This is the most aggressive of the four strategies. It typically involves active programs to expand into new markets and stimulate new opportunities. New product development is vigorously pursued and attacks on competitors are a common way of obtaining additional market share. They respond quickly to any signs of market opportunity, and do so with little research or analysis. A large proportion of their revenue comes from new products or new markets. They are often highly levered, sometimes with a substantial equity position held by venture capitalists. The risk of product failure or market rejection is high. Their market domain is constantly in flux as new opportunities arise and past product offerings atrophy. They value being the first in an industry, thinking that their “first mover advantage” will provide them with premium pricing opportunities and high margins. Price skimming is a common way of recapturing the cost of development. They can be opportunistic in headhunting key employees, both technical and managerial. Advertising, sales promotion, and personal selling costs are a high percentage of sales. Typically the firm will be structured with each strategic business unit having considerable autonomy. The industry that they operate in tends to be in the introduction or growth stage of its life cycle with few competitors and evolving technology.
This strategy entails a decision not to aggressively pursue markets. As a result, they tend to do none of the things prospectors do. A defender strategy entails finding, and maintaining a secure and relatively stable market. Rather than being on the cutting edge of technological innovation, product development, and market dynamics, a defender tries to insulate themselves from changes wherever possible. In their attempt to secure this stable market they either keep prices low, keep advertising and other promotional costs low, engage in vertical integration, offer a limited range of products or offer better quality or service. Then tend to be slower in making decisions and will only commit to a change after extensive research and analysis. Their goals tend to be efficiency oriented rather than effectiveness oriented. The industry tends to be mature with well defined technology, products, and market segments. Most sales tend to be repeat or replacement purchases. Individual strategic business units typically have moderate to low levels of autonomy.
The analyzer is in between the defender and prospector. They take less risk and make less mistakes than a prospector, but are less committed to stability than defenders. Most firms are analyzers. They are seldom a first mover in an industry but are often second or third place entrants. They tend to expand into areas close to their existing core competency. Rather than develop wholly new products, they make incremental improvements in existing products. Rather than expand into wholly new markets, they gradually expand existing markets. They try to maintain a balanced portfolio of products with some stable income generators and some potential winners. They watch closely the developments in their industry but don’t act until they are sure that the time is right.
A reactor has no proactive strategy. They react to events as they occur. They respond only when they are forced to by macroenvironmental pressures. This is the least effective of the four strategies. It is without direction or focus.
Prospector strategy
Defender strategy
Analyzer
Reactor
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