Competitive Strategy: Explain, Definition, Types, Example

Sohini Mazumder August 25, 2020January 16, 2023 0 Comments

Complete guide on what is Competitive Strategy, Definition, How Should a Company Develop it, Types of Competitive Strategy, Importance, and Examples.

Business organisations, producing homogeneous products, often become rivals of each other. They face tough and sharp competitions from their competing company or business organization. This is why competitive firms often try various ways and methods to lift their goods and services more than the opponent firms, so as to win the race.

What is Competitive Strategy?

One company needs to adopt some methods or ways to surpass their competitor. When a competing company adopts a systematic long-time approach to have a competitive advantage over the rival company after understanding their Strength, Weakness, Opportunity, and Threat of both the companies (widely known as SWOT analysis) is known as Competitive Strategy.

In simple words, Competitive Strategy can be defined as planned, the strategical plan laid down for a long term by one company or a business organisation after considering the Strength and Weakness of both the competing organisations.

For example, Burger King and Mc Donalds, both have separate demand. Both of them are known for its excellent fast food service. Both have targeted customers, especially for the young generation.

But little do we know about their existing competition. Both produce homogeneous products, they have almost similar qualities, both charge a reasonable price, which is also the cause of their competition.

This is where exactly the competing companies need to follow some Competitive Strategy to win the race.

How Should a Company Develop Competitive Strategy?

As we have come to know when to initiate a competitive strategy, the next question which appears is how can a company do this?

Understanding the reason behind the existence of a business organization. What is the set goal and importance the business is?
The uniqueness of the business, what are the strengths and opportunities of the business.
Currently where the business stands?
Understanding the types of products produced and services provided by the business organisation, their scope in the market.
Understanding the threats and obstacles of the smooth functioning of the business organisation.

Types Of Competitive Strategy:

There are 4 types of Competitive Strategy, they are:

1. Cost Low Strategy

A company that follows this strategy focusses on providing goods and services at a low cost. They lower the price than their competitive company, but the quality of the product cannot be compromised. This strategy is beneficial because lowering the cost and providing better quality products will create more consumers.

2. Differentiation Strategy

This strategy includes product differentiation. The firm should make products which are not similar to the product of their competitor, there should a uniqueness in that product so that it can be easily differentiated from the other competitors’ product. The product shall be different in terms of shape, quality, durability, reliability, design and other factors.

The strategy of Product differentiation can be further classified into 2 types:

Broad Differentiation Strategy
Focused Differentiation Strategy

For Broad Differentiation Strategy a huge number of consumers are considered. On the contrary, Focused Differentiation, focusses on a few segments of consumers, which are resulted by segregating the entire markets into several groups.

3. Best Cost Strategy

In simple words, this strategy means achieving consumer satisfaction by improving the quality of the products by reducing their cost. This strategy aims at consumer satisfaction.

4. Market Niche

Under this strategy, the company focusses on a particular group of consumers and on a specified market. It also concentrates on making their products and services available to the consumers according to their tastes and preferences.

Why Competitive Strategy is Important?

Importance of Competitive Strategy are as follows:

It helps in a proper and effective planned approach.
Helps to effectively utilize all the resources for the proper working of the business.
Helps in creating a competitive advantage over the competitors.

Given the above points discusses the four different types of Completive Strategies followed by different business organizations, but we also have to consider that these have their respective conditions to be applied.

After reading about Competitive strategy, we have understood what it is and what it means, what are its types, now if we can relate it with real-life situations then our understandings will become clear. For this reason, few examples have been stated below.

Examples:

Few examples of Competitive Strategy are as follows:

Improved customer service.
Product differentiation.
Effective Pricing without compromising on the quality.
Technology advancement helps in reducing the cost incurred and thus, with reduced cost the price set on the products can be also reduced.
The important thing for any business is to retain its customers. Gaining more customers is not as important as satisfying existing customers.

To conclude, this is what Competitive Strategy means. It should be effective enough to overcome the threat that the competing company gives. Strategies should be effective enough to encourage initiating a company or business organization.

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