Offensive Competitive Strategy

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Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated August 5, 2020

What is Offensive Competitive Strategy?

Offensive competitive strategy therefore refers to those strategies that companies adopt to stay ahead of the competition rather than react to the competition.

How Does Offensive Competitive Strategy Work?

As in team sports, companies can play defense or offense, strategically speaking.

For example, let's assume Company XYZ is in the publishing industry. The industry is undergoing significant changes in terms of technology and distribution. An offensive competitive strategy for Company XYZ might involve investing capital in developing and patenting new distribution technology, as well as diversifying into more attractive markets; a defensive competitive strategy, on the other hand, might involve waiting a few years to see "where the chips fall" in terms of readership preferences and then adopting whatever technology is the cheapest or most popular.

Other examples of offensive competitive strategy might include becoming an aggressive low-cost leader or developing substitute products.

Why Does Offensive Competitive Strategy Matter?

Though there is always a time and place for defensive competitive strategy, an offensive competitive strategy is generally what separates trend-setters from followers. Above-average technology or research and development expenses are indicators that a company might be pursuing an offensive competitive strategy. Companies that acquire other companies either to create some forward or backward integration or eliminate competitors are often pursuing offensive competitive strategies as well.

One disadvantage of an offensive competitive strategy, however, is that it is expensive. Thus, companies pursuing these strategies are sometimes highly leveraged or low on cash, which can bring more risk to the company and its shareholders.

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