In terms of cost leadership, a company intends to become the low-cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the search for economies of scale, patented technology, preferential access to raw materials, and other factors. A low-cost producer must find and take advantage of all sources of cost advantage.
If a company can achieve and maintain leadership in overall costs, it will perform above average in its sector, as long as it can achieve prices equal to or close to the industry average. In a differentiation strategy, a company seeks to be unique in its industry in certain dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important and is uniquely positioned to meet those needs. It is rewarded for its uniqueness with a higher price.
The generic approach strategy is based on the choice of a narrow competitive environment within an industry. The centrator selects a segment or group of segments of the industry and adapts its strategy to serve them while excluding others. The approach strategy has two variants:. A) In the cost approach, a company seeks a cost advantage in its target segment, while in (b) the differentiation approach, a company seeks differentiation in its target segment.
Both variants of the approach strategy are based on differences between the target segment of the focuser and other segments of the industry. Target segments must have buyers with unusual needs, or else the production and delivery system that best serves the target segment must differ from that of other segments of the industry. The cost approach takes advantage of differences in cost behavior in some segments, while the differentiation approach takes advantage of the special needs of buyers in certain segments. These factors must be considered during the planning phases as the company determines the competitive strategy it will employ.
Without following any of the competitive strategies mentioned above, it becomes very difficult for companies to stay in a competitive industry. Successful strategies often build on a company's existing competitive competencies or help the company develop new ones. As the name of this strategy suggests, differentiation is about differentiating yourself from the competition. In the race to offer products that meet customer needs, companies design many strategies in terms of product improvement, prices, values, benefits, etc.
If a company can create a product or service that is one step above the rest and that differentiates itself from its competitors, it won't be long before others come in and copy the effort. A competitive strategy must consider the capacity of its competitors and the dynamics of the industry. Because of their susceptibility to common use by all commercial companies, they are labeled generic strategies. As mentioned earlier, the primary purpose of employing competitive strategies is to gain a competitive advantage.
Business strategy encompasses all actions and approaches to competing against competitors and the ways in which management addresses various strategic problems. Working on the product or service without an adequate competitive strategy is not a sustainable way of working, since eventually, at some point, a competitor would start offering the same features at a lower cost or would offer more features at the same cost. . Competitive strategy is a long-term development and marketing plan designed to gain an advantage over the competition.
Employing a competitive strategy based on thorough market analysis can help companies attract customers, survive in a competitive market and gain a more prominent position in the market in which they provide services. The four types of competitive strategies identified by Porter are considered generic because of their ability to apply to any company or organization, regardless of the size of the company or the industry to which they provide services. Competitive strategy is a long-term plan of a particular company that is created to gain a competitive advantage over its competitors in the industry using levers such as cost, differentiation, etc. .