Published by MBA Skool Team, Last Updated: August 20, 2021
What is 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. Understanding competition, studying customer needs, evaluating their strengths & weakness etc. are all an important aspect of marketing strategy. Companies can study & evaluate on the basis of their market share, SWOT analysis etc., which would eventually help them drive business & sales revenue.
Types of competitive strategies by Porter
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 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
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
Without following anyone of above mentioned competitive strategies, it becomes very difficult for firms to sustain in competitive industry.
Examples of competitive strategy
There can be several examples based on the four parameters given by Michael Porter. Some examples are given below:
1. Cost leadership: Micromax smart phones and mobile phones are giving good quality products at an affordable price which contain all the features which a premium phone like Apple or Samsung offers
2. Differentiation leadership: BMW offers cars which are different from other car brands. BMW cars are more technologically advanced, have better features and have got personalized services
3. Cost focus: Sonata watches are focused towards giving wrist watches at a low cost as compared to competitors like Rolex, Titan, Omega etc.
4. Differentiation focus: Titan watches concentrates on premium segment which includes jewels in its watches.
Hence, this concludes the definition of Competitive Strategy along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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