Competitive Strategy

Competitive Strategy means “the way companies compete in a particular business.  It is concerned with how companies gain competitive advantage through their unique or distinctive ways of competing in the market place.  Competitive Strategy is to have a competitive advantage to compete in the market and the `advantage` must be sustainable.  A company must identify its position relative to the competition in the market.  Depending upon if the competition is a leader, or a challenger, or a follower or a nicher, the company should adopt appropriate strategies to compete.

Five steps of the competitive strategy are:-

• overall low cost leadership strategy
• best cost provider strategy
• broad differentiation strategy
• focused low cost strategy
• focused differentiation strategy.

Overall Low cost Leadership Strategy:

• To be the overall low cost provider in an industry by scrutinizing each cost activity,        
• managing each cost lower year after year reduces overall costs,
• to cut some costs activities in the value chain.

Best Cost Provider Strategy:

To give more value for money with low cost with upscale value differentiation.  The keys to success are:-¨To match key competitors on product attributes and beat on cost, and to contain costs with better product for customers.

Advantages of Best Cost Provider Strategy:

Equal product attributes at low cost, and to manage cost down with better quality products.

Broad Differentiation Strategy: 

To look for differentiation opportunities in supply chain, research and development, production activities, marketing, sales and service activities.

Focus Strategies:

• Strategy on low costs,
• Strategy on differentiation, and
• Use costs and differentiation to capture niche markets.

Keys to success:

Corner niche markets where customers have distinctive preferences, unique needs and special requirement; an ability to serve the niche markets and its needs.

Niche markets have to be big enough to be profitable, potential for growth, not critical to the success of major competitors, to have resources to serve the niche markets effectively and have the capability to defend challengers through superior service to the niche. To be sure  no competitors focus on the niche markets.

Each the five steps of competitive strategy has strengths and weaknesses and it is important for the company to analyze each of these factors before formulating the right combination of competitive strategy

Questions:

• Define Competitive Strategy.
• What are the five steps of the competitive strategy?