Strategic Deterrence - Essay Example

STRATEGIC DETERRENCE Strategic deterrence in its general form can be described as a pre-planned avoidance of its competitors in thesaid field. They may compete in some other field but try to avoid competing in the respective fields. This deterrence is only to avoid incurring losses unnecessary from his competitor. The competitor may be a weak party but still would be unwilling to compete. This strategy is primarily to avoid losses during industry shake out for any particular product. Some firms compete while others forbear from competing with their 'multipoint' rivals-those faced in more than one markets or market segment. According to the study it is clear that multi point contact may effect only within the same products or services but not between the strategic groups. There are many speculations that whether multipoint contact deters competition depends on strategic objectives. These predictions are often supported by estimates made by market exit rates. There are many indications and proofs that weak competitors can out survive strong competitors due to forbearance. It is also found that some of the strategic groups who are not protected by their boundaries of competition face strong competition from other strategic groups. Clear evidence is that multi market contact reduces pressures and research validates the cause and consequences of firms thriving for supremacy on each other in multiple markets. Recent census revealed that some of the multi point contacts entered coincidentally rather than strategically intending to compete as against to deter the competitor. These recent discoveries gave startling truths given the well-documented benefits of multi market contact. Multimarket or to be more precise multipoint contact offered immense resistance and knowledge to deter the aggressive actions by the competitors there by arising a situation of mutual forbearance among firms. But in order to have this situation the firms have to enter into each other's market which is just a kind of action that a competitor or a deterrent will limit. Validating some of the recent explorations, under what situations these firms enter into each other markets to compete and when will they realize for mutual forbearance as per their benefits. Clearly analyzing the effect of the multipoint contact on firms strategic moves change according to the level of competition of the rival firm. Strategic deterrence may sound somewhat negotiating between the companies or the firms but ideally speaking it really reduces the risk of incurring losses. Not only that it also helps reduce excessive manpower used if deterrence is not abided. The concept of Strategic deterrence all begins with the primary intention of saving the market from multi market competition battle, which can ultimately bring stability among multi markets. Strategic deterrence is not accepted the moment the multi market contact start to encroach the others market but it is just an understanding that too mutually agreed up activity, which after incurring substantial amount of losses from the companies involved. This situation comes when firms start loosing customer base, profit on sales and the business tending to break-even point, which is generally referred as no profit and no loss point. This position comes when the situation is from a very long time. Though Strategic deterrence is mutually agreed concept is in deed an unwilling act on behalf of the companies involved. It ensures no loss concept but never promises profits out of the deterrence. Strategic deterrence may be a positive attitude but is accepted only by small or medium companies but not by large multi national companies. Its implications on the multi markets are not only largely understood but are but are being analyzed to overcome the disadvantages due to the market encroachment. The markets un touched by this phenomenon is the monopoly market which stands high on sales and profit yet not letting any one step into its market. This is the only market, which does not need to negotiate with the fellow competitors in the multi market segments. Strategic deterrence some times tends to be very fair but in actual scenario it just an act of deceiving the fellow competitor there by amassing large customer base. Once customer base is achieved it is very hard for the rival firm to get to the competing level. He will always be a step behind the firm with a large customer base. Until recently Strategic deterrence use to get through in smaller markets but with the advent of globalization Strategic deterrence tends to be spreading even to the bigger markets with global players taking a step back in order not to have losses clinch the image of the company. Though its implications are high mutual deterrence always try to curb black market under the observation of all the competitors. Drawing on competitive intelligence and decision-making theory to argue that the advantages associated with competitive multi market contact are extended by the fact that a company's multi market competitors serve as a readily available model to minimize the uncertainty associated with market-entry decisions. The primary factors which lead the companies to think beyond an extent where forbearance issues piled up, to enter the markets in which their multipoint rivals already compete. The important elements of multi point contact to precisely define the business identify the goals and serve as the firm's resume. Pro forma balance sheet, an income statement, planning precise strategies and cash flow analyses comprises the basic components of a multi point contact. Preparing a marketing plan helps in the allocation of resources properly, making good decisions and handling of unseen or unexpected complications that may become hurdle in the future development of the business. One of the important aspects of marketing plan is that it provides organized information about the company and importantly a good business plan helps in attaining a loan application. Other important applications include informing the details of the company to the sales personnel, suppliers and others so that they become aware of company's goals and achievements Planning In any marketing sector marketing plan is considered to be very important and a thoughtful business plan cannot be overemphasizes because much hinges on it: financial support, management of the available resources like operation and finances, credit from suppliers, promotion and marketing and last but not the least company's goals and achievements. Mutual deterrence though not accepted whole-heartedly by the competitors they try to get relieved off with the black market and people involved. Due to Mutual deterrence it is highly difficult for any individual to attempt fake or black market the product either of the monopoly or oligopoly. Any company found involvement in the black market of the product has to face the consequences by the mutual competitors and also has to face difficulties in marketing other products of the same company. As long as the explanation goes there are only positive attributes to strategic deterrence and it works for almost all the type of businesses. What ever is good and bad there are always implications for any concept but what has to be looked upon is, what are the advantages out of the concept and to what extent they can help. Strategic deterrence in the present day world is not just a concept which carry's some advantages and implications but also has become a business culture the world over to recon with. It has an immense credibility to its concept and spreads its horizon across the globe and with time, people and business it has started taking the control of almost all kinds of business. A business house with a multi market contact having a monopoly market also has to accept the concept of strategic deterrence or else the firm has to loose on every thing from customer base to profits. Strategic deterrence to its credit has the biggest brands comply with it and make it as a business culture. The acutely effected business houses are the multi market firms who unwillingly has to accept this concept only because to not to get it to losses and deprive of the large customer base. Customer base is the most important element for any base since it counts on the customer base and invests capital, make promulgations for the future developments and can rely on the potential business base. We As explained earlier once a point is reached where all the multi point contacts tend to accept the mutual forbearance and its operation then it will stabilize the total structure of the competition with a better competitive intelligence and a s a result the propensity of a firm to enter into additional markets of its multi market rivals declines. The role of the CEO comes into the focus that is an extension of the multi point contact. Specifically, this argument can come up regarding the CEO's who are newly employed and longer tenured CEO's may have different influences on their preferences for particular competitive actions. We then try to test theories that whether CEOs will abide by the mutual interdependencies along with their firm's multi market ties which represent their tenure in the CEO position. There are innumerable evidences that longer-tenured CEOs are guided by their firm's multi market relationships. Compared to the longer tenured CEO's newer CEOs, however, do not seem to adopt a forbearance approach toward their firm's multi market competitors. Multi market theory has important implications according to my findings and the mentioned study is from the first to examine the role of managers within a multi market context. The concept of strategic deterrence and mutual forbearance made the managers to be aware of of the ways they have to make them selves more reliant to the multi market structure thought it is not enough for nay organization to be embedded just within a multi market structure but only for the firm to be benefited by the multi market structure. Because our findings show that newer CEOs can direct their firms to act in ways that are inconsistent with their firm's multi market position, we identify an area of potential competitive vulnerability for the firm. I had a concern that is deeply rooted towards competitive dynamics perspective support the mutual forbearance and resource dissimilarity theories of competitive behavior. Hence from the above detailed discussion the concept of mutual forbearance and strategic deterrence is clearly analyzed, theorized and to the possible extent gave enough validations which can bring these concepts and implications to a better understanding. Thus, the general understanding generally supports, but goes beyond, the facts of the already explained mutual forbearance and resource dissimilarity theories which is a an out come of the implications led by the un acceptance or avoiding strategic deterrence. Hence the concept of strategic deterrence along with mutual forbearance and its implications are clearly explained. References Louis E. Boone & David L. Kurtz. Contemporary Marketing. New York: South-Western College Pub. 2004. SBA. Marketing Basics. Retrieved Dec. 5, 2006, from . 2006. Mattias Ganslandt. Strategic Investment and Market Integration. Retrieved Dec. 6, 2006, from < http://ideas.repec.org/p/hhs/iuiwop/0560.html>. 2006. Robert Wilson. Strategic Models of Entry Deterrence. Retrieved Dec. 6, 2006, from < http://faculty-gsb.stanford.edu/wilson/archive/pdf/entry.pdf>. 1990. Read More