Strategic Withdrawal Defense Strategy Guide

Sometimes it’s best to walk away. If faced with threats from a competitor, learn when a strategic exit from a market is the best line of defense 👋

5 min read

An exit sign to connote strategic withdrawal as a Defense Strategy in business

When you’re coming under attack from a competitor there are a number of different defense strategies you could deploy to stave off their advances and fight to keep your market share. But….sometimes you have to ask, is the fight worth fighting?

What is a Strategic Withdrawal Defense Strategy?

Strategic Withdrawal, also known as Contraction Defence, is when a business removes itself from a market in which they are weak, in order to shift more focus and resource to areas that they are stronger. By withdrawing from markets where they are weaker, these organizations are defending against attacks from competitors targeting their vulnerabilities.

A visual depiction of a strategic withdrawal Defense Strategy in business

It tends to be larger, often market-leading organizations that deploy a Strategic Withdrawal, giving up their position in one market to ensure they maintain their leadership in another.

When there’s an anticipated attack on the horizon aimed at one of your weaker areas, the decision needs to be made whether the increased focus and potentially cost needed to defend that area of the business is viable. Will it come at the cost of the more successful markets and weakened that solid hold? If defending against an attacker in a weaker market causes any risk to your core market, then a Contraction Defence or Strategic Withdrawal should be considered.

When Should You Consider a Strategic Withdrawal Defense?

  • If you are facing an attack from a competitor in a market or market segment in which you are weaker
  • If you lack the capabilities to counter that attack head-on and maintain your market-share
  • If the competitor is extremely aggressive, well financed, ground-breakingly innovative or generally coming at you at considerable pace with a significant rate of growth (i.e. your chances of staving them off are slim)
  • If undertaking a different defense strategy would leave you vulnerable in your stronger areas due to the shift in focus needed to defend
  • If the investment needed to defend in this space would eat away all margin and make that area of the business unprofitable
  • If the market in which you’re facing the competitor threat is in decline or not strategically important
  • If, quite frankly, you have more important things to be doing

A Strategic Withdrawal in the face of a competitor threat is often considered a last resort. However, it can, in fact, be a very smart strategic move. Let’s not forget, stopping under-performing activities is almost as important in strategy as starting new activities! You often can’t do one without doing the other.

What Are the Advantages of a Strategic Withdrawal Defense Strategy?

  • Better return on investment on the resources redirected to the more profitable markets or market segments
  • Increased focus, resources and investment in the stronger markets can significantly grow and galvanize your market share in that area
  • You won’t be pulled off course in terms of your strategic objectives and priorities by having to down tools and rush to the defense

An example from the interactive Competitor Analysis Tool in Lucidity Strategy Software

What Are the Disadvantages of a Strategic Withdrawal Defense Strategy?

Leaving a particular market will often impact jobs. That could range from moving people to other areas of the business and having to deal with change management, right through to closing entire business units. This will need to be considered when planning a strategic withdrawal.

There is also the potential for a degree of damage to your brand perception when withdrawing from a market, particularly if it is clear it was done as a result of the threat from a competitor. It can highlight the weakness and that may impact how people think about your brand across the board, even in your strong markets.

A retreating business will need to have a strong story as to why they are exiting a market in order to mitigate against this risk.

What Examples of a Strategic Withdrawal Defense Strategy Are There?

One good example of a large, market-leading organization strategically withdrawing from a market where they were facing new threats from competitors is IBM and their retreat from the PC hardware market back in the early 2000s.

IBM, known for their pursuit of high margin business, found themselves faced with increasing competition when it came to laptops and PCs. Contenders like Compaq, Dell and Hewlett-Packard were starting to make a significant impact and the market increasingly became commoditized. As margins dropped in the market, IBM chose to withdraw, divesting their ThinkPad business and selling to Lenovo in 2004.

The now commoditized PC market with its decreasing margins no longer fit IBM’s strong strategic focus on high margin business units. So they withdrew.

What Other Defense Strategies Are There?

If a full strategic withdrawal feels too extreme and final, there are other approaches to consider if you’re feeling under threat from competitors.

Pre-emptive Defense Strategy

This is all about acting first! If you can anticipate a competitor attack, you act fast and attack them before they can attack you.

Counter-Offensive Attack

With this defense strategy you wait until the challenger makes the first move and then you launch an aggressive and full force counter attack.

Flanking Defense Strategy

This strategy takes a little forward thinking and analysis of your weaknesses. With a Flanking Defense Strategy you go to work on your weaker areas to improve them and prevent them being targets of anyone’s Flanking Attack.

Position Defense Strategy

This defense strategy is all about your brand and your perception in the market. Here you are defending against competitor advances by putting considerable time and effort into shoring up your brand perception and customer loyalty.

Mobile Defense Strategy

With a Mobile Defense Strategy you stay nimble, keep moving – different products, different markets – keeping the competition guessing and making it extremely hard to know how or where to attack you.

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