Economics department

Competitive strategies
Lecturer
Farmon Asadov
ECONOMICS DEPARTMENT
Learning Objectives
1. The concept of competition
2. Methods of competition
3. Factors determining the competitiveness of the firm
4. Determining the competitiveness of goods

What will you be able to do after this class?

In this lesson, we will walk you through everything you need to know about a competitive strategy – from what it means, why it matters to ways to sustain your competitive advantage.

-An action plan that is developed by a company to achieve a competitive advantage over the competition. This strategy is devised after assessing the strengths, weaknesses, opportunities, and threats of the competition and comparing them with your own. Having a competitive strategy is most important when a company has a competitive marketplace and several similar products are available for consumers.

What Exactly is Competitive Strategy?
Competitive Strategy in simple words
Competitive strategy refers to the research, planning, and tactics implemented by a company to increase its market share and stay ahead of the competition. The strategy involves multiple business functions – from product development to advertising and customer service.

Competitive Strategy VS Business Strategy: What’s The Difference?

A business strategy has a much wider scope than a competitive strategy.
A business strategy encapsulates all the actions and strategies that the business would implement for combatting the competition. Along with that, it also comprises of the ways management will address strategic issues. Competitive strategy is only about the company’s action plan for providing superior value to the target market and keeping the competition at bay.

Types of Competitive Strategy, According to Michael Porter

There are four types of competitive strategies that can be implemented in any business – irrespective of the size and the nature of the product/service. As these strategies can be implemented by businesses globally, they’ve been labeled as ‘generic strategies’
 Cost Leadership
In the cost-leadership strategy, a company offers its products and services at a lower price than the competitors. The cost-leader needs to spend as little as possible to build a product so that it can still earn a substantial amount of profit while selling the product at the lowest price.

Basically, the successful cost-leader needs to control costs throughout the value chain. The supplier has to sell the parts at the lowest prices, the manufacturing process needs to take place in the least expensive labor market, and operations need to be automated to increase efficiency.

Differentiation

• The differentiation strategy is completely opposite of the cost-leadership strategy. After all, not all the products and services in the market are sold at low prices.
• In this strategy, companies try to differentiate their products by adding value to them. This is done in order to attract customers who’re willing to pay a higher price.

• At each step of the value chain, the company tries to increase the features, quality, and attractiveness of the product.
• Innovation, research, and development, excellent customer service. Solid marketing – all these tactics are a part of the differentiation strategy.

Differentiation

Starbucks is a classic example of a differentiator. There are a lot of restaurants that offer coffee at a much lesser price, however, people are willing to pay high prices just for a cup of Starbucks
coffee!
Why? Because they love the restaurant’s atmosphere, product quality, customer service and the brand.
Cost Focus Strategy
Just like the cost leadership strategy, a cost focus strategy is about attracting customers and beating the rivals by offering the least value for your products and services.
So, what’s the difference between a cost leadership strategy and a cost focus strategy?
Well, in this method, you focus your marketing and selling efforts on a smaller market segment instead of a broad one.
Differentiation Focus Strategy
Just like the cost focus strategy,
this strategy targets a specific part of the market. But, instead of offering a product at low prices to
the customers, their driving force is providing unique value.
In short, the differentiation focus strategy is about improving the product with unique features that will make your company stand out from the crowd.
Luxury products often fall under this category.

Competitive Advantage

RESEARCH DESIGN
HYPOTHESIS
First thing first, competitive advantage is the edge that a company has over its rivals.
Achieving and maintaining a competitive edge is the primary goal of competitive strategies. Once a competitive advantage is achieved, every company needs to implement strategies to sustain this advantage.