A company can improve its competitive strategy through various guidelines and decisions that contribute to achieving superior positions compared to other organisations, i.e. creating competitive advantages with cost leadership, product differentiation and market segmentation; Michael Porter’s most popular methodologies.
By implementing a competitive strategy in your company you will be able to evaluate, answer and take advantage of the challenges and opportunities offered by your ideal market, the advantages of developing a certain project and creating value for your customers.
An organisation will have a very difficult time if it does not develop a strategy of this type, there are a multitude of alternatives for consumers and it is essential to outperform the competition in a sustained, generic and concrete way. In the next post we will see what competitive strategy is and how to use it to our advantage.
What is the competitive strategy?
One of the main objectives of the competitive strategy in a company is to circumvent the threats and risks that exist in the competitive business world. It is knowing how to create a competitive advantage that is oriented to the long term in order to exploit strengths, take advantage of opportunities and develop new capabilities that lay the foundations for a good positioning in the market.
With the right strategies, attracting and retaining customers is no longer a problem. By implementing them, the internal characteristics of the company are strengthened, added value is created, an almost indispensable element for business success.
Types of competitive strategies
The typology proposed by the researcher Michael Porter is still valid today. His economic and business theories continue to be currently used by many organisations around the world, and thanks to them, they have managed to position themselves and gain an advantage over their competitors. Let’s find out what they are and what they consist on:
Cost leadership
This competitive strategy seeks to have costs of the products or services it offers below those of its competitors. A company or organisation that leads in costs will have higher profitability margins and will force its competitors to lower their prices or even exit the market.
One of the characteristics of this strategy is that it seeks maximum optimisation of the resources and processes carried out by the company. The department in charge of costs will carry out a strict control to avoid any obstacle that might prevent it from achieving its objective.
In addition, it redesigns its products to facilitate manufacturing steps such as robotisation and automation. This is linked to the development and innovation of technological processes to improve productivity levels.
Examples of companies that have employed this type of competitive strategy include McDonald’s, Ikea and Primark, among others.
Product differentiation
To achieve product differentiation, a product must have a unique value feature that is immediately perceived by the customer, so that a competitive advantage is achieved and the customer is willing to pay more for the service/product.
A company will achieve product differentiation if it improves in several aspects in an innovative way, especially in design, quality and customer service. In other words, it must meet the following three conditions:
- It must be clearly perceived by customers.
- It must not cost too much, it must be economically viable.
- It must not be sporadic, on the contrary, it must be sustained in the medium and/or long term.
Examples of companies that have employed this type of competitive strategy are the prestigious Apple and Tesla, as well as well-known brands such as Ferrari and Rolex, or the Ritz-Carlton hotel chain.
Market segmentation
This strategy targets a specific market segment, focuses on it as much as possible, and competes in it, using either cost leadership or product differentiation. To achieve this, it conducts an analysis of all the areas that make up the market. These studies sometimes highlight niches that have been neglected by competitors or are unknown.
An example of a company that has employed this type of competitive strategy is the Inditex textile group, which includes such well-known brands as Zara, Kiddy’s and Pull and Bear, among others.
Hybrid strategies are inefficient
Michael Porter and his competitive strategies are still highly respected today. The great economist pointed out that companies or organisations must choose between one of the first two business tactics: cost leadership or product differentiation. It will not be good for the business to use both at the same time, because the goal is not achieved and it is inefficient to choose both, making the company less likely to survive.
Competitive strategies that can be applied in an enterprise
Let’s look at some competitive strategies that you can apply in your company:
- Provide more value for your regular and potential customers, this makes a difference in whether a person chooses one brand or the other.
- Build close relationships with your customers and turn them into your main competitive advantage, they will be in charge of spreading the word as they come across your product or service.
- Have operational excellence, be superior in both price, quality and service provided, i.e. offer reliable products.
- Create different payment models for those products or services that are receiving greater demand and popularity. In turn, create different packages and promotions that provide a competitive advantage to the company, as it opens up a range of options to sell other products.
Get the internationalisation of your company with EPBS
At EPBS we offer you the necessary tools to create the most effective competitive strategies for your company and to improve your competitive position in relation to other organisations. We point you in the right direction for your business.
We help you to find that element that makes you different in your market. Do you need more information? Contact us!
