Contents
- What is a competitive strategy?
- Why does a business need a competitive strategy?
- Types of competitive strategies
- How to choose and develop a competitive strategy?
What is a competitive strategy?
A competitive strategy is a long-term action plan that helps a company maintain its competitiveness and strengthen its market position. It includes various approaches that allow a company to stand out from its competitors, ensure its uniqueness, and attract customers. One vivid example of successful implementation of such a strategy is the airline "Pobeda," which achieves success in the air transportation market thanks to its low prices for services.
The term "competitive strategy" was introduced by American economist Michael Porter in the late 1970s. He proposed the first typology of competitive strategies, which became the basis for further research in this area. Other experts, such as Philip Kotler and Andrey Yudanov, have also developed their approaches to classifying these strategies, but the main concept remains unchanged.
Why does a business need a competitive strategy?
Competition is an integral part of a market economy, where companies compete for customer loyalty, production, and favorable sales conditions. A competitive strategy is necessary for companies to compete successfully, increase sales volumes, and enhance profitability. According to Porter, there are five main competitive forces in business that must be considered:
- Current competitors: The presence of strong rivals restrains price growth and requires active brand promotion.
- Threat of new competitors: The emergence of new players forces companies to invest in improving products and marketing.
- Threat of substitutes: Substitute products require companies to make additional efforts to retain customers.
- Influence of customers: Companies must adapt to the needs and purchasing power of their customers.
- Influence of suppliers: The quality and cost of raw materials directly affect the production costs.
Analyzing these forces and managing them effectively helps companies remain competitive.
Types of competitive strategies
There are several key typologies of competitive strategies, with three main ones identified by Michael Porter:
Cost Minimization
This strategy involves reducing production, service, and promotion costs, allowing for lower prices on products and attracting customers. For example, companies like "Lenta" successfully apply this strategy by offering products under their own brand.
Differentiation
Within this strategy, companies focus on the unique characteristics of their products or services that distinguish them from competitors. This may relate to quality, design, or service. An example is Apple, which offers innovative products that users are willing to pay more for.
Focus
The focus strategy targets a narrow segment of the target audience. Companies like Ferrari specialize in producing luxury cars and successfully compete based on the uniqueness of their products.
How to choose and develop a competitive strategy?
When choosing a competitive strategy, a business should consider several factors, such as the company's goals, the level of competition in the industry, financial capabilities, and potential market changes. Using SWOT analysis can help identify the strengths and weaknesses of the business, as well as the opportunities and threats it may face. It is also necessary to consider the possibility of combining different strategies to achieve the best result.
After selecting a strategy, the company should develop and implement a specific action plan that will involve participation from top management, senior executives, and external experts.