to
strategy and competitive advantage. The resources and capabilities of the newly created enterprise end up
much the same whether the combination is the result of acquisition or merger.

The main impetus for merger and acquisition strategies is to fundamentally alter a company's trajectory and
improve its business outlook. Such strategies typically aim at achieving any of four objectives:35

1. Creating a more cost-efficient operation out of the combined companies. Many mergers and acquisitions
are undertaken with the objective of transforming two or more otherwise high-cost companies into one

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 140

lean competitor with average or below-average costs. When a company acquires another company in the
same industry, there's usually enough overlap in
operations that certain inefficient plants can be closed Combining the operations of two companies, via
or distribution activities partially combined and merger or acquisition, is an attractive strategic
downsized (when nearby centers serve some of the option for fundamentally altering a company's
same geographic areas) or sales force and marketing trajectory—achieving operating economies,
activities can be combined and downsized (when strengthening the resulting company's resources,
each company has salespeople calling on the same capabilities, and competitiveness in important
customer). The combined companies may also be ways, and opening up avenues of new market
able to reduce supply chain costs because of buying opportunity .
in greater volume from common suppliers and from
closer collaboration with supply chain partners. Likewise, it is usually feasible to squeeze out cost savings in
administrative activities, again by combining and downsizing such administrative activities as finance and
accounting, information technology, human resources, and
so on.

2. Strengthening the resulting company's resources, capabilities, and competitiveness in important ways.
Combining the operations of two or more companies, via merger and/or acquisition, is often aimed at
significantly bolstering the competitive power of the resulting company's resources, know-how, skills and
expertise—and doing so quickly (as compared to undertaking a time -consuming and perhaps expensive
internal effort to accomplish the same result). From 2000 through February 2021, Cisco Systems purchased
134 companies to give it more technological reach and product breadth, thereby enhancing its standing as
the world's biggest provider of hardware, software, and services for building and operating Internet networks.

3. Expanding a company's geographic coverage. One of the best and quickest ways to expand a company's
geographic coverage is to acquire rivals with operations in the desired locations. And if there is some
geographic overlap, then a side benefit is being able to reduce costs by eliminating duplicate facilities in
those geographic areas where undesirable overlap exists. Banks like Wells Fargo and Bank of America have
pursued geographic expansion by making a series of acquisitions over the years, enabling them to establish
a market presence in an ever-growing number of states and localities. Food products companies like Nestlé,
Kraft, Unilever, and Procter & Gamble have made acquisitions an integral part of their strategies to expand
internationally. Travel company Expedia acquired HomeAway, an online vacation rental enterprise, to extend
its coverage in the vacation rental marketplace both internationally and across the United States.

4. Extending the company's business into new product categories. Many times, a company has gaps in its product
line that need to be filled. Acquisition can be a quicker and more powerful way to broaden a company's
product line than going through the lengthy exercise of doing the R&D, design and engineering, and testing
to put the company in position to prepare to manufacture and then introduce an assortment of new products
to grow its lineup of product offerings. PepsiCo acquired Quaker Oats chiefly to bring Gatorade into the Pepsi
family of beverages. While Coca-Cola has expanded its beverage lineup by introducing its own new products
(like Powerade and Dasani), it has also expanded its lineup by acquiring Minute Maid (juices and juice
drinks), Odwalla (juices), Hi-C (ready- to-drink fruit beverages), and dozens of other brands of beverages.
Going into 2021, Coca-Cola had a portfolio of over 500 brands and 4,700 choices of beverage products,
some internally developed and most the result of an active and longstanding acquisition program. In 2020,
financial services and wealth management firm Morgan Stanley acquired online stockbroker E*TRADE
Financial Corp. as a means of extending its financial services offerings to include online stock trading, a
service already offered by rivals Merrill Lynch and Charles Schwab. Also in 2020, Uber Technologies
acquired privately held Postmates to expand its footprint and capabilities in the home delivery business.
Postmates entered the home delivery marketplace in 2011 and specialized in delivering restaurant-prepared
meals and other goods to residents and businesses; it had operations in some 3,000+ localities in the United
States as of late 2020.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 141

Many Mergers and Acquisitions Are Not Successful Mergers and acquisitions often do not result in the
hoped-for outcomes. The failure rate of mergers and acquisitions is between 70 and 90 percent.36 The reasons
are numerous.37 The anticipated revenue growth may not occur. Cost savings may prove smaller than
expected. Gains in competitive capabilities may take substantially longer to realize, or worse, never materialize
at all. Efforts to mesh the cultures can be defeated by formidable resistance from organizational members. Key
employees at the acquired company can become disenchanted with newly instituted changes and leave.
Differences in management styles and operating procedures can prove hard to resolve. Personnel at the
acquired company may stonewall changes, arguing forcefully for doing certain things the way they were done prior to the acquis

Unsuccessful mergers and acquisitions can be costly. Ford reportedly lost over $10 billion trying to make
successes of its $2.5 billion acquisition of Jaguar (1989) and $2.7 billion acquisition of Land Rover (2000);
Frustrated by poor results, Ford sold the operations of both brands to India's Tata Motors in 2008 for $2.3
billion.38 Bank of America's supposedly bargain-priced $2.5 billion acquisition of ethically challenged and
financially troubled Countrywide Financial in January 2008 was, according to a prominent banking and finance
professor, “the worst deal in the history of American finance. Hands down.”39 Countrywide, a big originator of
questionable subprime and adjustable-rate mortgages that helped trigger the Fall 2008 collapse of the housing
market, cost Bank of America almost $57 billion in real estate losses, settlements with federal and state
agencies for selling toxic mortgage loans that were falsely represented as quality investments, and payments
for legal fees.40 Google's $12.5 billion acquisition of struggling smartphone manufacturer Motorola Mobility in
2012 turned out to be minimally beneficial in helping to “supercharge Google's Android ecosystem” (Google's
stated area are for making the acquisition). When Google's efforts to rejuvenate Motorola's smartphone
business by spending over $1.3 billion on new product R&D and revamping Motorola's product line resulted in
disappointing sales and huge operating losses, Google sold Motorola Mobility to China-based PC maker,
Lenovo, for $2.9 billion in 2014 ( however, Google retained ownership of Motorola's extensive patent portfolio).
While Lenovo had great ambitions for using Motorola Mobility as a vehicle for transforming both the Lenovo
and Motorola brands of smartphones into major contenders in the global smartphone market, six years later
the results were disappointing. During the first three quarters of 2020 the combined global market shares of
the two brands was in the low single digits, far behind the four best-selling brands—Samsung (~18.8%), Apple
(~14.8%), Huawei (~13.5 %), and Xiaomi (~10.8%)—and also trailing three other brands.41 German chemical
manufacturer Bayer's $63 billion acquisition of Monsanto in June 2018 proved problematic because a
subsequent public uproar over the safety of food products produced with Monsanto's genetically modified
seeds Caused Many Farmers to refuse to use Such Seeds and, Further, Because of the Subsequent Filing of
An estimated 125,000 Lawsuits Alleging That Monsanto's Popular Best-Selling Roundup Weedkiller Cacen
Caince-Damages Resulting From The Settlement of About 85,000 Lawsuits Amount to ion as of early 2021.
These two developments triggered a 38 percent drop in Bayer's stock price in the 14 months following the
closing of the acquisition (in early 2021 Bayer's stock price was almost 50 percent below Bayer's June 2018
stock price), led to investor protests about the performance of Bayer's recently appointed CEO, prompted
Bayer to drop the use of the Monsanto name, and forced a major restructuring of Bayer's business makeup
and internal operations to cope with the financial fallout and the debt Bayer incurred in acquiring Monsanto.42

CHOOSING APPROPRIATE FUNCTIONAL-AREA

STRATEGIES
A company's strategy is not complete until company managers have made strategic choices about how the
various functional parts of the business—R&D, production, human resources, sales and marketing, finance,
and so on—will be managed in support of its basic competitive strategy approach and the other important
competitive moves being taken. Normally, functional-area strategy choices rank third on the menu of choosing
among the various strategy options, as shown in Figure 6.1. But whether commitments to particular functional
strategies are made before or after the choices of complementary strategic options (shown in Figure 6.1) is
beside the point—what's really important is what the functional strategies are and how they mesh to enhance
the success of the company's higher -level strategic actions.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 142

In many respects, the nature of functional strategies is dictated by the choice of competitive strategy. For
example, a manufacturer employing a low-cost provider strategy needs (1) an R&D and product design strategy
that emphasizes efficient assembly and cheap-to-incorporate features, (2) a production strategy that stresses
capture of scale economies and actions to achieve low-cost manufacturing (such as high labor productivity,
efficient supply chain management, and automated production processes), and (3) a low-budget marketing
strategy. A business pursuing a high-end differentiation strategy needs a production strategy geared to top-notch
quality and product performance, and a marketing strategy aimed at touting differentiating features and using
advertising and a trusted brand name to “pull” sales through the chosen distribution channels .

Beyond general prescriptions, it is difficult to say just what the content of the different functional-area strategies
should be without first knowing what higher-level strategic choices a company has made, the industry environment
in which it operates, the valuable resources and capabilities that can be leveraged, and so on. Suffice it to say
here that lower-ranking company personnel who have strategy-making responsibilities must be clear about which
higher-level strategies top executives have chosen and then must tailor the company's functional-area strategies
accordingly.

TIMING A COMPANY'S STRATEGIC MOVES

When to make a strategic move is often as crucial as what
move to make. Timing is especially important when first CORE CONCEPT
move advantages or disadvantages exist.43 Being first Because of first-mover advantages and
to initiate a strategic move can have a high payoff when: disadvantages, competitive advantage can spring
from when a move is made as well as from what
l Pioneering helps build a firm's image and reputation
move is made.
with buyers and creates strong brand loyalty. For
example, Open Table's early moves to establish
its online restaurant reservation service built a strong brand and loyal user following that fueled its
expansion worldwide.

l An early lead enables a first mover to gain an absolute cost advantage over rivals because it captures
economies of scale sooner and enjoys volume-based cost advantages or because it is able to move
down a steep learning curve ahead of rivals and lower its unit costs as its experience accumulates in
working with the associated technology or production methods.

l A first-mover's customers will thereafter face significant costs in switching to the product offerings of later
entrants. High switching costs can emerge when customers make large investments of time and money
in learning how to use a specific company's new product or when they purchase complementary products
that can only be used with the first-mover's product.

l Moving first constitutes a preemptive strike (like securing an especially favorable location or acquiring
an appealing company with uniquely valuable resources or capabilities).

l A first-mover's actions are protected by patents, copyrights, or other forms of property rights, thus thwarting
the efforts of would-be followers to copy what the first-mover did.

l A first-mover's actions prove so overwhelmingly popular that its product sets the technical standard for
the industry.

Whenever buyers respond well to a pioneer's initial move, the pioneer may be able to reap temporary monopoly
benefits—such as faster recovery of its initial investment, a cost advantage, and good profits—until rivals are
able to enter the same market space. The bigger the first-mover advantages, the more attractive making the first
move becomes and the more difficult it becomes for later movers to dislodge the advantages.44

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 143

To sustain any advantage that initially accrues to a pioneer, a first mover must be a fast learner and continue to
move aggressively to capitalize on any initial pioneering advantage. It helps immensely if the first mover has deep
financial pockets, important competencies and competitive capabilities, and astute managers. If a first mover's
skills, know-how, and actions are easily copied or even surpassed, then followers and even late movers can catch
or overtake the first mover in a relatively short period. What makes being a first mover strategically important is not
being the first company to do something but rather being the first competitor to put together the precise combination
of features, customer value, and sound revenue/cost/profit economics that gives it an edge over rivals in battling
for market leadership.45 If the marketplace quickly takes to a first mover's innovative product offering, a first mover
must have large-scale production, marketing, and distribution capabilities if it is to remain ahead of fast followers
who possess competitively valuable resources and capabilities. In cases where the industry's technology is
advancing at a pace that enables rapid introduction of next-generation products, a first mover cannot hope to
sustain an early lead without having strong capabilities in R&D and fast-cycle product development, along with the
financial strength to fund these activities.

Sometimes, though, markets are slow to accept the innovative product offering of a first mover, in which case a
strategically astute fast follower with substantial resources and marketing muscle can overtake a first mover (as
Fox News did in surpassing first-mover CNN to become the most-watched cable news network). Sometimes furious
technological change or product innovation makes a first mover vulnerable to quickly appearing next generation
technology or products. For instance, former market leaders in cell phones Nokia and BlackBerry were quickly
victimized by Apple's far more innovative iPhone models and new Samsung smart phones based on Google's
Android operating system. Hence, there are no guarantees that a first mover can sustain an early competitive
advantage.46

The Potential for Late-Mover Advantages or First-Mover

Disadvantages
There are times, however, when being an adept follower rather than a first mover actually has its advantages.
Such late-mover advantages (or first-mover disadvantages) arise in six instances:

l When pioneering leadership is more costly than imitating followership, and only negligible experience or
learning-curve benefits accrue to the leader—a condition that allows imitative followers to (1) quickly catch
up to a first mover by learning from its experience and avoiding its mistakes and (2) achieve lower costs
than the first mover.

l When an innovator's products are somewhat primitive and do not live up to buyer expectations, thus allowing
a clever follower with better-performing “next-generation” products to win disenchanted buyers away from
the leader.

l When buyers are skeptical about the benefits of a new technology or product being pioneered by a first
mover, thus allowing late movers to wait until the needs of buyers and the attributes they prefer are clarified.

l When rapid market evolution (due to fast-paced changes in either technology or buyer needs) gives fast
followers and maybe even cautious late movers the opening to leapfrog a first-mover's products with more
attractive next-version products.

l When customer loyalty to the pioneer is low and a first-mover's skills, know-how, and actions are easily
copied or even surpassed.

l When a first mover must make costly investments in R&D or in pioneering and perfecting its new technology
(that may or may not pay off) and followers can copy its product innovation or technological advances
without spending nearly so much time and money—in other words it turns out to be cheaper and less risky
to be a fast follower or even a late mover than a pioneer.

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 144

To Be a First Mover or Not

In weighing the pros and cons of being a first mover versus a fast follower versus a slow mover, it matters
whether the race to market leadership in a particular industry is likely to be closer to a 2-year sprint or a 10-year
marathon. Being first out of the starting block turns out to be competitively important only when pioneering early
introduction of a technology or product delivers clear and substantial benefits to early adopters and buyers, thus
winning their immediate support, perhaps giving the pioneer a reputational head-start advantage , and forcing
would-be competitors to quickly follow the pioneer's lead. In the remaining instances where the race is more of a
marathon, the companies that end up dominating new-to-the-world markets are almost never the pioneers that
gave birth to brand-new markets—first-mover advantages are fleeting and there is time for resourceful fast
followers and sometimes even late movers to overtake the early leaders.47

The first lesson here is that there is a market-penetration curve for every emerging opportunity; Typically, the
curve has an inflection point at which all pieces of the business model fall into place, buyer demand explodes,
and the market takes off. The inflection point can come early on a fast-rising curve (like use of e-mail and sales
of smartphones) or further on up a slow-rising curve (as with battery-powered motor vehicles, solar and wind
power, and digital textbooks for college students—which have taken about 10 years to take off). The second
lesson is that the timing of strategic moves matters, which makes it important for a company's strategists to
assess the particular first-mover advantages and disadvantages that may flow when either the company (or an
important rival) is first to initiate a specific strategic move. There are several other hard questions that need to be
asked:

l How fast will buyer demand for a first mover's newly introduced product take off–will the market penetration
curve be fast-rising or slow-rising?

l Does market takeoff depend on the development of complementary products or services that currently
are not available?

l Will buyers need to learn new skills or adopt new behaviors?

l Will buyers encounter high switching costs in moving to a first-mover's new product or service?

l Are there influential competitors in a position to delay or derail a first mover's strategic actions?

KEY POINTS
Once a company has selected which of the five generic competitive strategies to employ in its quest for
competitive advantage, it must decide whether and how to supplement its choice of a competitive strategy
approach, as shown in Figure 6.1.

Companies have a number of offensive strategy options for improving their market positions and trying to secure
a competitive advantage: offering an equal or better product at a lower price, leapfrogging competitors by being
the first to adopt next-generation technologies or the first to introduce next -generation products, pursuing
sustained product innovation, attacking competitors' weaknesses, going after less contested or unoccupied
market territory, using hit-and-run tactics to steal sales away from unsuspecting rivals, and launching preemptive
strikes. A blue ocean type of offensive strategy seeks to gain a dramatic and durable competitive advantage by
abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or distinctive
market segment that renders existing competitors largely irrelevant and allows a company to create and capture
altogether new demand.

Defensive strategies to protect a company's position usually take the form of making moves that put obstacles in
the path of would-be challengers and fortify the company's present position while undertaking actions to dissuade
rivals from even trying to attack (by signaling that the resulting battle will be more costly to the challenger than it
is worth).

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Chapter 6 • Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices 145

One of the most pertinent strategic issues that companies face is how to utilize its website—whether to use its
website as only a means of disseminating product information (with traditional distribution channel partners
making all sales to end users), as a secondary or minor channel , as one of several important distribution
channels, as the company's primary distribution channel, or as the company's exclusive channel for accessing customers.

Outsourcing pieces of the value chain formerly performed in-house can enhance a company's competitiveness
whenever (1) an activity can be performed better or more cheaply by outside specialists; (2) the activity is not
crucial to the firm's ability to achieve sustainable competitive advantage and won't weaken its ability to be a
master of its own destiny by hollowing out the competitive power of its internal resources and capabilities; (3) it
reduces the company's risk exposure to changing technology and/or changing buyer preferences; (4) it streamlines
company operations in ways that improve organizational flexibility, cuts cycle time, speeds decision making, and
reduces coordination costs; and/or (5) it allows a company to concentrate on its core business and do what it
does best.

Vertically integrating forward or backward makes strategic sense only if it strengthens a company's position via
either cost reduction or creation of a value-enhancing, differentiation-based advantage. Otherwise, the drawbacks
of vertical integration (increased investment, greater business risk, increased vulnerability to technological
changes, and less flexibility in making product changes in response to shifting buyer preferences) are likely to
outweigh any advantages.

Many companies are using strategic alliances, collaborative partnerships, and joint ventures to help them in the
race to build a global market presence or be a leader in the industries of the future. These forms of strategic
cooperation with other companies can be an attractive, flexible, and often cost-effective means by which
companies can gain access to missing technology, expertise, and business capabilities.

Mergers and acquisitions are another attractive strategic option for strengthening a firm's competitiveness. When
the operations of two companies are combined via merger or acquisition, the new company's competitiveness
can be enhanced in any of several ways: lower costs; stronger technological skills; more or better competitive
capabilities; a more attractive lineup of products and services; wider geographic coverage; and/or greater financial
resources with which to invest in R&D, add capacity, or expand into new areas.

Once all the higher-level strategic choices have been made, company managers can turn to the task of crafting
functional and operating-level strategies to flesh out the details of the company's overall business and competitive
strategy.

The timing of strategic moves also has relevance in the quest for competitive advantage. Company managers
are obliged to carefully consider the advantages or disadvantages that attach to being a first mover versus a fast
follower versus a wait-and-see late mover.

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