CHAPTER 13
Defensive Strategies
General Motors Corporation apparently has no plans to
relinquish its position as the world’s largest automaker
in the face of the strong challenge from Toyota Motor
Corporation. “I’m not conceding anything to anybody,”
said GM Chairman and CEO Richard Wagoner in
response to reports that Toyota is boosting its global
production to 9.06 million units in 2009.
In 2009, the then-CEO of General Motors cited a production figure that was just short of GM’s forecast of 9.08
million vehicles. But a sales forecast released by J.D. Power & Associates after the CEO’s remarks indicated
GM would continue to lose market share. Most students are well aware of GM’s long, steady decline in market
share. You could discuss how GM, which at one time dominated the U.S. auto market with a 60 percent share,
is fighting a foreign competitor for the position of the world’s largest car maker.
Introduction
Tostitos is one of the top-selling brands in the snack food market. With sales of $1 billion, Tostitos’ defensive
plan is to protect its market leadership position with a portfolio of flanker brands listed in the shaded box. Each
sub-brand carries the Tostitos umbrella brand name and addresses a different taste or need. This has allowed
the company to introduce vertical brands under the Tostitos umbrella brand.
Tostitos Gold is the latest brand added to the Tostitos product line. At a retail price is $3.49, the producthas a
higher margin since a bag contains only 12 ounces instead of the usual 14 ounces, giving Tostitos a 20 percent
higher margin. The product was heavily advertised as a chip that won’t break in a dip. Tostitos sold out
immediately. Points to discuss are:
How has adding flanker brands to its product line helped prevent erosion of Tostitos’ position as market
leadership position?
Why would profits increase at a faster rate when more brands are added?
Why is it important for flanker brands to have higher margins?
Teaching Objectives
Delineate the importance of defensive market strategies in meeting the short-run revenue and financial
performance objectives of a business.
Demonstrate the importance of defensive marketstrategies in protecting important strategic market positions
as well as producing investment funds for long-run, more growth-oriented offensive market strategies.
Present and discuss each of the defensive market strategies and how they are managed strategically to
contribute to both short- and long-run performance objectives.
Harvard Business School Case Studies
Quaker Oats’ Oatmeal Division (2006). HBS Case KEL182-PDF-ENG. The hot breakfast cereal division of
Quaker Oats was in serious decline, and the increasing preference by Americans for speed and convenience
at breakfast did not bode well for the category. The senior vice president overseeing the hot breakfast
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Tostitos: Restaurant Style, Scoops, Bite Size, Santa Fe,
Crispy Rounds,Hint of Lime, and Gold
division has been given an ultimatum by the CEO to turn around the company’s namesake product line. She
develops a marketing plan, but will it work?
Dell – New Horizons (2002). HBS Case 502022 (24 pages). Founded in 1984, Dell quickly achieved
phenomenal growth. It’s now late 2000, and Dell has topped $25 billion in sales and over $2 billion in net
income. In the fourth quarter of 2000, however, the average 30-year growth rate for the PC industry has
crashed to a negative 10 percent. Dell must make difficult decisions on how to sustain its profitability in light
of its broad product portfolio–PCs, workstations, and servers on storage products for a broad range of
customers in the U.S. and worldwide. Should Dell stay the course or fundamentally change strategy?
Polaroid Corp: Digital Imaging Technology in 1997. HBS Case SM 33. The case study focuses on the
need for Polaroid to develop a digital capability in order to protect a worldwide leadership position that was
built with traditional chemical imaging technology. The case examines product line decisions involving a
digital camera designed for mass-market penetration.
Dominion Motors & Controls LTD. HBS Case 9-589-115. The leading manufacturer of motors in Canada is
threatened by a loss of market share in oilfield pumping motors because a major customer, having tested
several competing motor brands, finds another motor superior. A central issue is whether to make a
special-purpose motor for this market, reduce the price of the current design, or counter the customer s test
results. Teaching Note 5-589-119.
Cat Fight in Pet Food Industry (A). HBS Case 9-391-189. This case describes the pet food industry in the
mid-1980s prior to the breakout of a major competitive battle that saw manufacturers fight for share. It
illustrates how, when there are benefits to playing in multiple markets, competitors will take action in one
market to preserve their positions in other markets. The case presents an example of multi-market
competitive interaction and covers competitor analysis and prediction, as well as economies of scope.
Teaching Note 5-391-276. Three supplements: 9.391-195, 9.391-196, and 9.391-197.
Alloy Rod Corp. HBS Case 9-586-046. In July 1985, the managers of Alloy Rod (who had recently
purchased the company through a leveraged buy-out arrangement) find that their chief competitor (a
company more than six times larger) has introduced a new product clearly aimed at Alloy Rod’s most
profitable market segment. Management must frame a response with a prime focus on distributors. The case
provides an excellent vehicle for comparing very different channel strategies and channel management
philosophies. It confronts students with the necessity of developing and implementing marketing programs
within the context of financially constrained organizations. Teaching Note 5-598-076.
Snapple. HBS Case 9-599-126 (17 pages). After being acquired by Quaker, Snapple went into decline and
was sold for a fraction of its original value. The case presents a qualitative study of the brand, its history, and
the factors influencing growth as well as decline. This case could be used to discuss the defensive strategic
market plans that Snapple might have implemented to possibly defend its market leadership position.
Market-Based Strategic Thinking
1. Why did General Motors’ 2009 defensive strategic market plan produce improved performance in
2010?
The GM defensive strategy was basicallyto retain car lines that were profitable and had future profit
potential,and to divest those lines that were a drain on profits and had limited or no future profit potential.
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2. Why was it important for General Motors to develop the Volt?
GM’s product portfolio is dominated by mature products in late to mature stages of their product life cycles.
3. How do defensive market strategies contribute to a business’s performance objectives (sales
growth, share position, and profit performance)?
Defensive market strategies are critical to short-run performance. They are designed to protect valued
4. What are the differences between defensive market strategies and offensive market strategies?
Defensive market strategies are reactive in that they protect or eliminate product-market positions.
5. Why is it more difficult to protect Apple’s iPhone market share in a high-growth market than
Apple’s Mac in a slow-growth market?
When Apple entered the personal computer market in the late 1970s,the company’s immediate market
share was over 90 percent. Today,the Mac’s market share is less than 5 percent. The Mac is now in a
6. Why do share leaders like Microsoft, Google, and Intel have to work harder than share followers to
protect share?
Share leaders have more market forces eating away at their share positions. Their competitors, especially
7. What are some of the key aspects of performance that would enable a share follower like Yahoo to
achieve the same level of profit as a share leader?
Given Google’s market dominance, Yahoo is likely to remain a share follower for the foreseeable future.
The goal for Yahoo should be to remain a profitable share follower as opposed to a bankrupt share
8. What aspects of positioning and marketing effort may be managed to achieve a high profit with a
reduce-market-focus strategy for Dr. Pepper?
Dr. Pepper is a niche product that has done very well in the soft drink market dominated by Coca-Cola and
Pepsi. As outlined in Figure 13-8, high-profit niche businesses have high relative product quality and low
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9. Why should a reduce-market-focus strategy with above-average customer value deliver
above-average profits for Ben & Jerry’s Ice Cream?
Ben & Jerry’sis a specialty product business that competes on quality and uniqueness. It is not a low-cost
volume business that pursues all customers at any cost. As a low-share niche business with
10. How do defensive market strategies contribute to the long-run share position and profit
performance for a company like General Motors?
As Figure 13-1 shows, GM used defensive strategies to protect the market share, positioning, and profits of
11. Compare defensive market strategies to protect a share position with strategies to exit a share
position in terms of their contributions to short-run profit performance and the overall share
position of the business.
Defensive market strategies to protect share are critical to the short-run profitability of a business.
12. Why would a mature paint company pursue a reduce-market-focus strategic market plan?
A mature paint company in many instances has a favorable position in a somewhat attractive market, but
13. What is the primary objective of a monetize strategic market plan?
A monetize strategic market plan aims to extract the maximum amount of short-run cash flow from a
14. Under what conditions would a business select an exit market strategy over a strategy to protect
share position?
A business usually implements an exit strategy when profits are below average and market attractiveness
15. When should a business pursue a harvest market strategy, and how could that strategy affect
short-run profit performance?
When the combination of market attractiveness and competitive advantage is weak to unfavorable, a
16. When should a business pursue a divest market strategy, and how could that strategy affect
short-run profit performance?
When profit in one of a company’s markets is below average and significant amounts of resources and
management time are consumed by that market, and when the market attractiveness or competitive
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17. Why might a company continue to support one of its products in a harvest- or divest-share
portfolio position rather than harvesting or divesting it?
Even whena product is in a poor portfolio position with respect to market attractiveness and competitive
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