Market Defensive or Offensive Strategy
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Suppose the competitor analysis reveals that the American subsidiary of your firm's German competitor is about to broaden its product mix in the American market be introducing a new line against which your company has not previously had to compete in the home market. The environmental analysis shows that recent weakness in the dollar-Euro exchange rates is expected to continue, making American exports relatively less in Germany.
(a) Do you recommend a defensive strategy, or do you attack your competitor in its home? Discuss fully.
(b) How will you implement your recommended strategy? Provide evidence to support your position.
(c) Management learns from the economic analysis of Country A that the wage rates are expected to increase by 10 percent next year. Which functional areas of the firm will be concerned? Why is management concerned? Provide evidence to support your arguments.
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Solution Summary
The solution discusses market defensive or offensive strategy.
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In the current business environment, companies use a strategic planning process in which they formulate alternative competitive strategies and corresponding plans of action by considering internal strengths and weaknesses and external environmental forces to be competitive in the market. This work discusses use and implementation of a defensive strategy by the company. It also discusses the organizational functional areas that will be concerned due to increase in wage rates.
Defensive Strategy
The competitor analysis shows that one of the company's German competitors is planning to broaden its product mix in the American market. It is considering the introduction of a new line against which the company has not previously had to compete in the home market. The environmental analysis also shows that the recent weakness in the dollar-Euro exchange rates is expected to continue and it will make American exports relatively less in Germany. With the consideration of all of these facts, the company should use a defensive strategy in order to be competitive in the market. At the same time, the company cannot persuade the strategy of attacking the competitors in its home. It is because due to the weakness of the dollar-Euro exchange rates, export in Germany will not be profitable for the American Company.
The main purpose of the company behind selecting a defensive strategy is to make the possible attack unattractive and discourage the German competitor to enter in U.S. market. Through this strategy, the company will try to convince the competitor that the return on its investment will be low if it enters in the market (Nolan, 2008). The company should adopt the following two defensive strategies:
Fortify and Defend: Under this strategy, the firm should create barriers to entry for the competitor. There are several ways that can ...
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