Competitive strategy – a way to gain an advantage in the market!

Competitive strategy today is what attracts customers to your business. Your and your competitors' products may be similar to each other, and the services at the same level. What makes you different is the way you mark your competitive advantage. 

What will you learn from the article?

In today's volatile and competitive business environment, having a clear competitive strategy is crucial to achieving success in the market. In this article, we will discuss various aspects of competitive strategy, starting with its definition and role in business. We will also look at the approach to competitive strategy according to two well-known authorities in the field of marketing: Michael Porter and Philip Kotler. We will also learn the concept of the mini maxi strategy and examples of its practical application.

Analyzing the competitive environment plays a key role in the process of creating an effective competitive strategy, which is why we will explore its meaning and methods of conducting it. Finally, we'll discuss the mistakes you should avoid when developing and implementing a competitive strategy to achieve the results you want. Ready to explore the secrets of effectively competing on the market? We invite you to read!

Contents

What is competitive strategy and what is its role? 

Perhaps there isn't much that sets you apart from your competitors. Or maybe everything is different, but your customers don't know about it? In both cases, you need a competitive strategy that will allow you to highlight the differences and thus stand out. If you look at the activities of the largest companies, you will quickly notice that they consciously build their advantage in opposition to the competition. 

Even if both companies sell a carbonated drink that is identical in appearance and taste, they are able to find the right lure for their customers and convince them that they are dealing with two completely different products. 

Małgorzata Lewandowska writes in the "International Journal of Management and Economics" that: "Developing a competition strategy means answering the questions: how the company intends to compete on the market, what its goals are and what possibilities of achieving them." The researcher notes that even the decision not to compete with market rivals is also a deliberate and planned action.

Jolanta Lubomska-Kalisz, from the Faculty of Economic Sciences and Management at the University of Szczecin, emphasizes the distinction between the strategy and competitive concept of enterprises. These are two completely different phenomena. In this classification, the first term refers to how a company competes with others. Meanwhile, the concept of competitiveness is "a general way of dealing with competition, a way of achieving and maintaining the competitiveness of an enterprise, which determines the main instruments and mechanisms of competition in the short and long term." 

Competitive strategy according to Porter 

Competitive strategy was first broadly defined in the 1970s, when Michael Porter's theory was created. According to him, there are three main ways to achieve the right advantage. It's about cost leadership, differentiation and focus. The cost leadership strategy is, of course, nothing more than price competition. Specifically, it is about minimizing overhead and direct costs.

Sources of savings can be found in areas such as advertising or research and development. They may also involve a change in strategy, e.g. focusing on the most profitable customers. On the one hand, it allows you to attract customers through lower prices. On the other hand, it somehow "impregnates" the company in case of problems. When some costs increase or the market situation changes, competitors will start to lose earlier than those who managed to optimize costs in time.   

Porter's second competitive strategy is differentiation. You can distinguish yourself from others thanks to the quality, packaging and price. The discriminant may be factual or related to the realm of ideas or beliefs. Read on the Commplace blog more about trends in differentiation strategy.

Porter's third competitive strategy is concentration. It's about focusing on a specific segment, area or group of customers. Such specialization allows you to stand out. Especially if you can deal with this small part in a comprehensive way and provide, for example, the best service there.  

In Porter's books, he uses a chart to suggest how to quickly estimate which strategy will be best in a specific case. And such a broad market and cost advantage provide a cost leadership strategy. If the market is narrow and the company can compete on costs, the lowest cost strategy will be best.

A narrow market and the advantage of differentiation provide a concentration strategy, while a broad market and the advantage of differentiation indicate that it is worth choosing a differentiation strategy. In this way, on four colored fields, Porter briefly presents which strategy may be useful in various business realities. 

How to compete according to Kotler 

The second researcher who had a great influence on marketing concepts in general was Philip Kotler. We have already written about the one developed by him lateral marketing. Competitive strategy according to Kotler is the second important concept in his achievements. He distinguishes the strategy of leader, challenger, follower, niche and alliances. The names speak for themselves to some extent. The leader defends his position at the top, the challenger tries to overtake him, and the follower tries to catch up with those who are in the lead. Niche competitive strategy means the same as concentration strategy.

The final form of competition is the alliance strategy. Rivals then prefer to cooperate in a specific area to achieve a higher goal (which may be profit or the removal of other competitors). To sum up: the two most important in the competition area are Porter and Kotler strategies. In total, they provide seven options that can be adapted to specific situations and based on them development strategy companies.

Competitive mini maxi strategy

The mini maxi strategy is one of the company's marketing management methods, but it will only work in some cases. What kind? To find out, please familiarize yourself with the SWOT analysis process.

Well-planned marketing is the easiest way to achieve success in business. Well-thought-out steps always bring greater benefits than actions without any clearly defined plan. Marketing planning allows you to create a coherent strategy in pursuit of the goal. One that will allow you to maximize the company's potential and lead it to the top.

One of the basic tools for creating marketing strategies is the SWOT analysis created by Albert S. Humphrey in the 1960s. Its aim is to plan activities that will improve the company's situation on the market - it allows you to learn about the strengths (S) and weaknesses (W) of the brand, as well as opportunities (O) and threats (T). – threats) coming from the environment.

Strengths belong to internal factors. These are the elements that distinguish the company on the market and enable it to achieve success. Weaknesses, which are also considered internal factors, are the company's flaws and obstacles to success. Opportunities are external factors that can create favorable conditions for business development. Threats (external factors) are threats resulting from, for example, the activities of competitors, which may have a negative impact on the company.

A SWOT analysis is a logical summary and ordering of thoughts, brand characteristics and business perception. Full use of the conclusions resulting from the analysis is the key to improving the company's operations and creating a competitive strategy that will distinguish the company from others.

The mini maxi strategy is one of the results of the SWOT analysis. It means that the company's weaknesses outweigh the strengths, and opportunities dominate in the brand environment. However, these opportunities are difficult to exploit as they are closely related to the brand's weaknesses. The mini maxi strategy assumes striving to minimize weaknesses in order to be able to take advantage of external opportunities. In a nutshell, the company uses the opportunities while reducing its weaknesses. The effect of the mini maxi strategy is the significant improvement of the company, increasing the capital, which allows you to build or maintain a competitive advantage on the market.

Competitive strategy - examples

A well-thought-out and effectively implemented strategy is a recipe for competitive advantage on the market. When using the mini maxi strategy, the company must overcome its weaknesses in order to take advantage of external opportunities. How to proceed in a mini maxi competitive strategy? The activities can be divided into several stages:

• increasing your resources,
• improvement of the offered products,
• increasing productivity,
• reducing the cost,
• striving to maintain a competitive advantage.

At the beginning, it is worth conducting a detailed analysis of the company's resources - financial, product. It may turn out that the company's resources are insufficient. It is therefore important to find a way to increase them by taking advantage of the opportunities that arise. An example of such an action may be the conclusion of a cooperation agreement with another company. Collaboration will not only increase resources, but can also eliminate a competitive threat (the partner could become a brand competitor in the future).

Increasing efficiency, improving the product and trying to reduce costs are the next important steps in the mini maxi competitive strategy. First, you should focus on the product. Is something missing? What distribution channels do we use? How to effectively sell a product? Productivity analysis is also important. It may turn out that with the resources we have, we are able to produce more of the product. It is also worth thinking about reducing costs, which will give us a sense of comfort. To maintain a competitive advantage, you need to constantly monitor the market and seize all opportunities. An example would be to expand the assortment, not to cling to a single product.

It is crucial in running a competitive strategy  strategic management - that is, the constant search for a way for the company to adapt to changing external and internal conditions. Strategic management is a constant modification of goals and methods of achieving the goal, which allows you to effectively manage resources, achieve the best financial results and maintain a competitive advantage on the market.

Analysis of the competitive environment - an important element in creating a strategy

However, before you decide to implement one of the competitive strategies, you need to get to know the environment in which your company operates. Knowing the market is the key to success.

The most important element of the competitive environment are companies from the same industry - brands that offer products or services similar to yours and have the same target group. The more competitors there are, the harder it is to become a market leader. However, you should remember that not every company from the same industry poses a real threat to us. Therefore, market research should be reliable. It must take into account various elements and variables - including entry and exit barriers.

Entry and exit barriers are also important to the development of potential competitors. Entry barriers are factors that make it more difficult for firms to enter a given market, and exits reduce the attractiveness of new businesses. The lower the barriers to entry and the greater the exit, the more likely the market is to develop new competition. When analyzing the company's environment, take into account the substitutes of your products / services. Also consider whether there may be new substitutes that will be more attractive to customers in the near future.

Another important issue is the number and quality of suppliers. The worst situation is the availability of only one supplier who, due to the monopoly, will not pay attention to the quality of service, and at the same time will dictate high prices. It is better when there are several suppliers on the market that have to compete with each other and, consequently, offer good quality and favorable prices.

The company is also surrounded by customers. In order to establish an effective competitive strategy, you need to know the consumer's profile, needs and expectations. In order to attract the attention of recipients and maintain good relations with them, it is necessary to ensure the attractiveness of the message, innovation and originality of the product as well as a good model of after-sales service.

The last, but no less important, element is consumer trends. It is awareness of what is happening around you. The analysis of trends allows you to introduce changes, apply innovative ideas, create an offer that best suits the needs of customers and the current realities, and thus stand out from the competition.

Mistakes to Avoid 

It may seem that highlighting a competitor's downsides is the best option to beat the competition. Meanwhile, numerous studies prove that communication strategy based on a negative message is not effective. If you highlight your competitors' flaws on your website or in your ads, customers will not remember the details, but only a negative impression.

It's similar when you focus too much on the problem instead of the solution you're offering. A competitive strategy can be offensive or defensive. Companies with large resources often choose the offensive approach. This can be conducted from the outside PR campaigns hitting a competitor, but even then, the brand in the advertising message does not focus on the competition's disadvantages and problems, but on its own benefits and solutions. 

Do you want to stay ahead of the competition and increase your sales? contact us and start achieving these goals even more effectively.