Defensive strategies are only used by market leaders in strategic management. If your small-business has reached a market-leading position, you may need to use such strategies. The goal of these strategies is to hold onto your position as the market leader, fighting off competitors who try to take away your market share. Because firms tend to target market leaders, this will not be an easy task, but fortunately you have multiple strategies to choose from.
The position defense is the simplest defensive strategy. It simply involves trying to hold your current position in the market. To do this, you simply continue to invest in your current markets and attempt to build your brand name and customer loyalty. The problem with this strategy is that it can make you a target for new entrants to the market.
The mobile defense involves making constant changes to your business so that it is difficult for competitors to compete with you. This can involve introducing new products, entering new markets or simply making changes to existing products. This constant moving between strategies requires a flexible business that can adjust to change.
When a firm uses the flanking defense, it defends its market share by diversifying into new markets and niche segments. The idea behind the strategy is that if you lose your market share in the existing market you can make up for it in these new markets. The danger of the flanking defense is that it can stretch your resources thin and pull attention away from your main focus.
The counter-offensive defense is a retaliatory strategy. When a competitor attacks your business, you strike back with your own attack. For instance, if you operate a bakery that only produces gluten-free products and a competitor who produces regular bread also begins producing gluten-free products, you could hit back at it by introducing regular bread products.
The contraction defense is the least desirable defense because it involves retreating from markets. If you don't believe you can successfully defend those markets,however, then it can be the best option. This allows you to redeploy your resources into other areas. For example, imagine that you manufacture two products: liquid soap and bar soap. If you find that you can no longer compete in the bar soap market, then it makes sense to retreat from that market and focus on liquid soaps.
