One of the many fascinating areas of strategic management is when to (and when not to) launch an attack on a rival firm by implementing product development, market development, acquisitions, or any other various aggressive strategies. In a 2012 article in the Academy of Management Journal, Upton et. al. explored this very notion by researching how firms use footholds as a means of 1) controlling rival firms and 2) as a platform to launch an attack into the desired market with respect to both market commonality and resource similarity.
Key Terms:

Foothold – Intentionally establishing a SMALL position in a potential target market that is currently occupied by a competitor on a large scale.

Foothold Attack – When the firm with the established foothold fully enters the market (launches the attack).

Foothold Withdrawal – When the firm with the established foothold relinquishes the foothold all together.

Market Commonality – Degree to which rival firms operate in the same or similar markets over a broad product line spectrum (could be geographic as well). But this article focuses on product lines.

Resource Similarity – Degree to which rival firms possess similar internal resources such as 1) Financial Capacity 2) Patents 3) Skilled Employees 4) Industry know how, and so on.

To Control Rival Firms

The authors describe that as market commonality and resource similarity increase between firms, there is an increased tendency for each firm to establish footholds into areas that are currently well occupied by the rival firms. The main rationale behind the premise is a foothold is small enough to usually not attract a major response, yet its presence alone requires the entrenched firm enough concern to monitor the development and likely form footholds of its own into markets that are well entrenched by the rival firm that recently established the foothold in its market. This is true because the foothold is a platform that could be expanded quickly if desired into an all out attack. In this respect, when both market commonality and resource similarity are high, it creates a stalemate situation, where firms are advised to monitor and launch footholds into each other’s markets as mere bluffs as a means of forcing the opposing firm to devote time and resources away from more productive areas of business by launching their own footholds, and monitoring the rival firms footholds. An important take away, is when firms have high market commonality and resource similarity, the often do not want to enter price wars, or other attacks with each other. Utilizing footholds can help prevent opposing CEOs from trying such a tactic.
As A Vehicle To Launch A Future Attack
If both firms posses high market commonality then there is less interest in evaluating resource similarity and implementing an attack as described in the previous paragraph. So when do firms consider launching an attack from a foothold? Usually the answer is when the two firms have low market commonality. For example, if Firm A operates in the USA, Mexico, and Latin America and Firm B operates in Europe, Asia, and Mexico then Firm A may establish a foothold in Europe since they only fear a quick attack in the Mexican market where both firms are entrenched. To counter this strategy, Firm B should, as advised in the previous paragraph to launch its own footholds into the USA and Latin America. So once determining there is low market commonality, then executives must examine the resource similarity component and decide from that location whether or not to launch the attack. If executives determine they have superior resources, then an attack is likely eminent.
Foothold Withdrawal
With respect to foothold withdraws as market commonalty goes down (the firms are not competing in the same markets to a sufficient level), then resources can be better utilized and footholds in those markets are likely withdrawn. And likewise, as firm’s resources become different to the others, the foothold strategy has less merit and a withdrawal is expected provided market commonality is also low.

Conclusion

The astute reader may have noticed that both foothold attacks and foothold withdraws are inversely related to 1) market commonality and 2) resource similarity. So, what is the point of studying the dimensions and relationships between market commonality and resource similarity if you can predict a move (either a withdrawal or an attack) but cannot predict which move it will be? It is an interesting question that unfortunately is going to require further research. However, the practical take away for executives is establishing footholds still has the three main benefits: 1) being used as deterrents to prevent attacks from rival firms, 2) force rival firms to devote resources in establishing its own footholds and monitoring rival footholds in its own markets, and 3) for firms to more easily launch attacks if they determine the situation is advantageous. Ironically, the fact that we are often able to predict a rival footholds move but not in what direction provides extra incentive for firms to actually establish footholds as a deterrent to attacks from rivals. The day when research reveals how to predict the direction of a foothold move, this aspect (and maybe footholds all together) will no longer be as valuable of a strategy.

Upson, John, David Ketchen, Brain Connelly, Annette Ranft (2012), Competitor Analysis and Foothold Moves, Academy of Management Journal, 55 (1), 93-110.