Competitive Strategy

Competitive strategy can be defined as the long-term plan of a particular company to enable it gain an advantage competition-wise over its rival competitors in the same industry. This type of strategy is often used in advertising campaigns by negatively showcasing a rival company’s product or service.This type of strategy is directed at creating a defensive position in an industry and achieving a superior ROI (Return on Investment). ROI measures the profit or loss accumulated on an investment corresponding to the amount of money invested, it is expressed in percentage and is used to compare the profitability of two or more companies.ROI = (Net Profit / Cost of Investment) x 100 Types of Competitive Strategy1. Cost leadership2. Differentiation leadership3. Cost focus4. Differentiation focusCost leadership: This type of strategy involves the firm becoming the lowest cost producer in the industry by producing in large scale which allows the firm to achieve economies of scale. Then, the firm sells the cheaply made products to consumers at the lowest markup price possible thereby making it harder or virtually impossible for other competitors to compete.This type is typically only employed by large companies, small companies cannot partake in this type of type of competitive strategy due to the involvement of economies of scale. Differentiation leadership: With this type of competitive strategy, companies offer a wide array of unique and different goods or services. Firms can target to achieve market leadership because other competing firms will not be able to surpass the company’s standards.Again, this is another type of competitive strategy that large companies and firms would most likely adopt due to the large investment of resources in the research and development of new products. Cost focus: This type of strategy is similar to the cost leadership strategy except that it focuses on a niche (specific) market. The company concentrates its efforts on a specific population area of the market and keeps its products low priced in an attempt to establish itself as the cheapest seller in that specific market area.For example, a service provider, like MTN, could choose to focus on a particular town or city and then strive to be the cheapest in the town only. This kind of strategy enables firms to satisfy consumers and gain popularity.Differentiation focus: Like the cost focus strategy, this type of strategy also focuses on a specific population area of the market, but instead of being the cheapest seller of a product, it tries to market that product to the specific area as a unique product or service, this way differentiating itself from one or more competitors.For example, a company could make a product specifically designed for gamers  For a multi-national company, the best types of competitive strategy to adopt would be Cost leadership and/or Differentiation leadership strategy  

Leave a Reply

Your email address will not be published. Required fields are marked *