Once a company has selected which of the five basic competitive strategies to employ in its quest for competitive advantage, then it must decide whether to supplement its choice of a basic competitive strategy approach, as shown in Figure 6.1 (p. 162).

Many companies are using strategic alliances and collaborative partnerships to help them in the race to build a global market presence or be a leader in the industries of the future. Strategic alliances are an attractive, flexible, and often cost-effective means by which companies can gain access to missing technology, expertise, and business capabilities.

Mergers and acquisitions are another attractive strategic option for strengthening a firm's competitiveness. When the operations of two companies are combined via merger or acquisition, the new company's competitiveness can be enhanced in any of several ways—lower costs; stronger technological skills; more or better competitive capabilities; a more attractive lineup of products and services; wider geographic coverage; and/or greater financial resources with which to invest in R&D, add capacity, or expand into new areas.

Vertically integrating forward or backward makes strategic sense only if it strengthens a company's position via either cost reduction or creation of a differentiation-based advantage. Otherwise, the drawbacks of vertical integration (increased investment, greater business risk, increased vulnerability to technological changes, and less flexibility in making product changes) are likely to outweigh any advantages.

Outsourcing pieces of the value chain formerly performed in-house can enhance a company's competitiveness whenever an activity (1) can be performed better or more cheaply by outside specialists; (2) is not crucial to the firm's ability to achieve sustainable competitive advantage and won't hollow out its core competencies, capabilities, or technical know-how; (3) reduces the company's risk exposure to changing technology or changing buyer preferences; (4) streamlines company operations in ways that improve organizational flexibility, cut cycle time, speed decision making, and reduce coordination costs; or (5) allows a company to concentrate on its core business and do what it does best.

One of the most pertinent strategic issues that companies face is how to use the Internet in positioning the company in the marketplace—whether to use the Internet as only a means of disseminating product information (with traditional distribution channel partners making all sales to end users), as a secondary or minor channel, as one of several important distribution channels, as the company's primary distribution channel, or as the company's exclusive channel for accessing customers.

Companies have a number of offensive strategy options for improving their market positions and trying to secure a competitive advantage: offering an equal or better product at a lower price, leapfrogging competitors by being first to adopt next generation technologies or the fi rst to introduce next-generation products, pursuing sustained product innovation, attacking competitors weaknesses, going after less contested or unoccupied market territory, using hit-and-run tactics to steal sales away from unsuspecting rivals, and launching preemptive strikes. A blue ocean strategy seeks to gain a dramatic and durable competitive advantage by abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or distinctive market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand.

Defensive strategies to protect a company's position usually take the form of making moves that put obstacles in the path of would-be challengers and fortify the company's present position while undertaking actions to dissuade rivals from even trying to attack (by signaling that the resulting battle will be more costly to the challenger than it is worth).

Once all the higher-level strategic choices have been made, company managers can turn to the task of crafting functional and operating-level strategies to flesh out the details of the company's overall business and competitive strategy.

The timing of strategic moves also has relevance in the quest for competitive advantage. Company managers are obligated to carefully consider the advantages or disadvantages that attach to being a first-mover versus a fast-follower versus a late mover.