Competitive strategies (Nov’11)

Q. What do you mean by competitive strategies (Nov’11)?

Competitive strategies: Competitive strategies are the method by which you achieve a competitive advantage in the market. There are typically three types of competitive strategies that can be implemented. They are cost leadership, differentiation and a focus strategy. A mixture of two or more of these strategies is also possible depending on your business' objectives and current market position.

Cost leadership: The aim of this strategy is to be a low-cost producer relative to your competitors and is particularly useful in markets where price is a deciding factor. Cost leadership is often achieved by carefully selecting suppliers and production techniques to minimize production, distribution and marketing costs. However you need to be aware of any serious loss in quality that may render low cost ineffective.

Differentiation: A differentiation strategy seeks to develop a competitive advantage through supplying and marketing a product that is in some way different to what the competition is doing. If developed successfully this strategy can potentially reduce price sensitivity and improve brand loyalty from customers.

Focus strategy: This strategy recognizes that marketing to a homogenous customer group may not be that effective a strategy for the product the business is selling. Instead the business focuses its marketing efforts on a different selected market segments. That is, identify the needs, wants and interests of the particular market segments and customize marketing techniques to reflect those characteristics.

References: http://toolkit.smallbiz.nsw.gov.au