Generic competitive strategies

Everyone knows that it is possible for a monopoly to obtain higher prices than they would be in perfect competition.
Alle Competitive strategies zielen darauf ab, den Produktmarkt (oder Faktormärkte) zu verändern und ihm gewisse Aspekte des Monopols oder der monopolistischen Konkurrenz zu verleihen, und die Unternehmung zum Nutznießer dieser Aspekte werden zu lassen.

In presentations and in management literature, the microeconomic terms of monopoly or monopoly competition are replaced by the term competitive advantage and the objectives outlined above are referred to as competitive strategies. Relevant work goes back to PORTER, who developed a doctrine of generic competition strategies. 98 There are three strategies:
1. the pursuit of low costs,

2. the differentiation in the product market from the competition and

3. the concentration on individual customer segments and the focus

PORTER's teaching distinguishes between two basic types of competitive advantages: low costs and differentiation in the product market. With these competitive advantages, a company can pursue a narrower or a broader goal. The combination creates a matrix with four fields.

If two of the four fields are combined, the matrix provides the three aforementioned generic competitive strategies: 1. cost leadership, 2. differentiation and 3. concentration on priorities, which in turn are either on costs (3a) or on differentiation in the product market ( 3b) can focus.

1. Sustainable competitive advantages can only be achieved in PORTER's teaching by choosing a strategy. Therefore, companies have to decide which of the three strategies to follow. A mixed solution or a combination is not possible, because this does not allow a company to set itself apart from the competition - as the Americans say, it is stuck in the middle.

2. Alle drei Strategietypen führen jeweils auf ihre Art und Weise zum angestrebten Ziel. Voraussetzung für die Wirksamkeit und Umsetzbarkeit der gewählten Strategie sind die Anpassung der Unternehmensorganisation und der Corporate culture an die Grundstrategie. Sowohl die neue Organisationsstruktur als auch die neuen Normen und Werte tragen dann zum Erreichen des angestrebten Wettbewerbsvorteils bei.
The three basic types are briefly explained below:

1. Cost leadership: As a cost leader, a company strives to become the most cost-effective manufacturer in the industry. For this it is necessary to realize economies of scale with a cost-effective production. As a rule, cost managers will have a hierarchical structure and sophisticated controlling. The corporate culture is characterized by discipline and clear responsibilities.

2. Differentiation: With this strategy, a company tries to be unique to its competitors in some of the characteristics that its customers consider to be important. These can be in a particular product design or brand name, technology, or business process. By differentiating itself from the competition, the company positions itself in the market in a favorable situation compared to the competition.

The uniqueness of the coverage of customer needs increases customer loyalty. At the same time, the price sensitivity of customers is reduced and the company's profit margin increases. Of course, the cost of differentiation must not get out of hand despite this exceptional situation. This type of strategy develops in organizations with a strong focus on innovation.

3. Concentration on focal points: With this type of strategy, the company selects an industry segment or a sub-segment of an industry in order to optimally satisfy the needs of its customers. It is therefore not a question of a general, but rather a competitive advantage specially tailored for a certain target clientele, a market niche. This can either be a cost or a differentiation focus.
The differentiation advantage makes use of special customer needs in a certain customer segment, while the cost focus exploits the high price sensitivity of a certain target clientele. Organizational structures and corporate culture of the company using it must be tailored to the targeted target segment and are based on the chosen focus.

In management theory, further approaches for the strategic positioning of companies have been developed. In 1965, IGOR ANSOFF put together a matrix named after him in which four generic competitive strategies categorized according to the dimensions of product and market are presented.

ANSOFF has identified four strategies: 1. the market penetration strategy, 2. the product development strategy, 3. the market development strategy and 4. the diversification strategy.99 According to this, a company can grow either through newly developed products or by opening up new markets, the latter for example by means of new sales channels or one geographic expansion.

1. With the market penetration strategy, a company chooses to continue growing with the existing product range in the markets currently being worked on.

2. Furthermore, the company can open up new markets with its current offers: Market development strategy.

3. If, however, it decides in favor of the product development strategy, it wants to serve its current customers with new products to be developed.

4. Finally, the company can diversify by entering new markets with new products. This diversification strategy should be chosen if the company does not expect its current products to have promising success and market potential.

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