Competition in the Market
In recent days, the competition in the market has been the toughest one, and therefore for a company to get a competitive advantage over them is not an easy task to do so. You not only need to manage your products effectively, but you should also have a good relationship with your customers.
For this purpose, the company gives more value to its customers. Moreover, there are two steps that are quite helpful for a company in gaining a competitive advantage in the market.
- In the first step, competitor analysis is made by which the company identifies the strength of weaknesses of competitors and then goes for threats and opportunities. It is actually a SWOT analysis of the company.
- In the second step, competitive marketing strategies are made by which the company seriously positions itself among competitors and ascertains a path to give a competitive advantage.
In Competitive Analysis, the company tries to know everything about its competitors so that it can prepare an effective marketing strategy. By doing so, the advantages and disadvantages of competitive advantage are ascertained by the company.
How to get a Competitive Advantage?
Identification of Competitors
Competitors are actually those organizations who manufacture the same goods and services to the same customers and at similar prices. SO competitors include
- Manufacturer of similar class products.
- Supplier of similar services.
- Companies that compete for similar customer dollars.
The objectives of the competition are important to ascertain. Following are the important areas that should be ascertained in the assessment of the competitors for getting a competitive advantage.
- Current profitability
- Growth of market share
- Cash flow
- Technological leadership
- Service leadership
- Other goals
The competition also depends upon the resemblance of the marketing strategies of the two companies. The strategic group in an industry should be identified which follows a similar set of strategies. For this purpose, two important things should be considered. The first is that rivalry must exist among competitors. The second thing is that all the angles should be analyzed to ascertain the right competitors.
Selection of Competitors and the Policies
The company should focus on the fact that it can select a number of competitors to attack and avoid. Attacks may be made on either strong competitors or weak ones, but weak competitors are quite easy to target and are less profitable.
On the other hand, dominating over the strong competitors gives higher profit mostly. Customer value analysis is a useful tool for assessing the strengths and weaknesses of the competitors. Thus customer value analysis tool provides an idea of how the customers rank various offerings of the competitors according to the perceived value. So the important steps of customer value analysis are as follows.
- Identification of the main attributes that are considered by the customers according to their importance.
- Assessment of the performance of the company and competitors on the valued attributes.
- There are many benefits linked with the competition like,
- The total demand increases with higher competition.
- The New Product Development Process costs and market costs are shared between competitors and the application of new technologies is easily made available.
- Product differentiation is promoted and less attractive segments are also targeted.
- The bargaining power against labor or regulators is improved which lowers the antitrust risk.
Designing of Competitive Intelligence System
The competitive advantage is acquired by designing the broader competitive strategy of the company. There is no single strategy that is best for all companies. The main functions of competitive intelligence systems are as follows.
- Identification of the important categories of competitive information is ascertained along with their best sources.
- The continuous updating of competitive information is made by the system through the published data and field.
- All the information is checked to know the reliability and validity and then the system interprets all this information to organize it in an effective way.
- The managers and other decision-makers can get useful key information that facilitates their decision-making process.
Types of Competitive Strategies
Approaches to Marketing Strategies
There is no single strategy of marketing that is best for all companies therefore different companies approach different strategies in their strategic planning process. There are three stages of approach to any marketing strategy which are as follows.
- Entrepreneurial marketing
- Formulated marketing
- Entrepreneurial marketing
Basic Competitive Strategies
Following are some of the basic competitive strategies that are quite helpful in gaining a competitive advantage over competitors.
Overall Cost Leadership
The position of lowest cost producer in the industry is gained by adopting this strategy of overall cost leadership. The company adopting this strategy keeps the prices of its products low as compared to the prices of the competing products and by doing so it can gain a large market share.
In this strategy, the company offers products that have unique features or customer benefits, which are not provided by the products of competitors. With this strategy, the company gains a leadership position in manufacturing unique products in the market and this, in turn, helps it to compete with the low-cost leaders.
Competitive advantage can be obtained by adopting this focusing strategy in which a smaller sub-segment is targeted with quality products and offerings that can best match the needs and wants of the targeted customers.
Competitive Position and Strategies
The companies that are competing in any market with similar products or services differ in their resources and objectives. Any company facing competition can take any of the following four forms.
The company that has the largest market share is known as a market leader and it adopts certain strategies that are related to its position in the market. Mostly it starts with the introduction of new products, changes in prices, promotion spending & distribution coverage, etc. Other companies follow the market leader initiatives. In addition, the following are the three steps that are taken by a market leader.
- Expanding the total demand
- Protecting market share
- Expanding market share
The runner-up company that fights to overtake the leading position in the market is the market challenger. The market challenger can adopt any one of the following strategies.
- Attack the leader
- Avoid the leader
- Attack other companies
- Acquire smaller companies
A company that possesses the runner-up status, but that three tries to keep the share and not break the boat is called the market follower. The market follower analyzes the factors causing success and failures to the market leader and tries to improve the products and programs of the market leader with less investment. They can also be attacked by others so they keep the prices of their products as low as high quality.
A company that targets smaller segments of the market that are ignored or overlooked by other companies is called a market niche. Since these market niches have limited resources. However, can acquire higher profit margins because they know their targeted segments very well. Hence their main focus is on specialization which may be in the following forms.
- End-user specialist
- Specific customer specialist
- Customer size specialist
- Geographic market specialist
- Quality-price niche etc.
On the basis of this competitive analysis believe that any company can get a competitive advantage over their rivals if they implement their plans and strategies as per see the analysis.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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