Competitive strategy

What is a competitive strategy?

The competitive strategy is a marketing strategy that is geared towards the entire relevant environment of the company.

Your tasks can be:

  • To position the company in the market in such a way that it is best prepared for the competition, e.g. B. by emphasizing a long industry tradition.
  • To improve the position of the company with strategic marketing measures, e.g. B. by highlighting the goodwill of a company with regard to the quality of its products and its technological leadership.
  • Recognize changes in the market at an early stage and, taking the change into account, react faster than the competition.
  • The main determinants of the competitive strategy are, on the one hand, the industry structure and the relative position compared to the competition. Types of Competitive strategies are:
  • The overall cost leadership strategy aimed at lowering costs relative to the competition. This strategy is usually only possible if the company produces large quantities and the necessary raw materials can be procured cheaply.
  • The strategy of differentiation, which tries to shape one's own services in such a way that they are viewed as unique to the industry in question.
  • The strategy of concentration, which can relate to a limited number of customers and / or to specific services.

    Further explanation:
    Every company must plan with which policy or strategy it would like to appear as a competitor in the product market, it must choose a competitive strategy.

Product market

The competitive strategy relates primarily to the product market, but a company may also define a strategy for its appearance in the markets for factors. As is well known, automotive groups have implemented a special strategy towards their suppliers over the past decade. Consulting firms or investment banks often have no particular problems selling their services, but they are constantly striving to attract university graduates.

In all of these markets for products and services or for factors, planned and unplanned elements play a role in the specific decisions of a company. A competitive strategy can be both intentional and planned and, as has been said, emergent. The latter describes an unplanned and spontaneous behavior that results from the experience of a senior manager who decides on a case-by-case basis whether a customer should be offered a price reduction. The competitive strategy can therefore be formally defined and communicated in writing or exemplified through the culture and thus made recognizable.

Choice of competitive strategy

There are numerous influencing factors or constraints when choosing a competitive strategy. It depends on one's own abilities, on the behavior of customers, on the technology of service provision, on the policies of competing providers and on the regulatory environment. Planning the competitive strategy requires answering various questions:

Who are currently the competitors in your own industry? Who could be a competitor in the future?

What technologies for production and distribution are used, what changes are emerging here?

Who are the buyers or customers, the suppliers of intermediate services and what substitutes are there? What role do brand names or fashions play? Does the next generation behave differently?

How are the relevant markets regulated?

What role do special taxes play?

The analysis of the competitive environment should enable management to position the company in the competition. Changes in these factors are often predictable and can occasionally be detected using early warning indicators. Many markets (financial services, aviation) are deregulated today. For this reason, traditional competitive strategies have to be revised.

Furthermore, the markets do not only open up to the extent that geographically more distant providers suddenly enter the local competition. The markets are suddenly opening up to providers from outside the industry. For example, financial services are now offered by non-banks.

Products on channels

In addition, the importance of products is shifting to channels. So there are fundamental changes that can require a revision of the competitive strategy.

Today's usual approaches to determining the competitive strategy are often based on an analysis of the industry. But it has recently been seen that there are forms of technical change that enable companies from outside the industry to enter the markets. The current industry structure Question: Which economic sector do we belong to? is therefore not very suitable to serve as a basis for the strategic positioning of the company. Instead, the company will see itself as a portfolio of core competencies. What can we actually do? and thus relativize the roots in an industry. It will not remain stuck in the traditional organizational scheme of the strategic business units with their strategic success positions. Where are we doing well in the market so far?

Once the skills or core competencies have been identified, the company will first derive the core products from them, which will then represent the basis for various market services in the business units.

Strategic Intent, a declaration of strategic intent.

The determination of the overall development described in this way can be expressed more through a clearly formulated ambition to shape the future than through the result of a partial analysis of the traditional industry. In order to align the company to a possibly new task, an ambition is required or, more specifically, a strategic intent, a strategic declaration of intent.

Indeed, today one increasingly hears announcements that a company wants to enter this or that research area or market. This behavior is intended to orientate potential competitors at an early stage and deter them from taking a similar direction.

first-mover advantage

Early announcement (to deter copycats) is a strategy studied in game theory. Game theory teaches when a participant secures a permanent lead by taking a first step (first-mover advantage). You can take a first step or, if time is of the essence, simply announce it.

In general, game theory is increasingly being used as a method to determine the policy towards competitors. Another game-theoretic solution is, for example, recommending that the best always observe and imitate the second-best in order to ensure against the fact that the second-best could advance with a maneuver (which the best may not perform) at once. For example, Microsoft was accused of no longer having the goal of further developing software itself and creatively, but merely observing what competitors are developing in order to put themselves at the forefront of new developments with an imitation and the still unbroken power of the first to overshadow the real inventor of the novelty.

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