Therefore, the concept of competitive strategy (as opposed to cooperative strategy) is competition-oriented. Competitive strategy includes those approaches that prescribe several ways to create sustainable competitive advantage. The objective of competitive strategy is to win the hearts of customers by satisfying their needs and, ultimately, to gain a competitive advantage and outperform the competition (or rival companies). The third factor of sustainability of distinctive competition, that is, the dynamism of the industry, is also an important determinant of competitive advantages.
For example, the software industry, the electronics industry and the PC industry are very dynamic due to the high rate of innovation. In such industries, competitive advantages are short-lived. Since achieving and maintaining a competitive advantage is the primary objective of competitive strategies, managers must take steps to maintain competitive advantage once they are achieved. Managers can create sustainable competitive advantage by taking the following steps.
As noted above, a company has a sustained competitive advantage when it can maintain a profit rate above the industry average for several years. This is made possible when the company emphasizes the four generic building blocks of competitive advantage, such as; Therefore, a company can enjoy a sustained competitive advantage. Managers must develop distinctive competencies to maintain a competitive advantage. Maintaining competitive advantage requires a pleasant environment in the organization that promotes learning within the organization (commonly known as organizational learning).
The continuous improvement of the quality of products and services (in fact, of everything a company does) is a sine qua non condition for maintaining a competitive advantage for a longer period. Adopting “best industry practices” helps develop distinctive competencies and therefore maintain competitive advantage. Companies are unable to maintain a competitive advantage because they cannot adapt to changes in the organization. They need to overcome resistance to change in order to maintain a competitive advantage.
Distinctive competencies refer to those strengths of the organization that allow it to achieve a competitive advantage in the market. First, competitive strategy is the first of the types of strategies in strategic management. It refers to a plan that combines the influence of the external situation. Along with the integrative concerns of an organization's personal status.
Competitive strategy aims to gain a competitive advantage in the market over the competition. Competitive advantage comes from strategies that lead to a certain uniqueness in the market. Winning a competitive strategy is based on sustainable competitive advantage. Examples of competitive strategy include contrast strategy, low-cost strategy, and focus or niche strategy.
Competitive strategy consists of business approaches and initiatives. Commits to a company to attract customers and deliver. Higher values than them by meeting their expectations and strengthening their position in the market. This Thompson and Strickland definition emphasizes the “tactics and ingenuity” of directors in outlining strategy.
It means that competitive strategy deals with stocks. Its managers are committed to improving the company's market position by satisfying customers. The enlightening market situation infers taking actions contrary to industry competitors. Therefore, the notion of competitive strategy has a competition angle.
Competitive strategy includes tactics that establish various ways to build a competitive and livable advantage. Management's action plan is the focus of competitive strategy. The objective of the competitive strategy is to win the heart of the customer by satisfying their needs. Finally, it is to outperform the competition and achieve competitive advantages.
Functional strategy is concerned with developing the right things to give a business unit a competitive advantage. Each business unit has its own set of departments and each department has a functional strategy. Functional strategies are adapted to support a competitive strategy. For example, a company that follows a low-cost competitive strategy needs a production strategy.
Insists on reducing operating costs and also on a human resources strategy. In addition, it insists on retaining as few employees as possible. These employees are highly qualified to work in the organization. Other functional strategies, such as marketing strategy, advertising strategy and financial strategy, should also be formulated to support competitive strategy at the enterprise level.
A cost leadership strategy works if the company can produce its products at the lowest cost in the industry. This strategy is commonly used in markets with products that are not clearly different from each other. They are standard products in a wide market, frequently purchased and universally accepted by most consumers. Walmart is one of the best-known companies that has an effective cost-leadership strategy.
Its focus is to market to the largest number of customers with the lowest prices on all of its products. A differentiation strategy requires the company to offer products with unique characteristics that consumers believe have value and are willing to pay more for them. If consumers perceive these unique properties as worthwhile, the company may charge higher prices for its products. Having a unique product is not the end of the story.
Implementing a differentiation strategy requires a sales team that has the skills to effectively communicate the unique properties of products and convince consumers that they are receiving more value for their money. At the same time, marketing campaigns should promote and establish the company as a reputable company known for its innovative and high-quality products. A differentiation strategy has several risks. Competitors will not be idle when they lose market share; they will find ways to imitate products and start their own differentiation campaigns.
Companies that follow a cost-focused strategy are taking the risk by leaving the mass market. While focusing on a specific demographic can develop a group of loyal customers, the company bases its fortunes on a small group of buyers. Features that are attractive to this niche market may not be attractive to the overall market. Like a cost-focus strategy, the differentiation approach targets a narrow niche market.
In this case, the company finds unique characteristics of its products that appeal to a particular group of customers. A successful differentiation approach strategy depends on developing strong brand loyalty from your customers and constantly finding unique features to stay ahead of the competition. There are four broad categories of competitive strategies, two with threatening movements and two with non-threatening movements. Threatening movements take two general forms, offensive and defensive strategies.
Similarly, non-threatening movements also fall into two broad categories; collusive strategies and strategic alliances, Porter defines them as movements that improve the position of the company and that of rival firms, even if they are not matched, improving the position of the firm and that of rival firms only if match my most rival firms, and improve the firm's position because they don't match rival firms. These strategies are discussed below. Defensive strategies are those movements that reduce the ability of the rival company's strategies to threaten the company's competitive strength or organizational resources. Because of this, they are rarely a source of competitive advantage, their purpose is to defend a position in the industry, protect competition resources from imitation, and maintain an existing advantage by reducing risk and weakening the impact of offensive attacks by rival companies.
There are five basic defensive strategies; retaliation, compromise, government intervention, strategic flexibility and avoidance. The retaliatory strategies described by Porter as discipline, denial of a base and compromise are efforts to discourage rival companies from attacking. Discipline involves immediate action, response directed to the initiator, so that rival companies can always expect retaliation to occur. Denying a base implies preventing a new participant from meeting their objectives, so that they withdraw or reduce their efforts.
Compromise strategies include those that deter retaliation by communicating a commitment to unequivocally move forward with offensive movements, deter threatening movements with a commitment to direct and ongoing retaliation if rival companies make certain moves, and build trust by communicating commitment. of not making new moves or renouncing existing movements in an effort to de-escalate a competitive battle, government intervention strategies involve the use of political and legal tactics to prevent rival companies from changing the rules of the game, the flexibility of the strategy protects the company's resources to through the ability to quickly exit declining markets into more prosperous markets, Finally, avoidance strategies avoid confrontation by focusing on market segments of little interest to rival companies. Strategic alliances are cooperative agreements of rival firms that do not involve reducing industry production to control prices. They are perceived as non-threatening when improvements arise in the performance of participating companies that would not be possible without the cooperative efforts of those.
They allow rival companies to manage risks and share costs when economies of scale and learning are lacking, facilitate low-cost entry into new markets , industries and industry segments by rival companies that individually lack the necessary products, capabilities and resources, and provide rival companies with strategic flexibility and an entry point without incurring the cost of full scale under conditions of high uncertainty. Strategic alliances take many forms, but they fall into three broad categories. Non-participatory alliances (licensing and distribution agreements) are cooperative agreements that are implemented through contractual obligations without rival companies sharing any capital position, equity alliances are the same as non-participatory ones except that a rival company or another or both makes an investment of capital in the agreement. This involves supplementing contractual relationships with stock purchases.
Joint ventures involve the formation of an independent company in which participating firms invest and share profits. Strategic alliances are a common use today by rival firms. Traditionally, only small businesses and niche players considered this type of cooperative agreement to manage risks, share costs and eliminate barriers to entry, global economic growth and advanced communication methods have encouraged the use of strategies small firm alliances, have also made it necessary and it is possible for large companies to use strategic alliances to reduce costs and enter global markets that were not previously exploited. Even companies with the best products in the world need a solid strategy to ensure that those products reach the widest possible number of consumers.
Therefore, there may be production strategy, marketing strategy, advertising strategy, sales strategy, human resource strategy, inventory strategy, financial strategy, training strategy, etc. Corporate strategy defines the markets and businesses on which a company is based on which the company will compete. Business strategy consists of action plans adopted to use a company's distinctive resources and competencies to gain competitive advantages in the market. Competitive strategy consists of the business approaches and initiatives undertaken by a company to attract customers and offer them superior value by meeting their expectations, as well as to strengthen its position in the market.
IKEA is a low-cost leader that uses a focused low-cost strategy, which appeals to a particular segment of the overall market. Many of the strategies needed to succeed in e-commerce are very different from competing in a non-digital environment. Finally, avoidance strategies avoid confrontation by focusing on a market segment of little interest to rival companies. In some companies, managers “develop an operational strategy for each set of annual objectives in departments or divisions.
Business strategy refers to the actions that managers take to improve the company's market position through customer satisfaction. The main focus of business strategy is product development, innovation, integration (vertical, horizontal), market development, diversification and the like. They have also made it necessary and possible for large companies to use strategic alliances to reduce costs and enter global markets that were not previously exploited. Strategy flexibility protects company resources through the ability to move quickly from declining markets to more prosperous ones.
Companies that are successful with a differentiated generic marketing strategy need a talented and creative product development staff. A corporate strategy, for example, of P%26G may be the acquisition of Canada's leading tissue companies to become the unquestionable market leader. . .