Competitive Strategies in Strategic Management

What Factors differentiate one competitive strategy from the other?

The two factors that differentiate two particular competitive strategies are:

1. 1. Defining the extent of company’s target market

1. 1. Deciding on the fact whether the company is taking competitive advantage based on the factors of low cost or differentiation

Based on the above factors the generic competitive strategies for a company can be divided into:

A Low-Cost Provider Strategy

This strategy involves using low-pricing techniques that focus on attracting a broad spectrum of consumers. The pricing strategy usually used is underpricing the rivals. This kind of strategy attracts a broad range of consumers, as most of the consumers belong to the category of being price conscious consumers. Walmart is a perfect example of this strategy. Walmart uses some highly effective low-cost models for pricing which are difficult to compete with in the market. Any company using this strategy has to provide the required value to the customers through its products and services at the set market price.

A Broad- Differentiation Strategy

This strategy involves differentiating the products or services of a company in a way that it appeals to a broad spectrum of consumers. Apple is a perfect example in this context. Apple differentiates its smartphones on the basis of superior technology and innovation from his close rivals in the market. The products are premium and expensive, but they have the capability to reach out to a broad range of customers. Successful differentiation allows the company to command a premium price for its product and services, and in getting increased customer loyalty for the brand. Similarly, Red Bull has its own set of customers who prefer the unique taste offered by the drink.

A Focused Low-Cost Strategy

This strategy revolves around creating a niche by outcompeting the rivals with a focused low-cost strategy. It revolves around serving the niche members at a lower price. Papa Murphy’s in the United States is a perfect example of this strategy. Papa Murphy’s focuses on reducing the cost of restaurant space by only making the pizza and by saving on the baking cost. The outlets don’t need much restaurant space as they don’t need a baking equipment, and this technique serves the niche group of customers who get the advantage of enjoying a restaurant made pizza at low-cost.

A Focused Differentiation Strategy

This strategy focuses on serving niche customers by offering them a customized product that serves their need. The products and services are customized to beat the competition in a strategic way. Tesla is a perfect example in this case, as it has customized its products in order to meet the requirements of a specific group of customers. Companies like ‘Four Seasons Hotels and Resorts’ use this strategy to serve their specified smaller group of customers who also tend to stay loyal to the brand in the long run.

A Best-Cost Provider Strategy

A very effective hybrid strategy that involves a mix of low-cost provider and differentiation strategy. The company focuses on beating the price expectations of the customers by giving them more value for their money and also by satisfying consumer’s expectations on key quality/features/ performance/service attributes. This strategy is used by the companies who have the capability to manufacture or deliver high- quality products at a low- cost. Amazon is one such example, as it has the perfect liberty of not bearing the basic operating costs that are managed by other retailers who have physical presence in the market. This strategy works best in those markets where product differentiation is considered to be a regular norm, and where a large number of buyers can be attracted to buy mid-range products.

Defining the strategy of a company is not an easy task, as a strategy is based on practical features like ‘what is relevant in the contemporary times.’ A company can use a particular strategy for a particular period, but it is the prerogative of the management to decide what works best under what conditions. Theoretically, most strategies focus on a value- cost trade-off, but blue ocean strategy is one modern strategy that allows on organization to provide high-value at a low cost. A company can make use of any strategy that suits its business environment, as the strategy should eventually focus on achieving profitability within the set timeframe.