Competitive Strategy is defined as the long-term plan of a particular company to gain a competitive advantage over its competitors in the industry. It is aimed at creating a defensive position in an industry and generating a superior ROI (Return on Investment). Such types of strategies play a very important role when the industry is very competitive and consumers are provided with almost similar products. One can take an example of the mobile phone market.
Before devising a competitive strategy, one needs to evaluate all strengths, weaknesses, opportunities, and threats in the industry and then go ahead which would give one a competitive advantage.
Types of competitive strategies by Porter
According to Michael Porter, competitive strategy is divided into 4 types:
Cost Leadership
Here, the objective of the firm is to become the lowest-cost producer in the industry and is achieved by producing on a large scale which enables the firm to attain economies of scale. High capacity utilization, good bargaining power, and high technology implementation are some of the factors necessary to achieve cost leadership. E.g. xiaomi/Redmi phones
Differentiation leadership
Under this strategy, the firm maintains unique features of its products in the market thus creating a differentiating factor. With this differentiation leadership, firms target to achieve market leadership. And firms charge a premium price for the products (due to high value-added features). Superior brand and quality, major distribution channels, consistent promotional support etc. are the attributes of such products. E.g. BMW, Apple
Cost focus
Under this strategy, the firm concentrates on specific market segments and keeps its products low-priced in those segments. Such a strategy helps firms to satisfy sufficient consumers and gain popularity. E.g. Sonata watches
Differentiation focus
Under this strategy, the firm aims to differentiate itself from one or two competitors, again in specific segments only. This type of differentiation is made to meet the demands of border customers who refrain from purchasing competitors’ products only due to missing small features. It is a clear niche marketing strategy. E.g. Titan watches
Without following any of the above-mentioned competitive strategies, it becomes very difficult for firms to sustain themselves in a competitive industry.
Examples of competitive strategy
There can be several examples based on the four parameters given by Michael Porter. Some examples are given below:
Cost leadership:
Xiaomi/Redmi smartphones and mobile phones are giving good quality products at affordable prices which contain all the features that a premium phone like Apple or Samsung offers
Differentiation leadership:
BMW offers cars which are different from other car brands. BMW cars are more technologically advanced, have better features and have got personalized services
Cost focus:
Sonata watches are focused towards giving wristwatches at a low cost as compared to competitors like Rolex, Titan, Omega etc
Differentiation focus:
Titan watches concentrates on the premium segment which includes jewels in its watches.
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