An initial direct attack is usually advantageous to the defender, and the attacker usually ends up exhausting resources without reaching its goals. In the 1970s, General Electric, Xerox, and RCA launched direct attacks against computer-market leader IBM. All of them suffered heavy losses and left the computer market. The venture cost RCA a staggering sum of $500 million. The marketer's objective is to utilize resources in a way that maximizes market share. A direct attack rarely serves this purpose, and nowadays, successful campaigns start with indirect attacks.
Xerox was a pioneer in the photocopier field. With the release of its 914 model, it introduced the world to photocopier technology and built a market for copiers. By the 70s, Xerox ruled the copier market, controlling 88% of the market's share. However, within a decade, Japanese companies pushed Xerox back to a position from which it has not been able to recover. How did this happen?
As Norton Paley writes in his excellent book The Manager's Guide to Competitive Marketing Strategies, "When an indirect attack is applied as a marketing strategy, the challenger would concentrate on a defender's weakness, or else move towards a market segment that is emerging, neglected, or poorly served by competitors." To illustrate the effectiveness of the indirect attack, Paley shows how Japanese contenders outwitted Xerox, an undisputed market leader.
Japanese companies found that Xerox was doing unidirectional marketing by supplying large copiers to large companies. Market research had shown to the Japanese that in North America, millions of small companies were using the services of stationery shops to do their copying. They could not afford to buy large copiers and did not have the space to house them. So companies like Canon, Sharp, and Ricoh focused on the defender's weakness and entered the market with small copiers designed for small organizations. Xerox hardly noticed them because there was no immediate effect on its sales.
As soon as the Japanese companies gained footholds in the market based upon small products, low prices, simplified technology, and distribution through office-supply dealers, they changed tactics and built upon their victory. They broadened their product ranges with mid-size and large models and began a direct assault. By the mid 1980s, Xerox had lost more than half of its market to the Japanese. Its market share went down to 44% within a decade.
The successful market penetration by the Japanese companies was facilitated by an indirect approach, and as Paley explains, "If the Japanese companies had tried to force their way into the market with large machines, they would have launched a costly direct frontal attack against Xerox with its dominant market presence," and they might have failed completely.
In today's fiercely competitive marketplace, the marketer who wants to come up with a winning strategy needs to focus on finding an unattended, neglected, or emerging market segment and use the marketing mix in a manner that targets the weaknesses of the competitor to build an advantage that affords his or her company the foothold it needs in the market segment. As soon as that foothold is gained, the marketer needs to consolidate the product's position by mobilizing all resources and expanding into the rest of the market.
The manager who uses a direct attack for primary market penetration is bound to end up with heavy losses that damage his or her company and career. The manager who can find an effective indirect approach can lead a campaign to victory.
Work Cited
Paley, Norton. The Manager's Guide to Competitive Marketing Strategies. Third ed. London: Thorogood, 2006.
