Posted in Marketing and Strategy Terms, Total Reads: 4909
Definition: Hit and Run Strategy
Hit and Run strategy is a strategy used by firms to enter a particular market to avail of the high profits during the time the profitability is high, and then leave the market when the profitability reduces.
Hit and run is also used to describe a kind of strategy where the purpose is to damage any target competitors’ business and then exit before any retaliation takes place from the other side.
Hit and run marketing is common where the barriers to entry and exit are very low. Because of this firms find it easy to enter the market when super normal profits are being made, and exit whenever the profitability goes down. So, today there is an increasing focus of not only raising barriers to entry but also exit.
XYZ Industries had a monopoly in markets of India and South-East Asia for its adhesive product named ‘Googlue’. So, during period of high growth, it raised prices by 30%. However, this move caused a hot of competitors from other FMCG firms to launch products at better prices, which were still profitable. Because of the options available supply exceeded the demand, and therefore the profitability of the segment reduced greatly. Finally, even the market got saturated and growth became negative. Within a short while, the large FMCG companies shut down their operations. So, in this case a hit and run strategy was adopted, where the FMCG giants made use of profitability of the market and sector for a while and also affected the business of XYZ.