There are two good reasons to go head-to-head against rivals, pitting one's
own strengths against theirs, price for price, model for modeL promotion tactic
for promotion tactic, and geographic area by geographic area. The first is to try
to gain market share by overpowering weaker rivals; challenging weaker rivals
where they are strongest is attractive whenever a firm can win a decisive market
victory and a commanding edge over struggling competitors. The other
reason is to whittle away at a strong rival's competitive advantage; here success
is measured by how much the competitive gap is narrowed. The merits of a
strength-against-strength offensive challenge, of course, depend on how
much the offensive costs compared to its benefits. To succeed, the initiator
needs enough competitive strength and resources to take at least some market
share from the targeted rivals.
All-out attacks on competitor strengths can involve initiatives on any of several
fronts-price-cutting, comparison ads, new features that appeal to a
rival's customers, new plant capacity in a rival's backyard, or new models
that match rivals'. One of the best ploys is for the aggressor to attack with
an equally good product offering and a lower price.8 This can produce market
share gains if the targeted rival has strong reasons for not cutting its prices and
if the challenger convinces buyers that its product is just as good. However,
such a strategy will increase profits only if volume gains offset the impact of
thinner margins per unit sold.
In another type of price-aggressive attack, firms first achieve a cost advantage
and then attack competitors with a lower price 9 Price-cutting supported
by a cost advantage is the strongest basis for launching and sustaining a priceaggressive
offensive. Without a cost advantage, price-cutting works only if the
aggressor has more financial resources and can outlast its rivals in a war of
attrition