It suits large companies that can produce a large volume of products at a low cost, and that's why Walmart implemented this strategy. Therefore, the concept of competitive strategy (as opposed to cooperative strategy) has a competitive orientation. Competitive strategy includes those approaches that prescribe several ways to create sustainable competitive advantage. The objective of competitive strategy is to win the hearts of customers by satisfying their needs and, finally, to achieve a competitive advantage, as well as to overcome the competition (or rival companies).
The third factor in the sustainability of distinctive competition, namely, the dynamism of industry, is also an important determinant of competitive advantages. For example, the software industry, the electronics industry and the PC industry are very dynamic due to the high rate of innovation. In such industries, competitive advantages are short-lived. Since achieving and maintaining a competitive advantage is the primary objective of competitive strategies, managers must take steps to maintain competitive advantage once they are achieved.
Managers can create a sustainable competitive advantage by taking the following steps. As stated above, a company has a sustained competitive advantage when it can maintain a profit rate above the industry average for several years. . Managers need to develop distinctive competencies to maintain a competitive advantage.
Maintaining a competitive advantage requires a pleasant environment in the organization that promotes learning within the organization (commonly known as organizational learning). Continuous improvement in the quality of products and services (in fact, of everything a company does) is an indispensable condition for maintaining a competitive advantage over a longer period of time. The adoption of “best industry practices” helps to develop distinctive competencies and, therefore, to maintain a competitive advantage. Companies fail to maintain a competitive advantage because they are unable to adapt to changes in the organization.
They need to overcome resistance to change in order to maintain a competitive advantage. Distinctive competencies refer to those strengths of the organization that allow it to achieve a competitive advantage in the market. The differentiation strategy is the complete opposite of the cost leadership strategy. After all, not all products and services on the market are sold at low prices.
In this strategy, companies try to differentiate their products by adding value to them. This is done to attract customers who are willing to pay a higher price. At every step of the value chain, the company seeks to increase the characteristics, quality and attractiveness of the product. Innovation, research and development, excellent customer service, strong marketing: all of these tactics are part of the differentiation strategy.
Like a cost leadership strategy, a cost-focused strategy involves attracting customers and overcoming rivals by offering the least value for their products and services. So what's the difference between a cost leadership strategy and a cost-focused strategy? Well, with this method, you focus your marketing and sales efforts on a smaller market segment rather than a large one. Like the cost-focus strategy, this strategy targets a specific part of the market. In short, the differentiation approach strategy consists of improving the product with unique features that will make your company stand out from the crowd.
Luxury products often fall into this category. Continuously improving the quality of your products and services, and everything else your company does, is a fully proven way to maintain your competitive advantage for a long time. The company's constant practice of developing new products, the premium pricing policy and the ability to make products complement each other create a barrier for competitors in the market. If competitors are firmly committed to doing business in a certain way, they won't suddenly imitate a company's innovation.
This means that competitive strategy refers to the actions that managers take to improve the company's market position through customer satisfaction. A competitive strategy is an action plan developed by a company to achieve a competitive advantage over the competition. Barriers to imitation make it difficult for competitors to easily copy a company's distinctive competition. Successful strategies often build on a company's existing competitive competencies or help the company develop new ones.
This strategy is conceived after evaluating the strengths, weaknesses, opportunities and threats of the competition and comparing them with your own. Michael Porter has identified four types of competitive strategies that can be applied in any business organization, regardless of the size and nature of the products. A competitive strategy will help your company grow, strengthen your brand and increase your customer base. Basically, a business strategy is based on the action plan that the company would adopt to gain a competitive advantage over its rivals, using the company's resources and the differentiating factor.