You will find it harder to succeed in your business if you have a high level of competition.
You have to set a high bar when entering a highly concentrated market; otherwise, you cannot compete with your competing companies, especially those who provide identical products as yours.
To develop a successful firm in a highly competitive market, you need to analyze your competitors’ strengths, weaknesses, and competitive advantages.
Be aware of all potential risks. To complete this assignment, you may want to conduct market research to understand your potential clientele’s needs, challenges, and preferences.
You can use their advice to determine where your existing products are lacking and improve them based on that information.
A competitive strategy allows businesses to make informed decisions and continually improve their products or services by following a systematic approach.
Competitive strategy can be defined as the techniques and methods to attract customers, exceed their expectations by providing greater value, and increase their market position.
Thompson and Strickland’s strategy definition emphasizes managers’ initiatives and approaches to establish strategic goals.
Competitive strategy is defined as the actions managers take to increase the business’ market position through excellent customer service.
Companies must take steps against their competitors in the sector to improve their market position.
The competitive strategy concept differs from the cooperative strategy because it focuses on competitors.
The techniques in this category suggest ways to gain and maintain a competitive advantage over your competition.
A competitive strategy is developed based on the management’s action plan. Management creates a business strategy to compete successfully in the market with its competitors. Furthermore, it aims to provide the best value to its clients.
An effective competitive strategy must first satisfy customers’ needs and then outcompete the competition or rival organizations to gain a competitive advantage.
What Is a Competitive Strategy?
A competitive strategy can be defined as a long-term corporate strategy that aims to achieve a competitive advantage over its competitors.
Its goal is to establish a defensive position in a certain industry while also delivering a higher return on investment (Return on Investment).
The importance of this type of strategy is magnified in an industry with high competition and products that resemble each other almost exactly. A good example is the mobile phone industry.
Competitive strategy refers to a long-term action plan designed to achieve a competitive advantage in business.
This strategy is designed to provide an above-average position and produce a higher Return on Investment than the competition (ROI).
This technique is extremely crucial for businesses operating in a competitive market with many identical products.
It is necessary to examine all of the industry’s strengths, weaknesses, opportunities, and dangers before developing a competitive strategy that will provide one with a competitive advantage.
A successful marketing strategy requires knowing the competitors, investigating customer needs, assessing the strengths and weaknesses of the customer, and many other elements.
Businesses can conduct a SWOT analysis, market share analysis, and other analyses to improve their business operations and sales profits.
Competitive strategies are long-term plans created by firms to gain a competitive advantage over their competitors by analyzing their strengths, weaknesses, opportunities, and threats and comparing them to your own company’s strengths and weaknesses.
Harvard professor Michael Porter introduced the concept of competitive strategy. According to him, businesses worldwide use four different types of competitive tactics to compete.
Companies need to understand the fundamentals of this idea to make well-informed decisions throughout the project. The success of a project depends on this understanding.
What Are The Types of Competitive Strategy?
Professor Michael Porter, an American academic and economist, has identified four competitive strategies that can be implemented in any company, regardless of its size or product type.
The generic nature of these strategies enables them to be widely adopted by all types of businesses, given their universal applicability.
These are the most basic types of competitive strategies.
The firm could also use other strategies, such as partnerships, joint ventures, mergers, acquisitions, vertical integration, and outsourcing, when they determine that it is necessary.
Cost Leadership Strategy
Small firms struggle with adopting a cost leadership strategy since committing long-term to providing products and services at lower rates than their competitors.
The company must produce at a low cost to achieve this goal; otherwise, they will lose money.
“cost leadership in the industry” refers to a low-cost producer or supplier. A large-scale company capable of providing and producing items at a low-cost thanks to economies of scale is considered cost-leading.
Several other elements lead to cost leadership, such as efficient operations, an extensive distribution channel, and technical innovation. A good example is Walmart.
The goal of this firm is to become the lowest-cost manufacturer in the industry, which it can achieve by manufacturing on a massive scale. This allows the firm to capitalize on economies of scale.
A company must achieve cost leadership by having a high capacity utilization rate, a strong bargaining position, and a high implementation rate of technology.
Differentiation Leadership Strategy
Differentiation Leadership Strategy is based on identifying product attributes unique to the company compared to its competitors in the marketplace as the driving force behind differentiation leadership.
The quality and value-added characteristics of a product that is different from others in the market will allow the product to charge a higher price to offset the high production and distribution costs.
This strategy aims to establish a distinctive point of differentiation between the company’s products and its competitors.
A corporation aims to achieve market leadership by taking advantage of differentiation leadership.
Furthermore, the products are sold at a premium price because of the high value-added features.
These items are distinguished by their superior quality and brand, extensive distribution channels, and strong promotional support, among other features.
This game-changing technique allows brands to differentiate themselves from their competitors. A company must identify a distinguishing characteristic that distinguishes it from its competitors.
A business that uses this method will have a competitive advantage over its competitors, allowing it to charge higher prices.
Starbucks and Apple are examples of companies that employ this method.
Cost Focus Strategy
The cost focus strategy bears a striking resemblance to cost leadership, but with one notable difference: organizations that employ this strategy target a particular market segment and provide the lowest possible price for the offered product or service.
This type of marketing effectively increases brand awareness while also satisfying your customers.
This strategy is adopted by companies targeting certain market categories and keeping their products as cost-effective as possible within those categories.
A business plan like this assists the company in satisfying sufficient numbers of customers and attaining recognition.
The key difference between this strategy and cost leadership is that it emphasizes the best possible pricing for customers.
The only difference is that a cost-focused approach targets a certain market segment with its requirements and desires.
Companies will have an easier time establishing brand awareness in this manner. This strategy requires companies to concentrate their efforts on geographical markets with specific requirements to succeed.
Mineral water manufacturers can reach out to market segments such as Dubai, where people need and consume only mineral water for drinking, and can sell their products at a lower price than their competitors.
Differentiation Focus Strategy
A differentiation-focused strategy is similar to a cost-focused strategy in that it targets a specific niche within a market; however, instead of giving lower prices, enterprises differentiate themselves from their competitors.
The differentiation strategy delivers distinctive qualities and attributes to attract the attention of its target audience.
This strategy will allow the company to differentiate itself from one or two competitors by concentrating on specific market segments.
Creating this kind of differentiation is necessary for the border customers who are unwilling to purchase competitors’ items solely based on minor characteristics absent from their products. It is a clear example of a targeted niche marketing strategy.
Companies that employ this strategy likewise concentrate on narrow market areas, but the driving force behind their operations is creating distinctive value.
Differentiation focus strategy, as opposed to cost focus strategy, refers to improving a product by including distinctive features that set your organization apart from your competitors.
For example, the Breezes Resort chain has multiple resorts, caters exclusively to couples without children, and offers a peaceful environment free of children’s disturbance. People can relax knowing that no child will annoy them due to this arrangement.
Examples of Competitive Strategy
Michael Porter has given four parameters based on which several examples can be provided. Here are a few examples:
Example of Cost Leadership Strategy
Xiaomi, Oppo, and Vivo offer good quality smartphones and mobile phones that come at an affordable price and come with features such as those found in a premium phone from a company such as Apple or Samsung.
Example of Differentiation leadership Strategy
Cars from BMW are different than those from other brands. There are more features on BMW cars, and services are more personalized.
Example of Cost Focus Strategy
The goal of OnePlus, Realme, and Mi Smartwatches is to offer smartwatches at a lower cost than their competitors, such as Apple and Samsung.
Example of Differentiation focus Strategy
Apple watches emphasize unique and premium features in their smartwatches as a premium brand.