Posted in Marketing and Strategy Terms, Total Reads: 9399
Definition: Competitive Strategy
Competitive Strategy is defined as the long term plan of a particular company in order to gain competitive advantage over its competitors in the industry. It is aimed at creating defensive position in an industry and generating a superior ROI (Return on Investment). Such type of strategies play a very important role when industry is very competitive and consumers are provided with almost similar products. One can take example of mobile phone market.
Before devising a competitive strategy, one needs to evaluate all strengths, weaknesses, opportunities, threats in the industry and then go ahead which would give one a competitive advantage.
According to Michael Porter, competitive strategy is devised into 4 types:
1. Cost Leadership
Here, the objective of the firm is to become the lowest cost producer in the industry and is achieved by producing in large scale which enables the firm to attain economies of scale. High capacity utilization, good bargaining power, high technology implementation are some of factors necessary to achieve cost leadership.
E.g. Micromax mobile phones
2. Differentiation leadership
Under this strategy, firm maintains unique features of its products in the market thus creating a differentiating factor. With this differentiation leadership, firms target to achieve market leadership. And firms charge a premium price for the products (due to high value added features)
Superior brand and quality, major distribution channels, consistent promotional support etc. are the attributes of such products.E.g. BMW, Apple
3. Cost focus
Under this strategy, firm concentrates on specific market segments and keeps its products low priced in those segments. Such strategy helps firm to satisfy sufficient consumers and gain popularity.
E.g. Sonata watches concentrates on lower segment customers by providing
4. Differentiation focus
Under this strategy, firm aims to differentiate itself from one or two competitors, again in specific segments only. This type of differentiation is made to meet demands of border customers who refrain from purchasing competitors’ products only due to missing of small features. It is a clear niche marketing strategy.
E.g. Titan watches concentrates on premium segment which includes jewels in its watches. Without following anyone of above mentioned competitive strategies, it becomes very difficult for firms to sustain in competitive industry.