International Journal of Business and Social Science Vol. 2 No. 13 [Special Issue - July 2011]
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This strategy is also used by chain stores when they rush to expand rapidly and keep competitors out of the
market. A firm that floods the market avoids being outflanked by competitors. It is also a way to tie up
distribution channels and shelf space. For example, Procter & Gamble, a master practitioner of this strategy,
dominates retail shelf space with products such as Ivory Soap, Crest, Tide, Pantene Pro-V and many others. A
firm that is trying to cover all bases may face one or more of the following difficulties. First, some firms,
especially the small ones, may not have the resources to offer a full product line. Second, product proliferation
may cause a firm to spread its resources too thinly, violating the principle of concentration of forces at the
decisive point. Covering too many markets and overextending itself, leaves a firm vulnerable to competitor
attacks, as it makes for an easy target. Third, this strategy cannot fully protect a company from attacks by other
competitors who wish to enter the industry. Even if a firm was able to cover the major segments, it is impossible
to cover every possible niche in the market. This allows small companies to enter the market and occupy these
niches. These niches, although small and unattractive at the time, often explode into large segments posing a
threat to established firms.
A special case of the cover-all-bases strategy is the introduction of a blocking brand. Blocking brands are used by
incumbent firms to block access to the market by potential entrants. The firm introduces a brand designed to fill a
niche in the market that could be used as a point of entry by a competitor. The intent of introducing a blocking
brand often is to protect an existing profitable brand by precluding competitors from entering the market and
stealing market share by undercutting the price of the existing product.
2.14 Continuous Improvement
A continuous improvement strategy calls for a relentless pursuit of improvements in costs, product quality, new
product development, manufacturing processes, and distribution. The choice of areas to improve depends on the
value proposition of the organization. A low cost competitor continuously tries to find ways of decreasing costs
through economies of scale, cutting costs and introducing new production methods. A differentiated company
looks for ways to maintain its competitive advantage through innovation, quality improvements, and new features
among others. The continuous improvement strategy also involves innovation and improvement in the firm’s
marketing mix. Product innovation may involve offering superior features or benefits. Price innovation could
include offering better sales terms and other incentives. Distribution could become more effective by looking for
new channels, making existing channels more effective, and seeking strategic alliances. Promotion can become
more effective by improving positioning, execution, using different media, and increasing emphasis on public
relations and publicity. The sales promotion function could be examined to see if improvements could be made in
the way the firm uses free samples, coupons, bonus packs, frequent buyer programs, and refunds.
Through a continuous improvement strategy, firms try to stay one step ahead of their competitors and help protect
their competitive position from hostile challengers. Firms following this strategy are often required to even make
their own products obsolete by replacing them with new versions. Intel is a prime example of a company that
follows the continuous improvement strategy. Its strategy is to introduce new and more powerful generations of
its microprocessors at regular intervals, intended to satisfy the never-ending appetite for increases in processing
power for personal and corporate computer users. Each successive version of its microchip makes its existing
version obsolete in the span of a few months.
2.15 Capacity Expansion
Manufacturing firms may build excess capacity as an entry deterrent strategy. When a potential entrant realizes
that the industry has excess capacity and its own entry will only add to the volume of unutilized industry capacity,
it will be reluctant to enter. Capacity expansion is a credible deterrent strategy if capacity costs are very high.
Otherwise, if the cost of adding capacity is low or capacity can be utilized for other purposes, it would be
relatively easy for rivals to enter.
DuPont used capacity expansion to increase its market share in the titanium dioxide market. In 1970, DuPont had
been using ilmenite in the production of titanium dioxide. This proved advantageous since the price of rutile ore,
the raw material used primarily by its competitors, sharply increased, giving DuPont a significant cost advantage
over its competitors. In order to maximize this cost advantage, DuPont developed a growth strategy of rapidly
expanding capacity to satisfy all of the future increases in demand and deter entry or expansion by existing
competitors. At the time DuPont adopted this strategy, in 1972, its market share was 30%. By 1985, its market
share was over 50% and five of its major rivals had exited the market (Cabral, 2000).