Competitive strategy: Being Ahead of Your Competitors

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When you enter a new market, you need to keep an eye on your competitors to survive. To maintain your business successfully, analyze the pros and cons of your business opponents and prepare a plan to improve your product, considering your competitors’ mistakes.

What does Сompetitive Strategy mean?

A definition of competitive strategy is a long-term plan that companies work out to strengthen their position on the market and win over competitors. It is extremely important in a situation when several companies operate in a highly competitive environment and offer similar products or services to consumers. 

Components of Competitive Strategy

With the Competitive Strategy, you can provide either better or cheaper goods than others in your industry and it will be your competitive advantage. The concept of competitive advantage in strategic management means to get more profit than other companies in the field. 

Analysis of competitive advantage in the market makes your business unique. Competitive advantages generate greater value for a company and its shareholders because of certain points of strength. The more sustainable the competitive advantage is, the more difficult it is for competitors to neutralize the advantage. Let’s consider in detail a few components of the Competitive Strategy:

1. Innovation

It is one of the key ways to develop your business and increase its competitive ability. Companies often don’t pay enough attention to this component, because it may take a lot of resources. But it doesn’t necessarily need to be anything extraordinary like Elon Musk’s ideas. Just think of something that could improve the quality of someone’s life, and implement it into your service or product.

2. Passion

Care about your business. Be passionate about it. People will definitely know when you really care about what you do. And it will motivate not only those who work with you, but also customers to cooperate with you.

3. Power

Your capability to provide the best product on the market, knowing all of its advantages and having a perfect understanding of your field, makes you powerful. You need to develop yourself every day, stay updated on the news, constantly analyse the market and be ready to improve your product when the market needs it.

4. Prestige

Customers need to realise they are buying an exclusive product, not everyone can afford. If they value the image of your brand and the features of your product over others, prestige pricing can help you keep value despite the production costs or quality of the product.

5. Trust

If you want to persuade someone to buy your goods, they should believe that you are not going to fool them. You need to make your customers feel safe, so that they will be ready to spend their money. Also, this leads to loyalty to your brand and, once you earn that trust, your clients come back again.

6. Mystery and teasers

Leave your customer a space for imagination. Announce a new product and make them wait for a few days. Let them make guesses and you will learn what they need from you. Then use it to create something useful for most of them.

7. Alert/announcements

Don’t forget to announce your new collections and send emails to advertise you are opening another store. It may attract new customers and keep existing ones interested. 

(Source: Email from Apple)

5 competitive strategies to use for your business

Now you understand why competitive strategy is important. Let’s have a closer look at the types of competitive strategy:

1. Supplier power. Suppliers have an influence not only on the price of a product, but also on the availability of the resources. Suppliers have the biggest power when businesses cannot go to others due to higher costs or lack of alternatives. You should prepare a couple of options before choosing a supplier to prevent this case from happening. Search newspapers for mentions of another company’s suppliers. Suppliers are often happy to report their cooperation with a major company.

2. Buyer power. Consumers can put the pressure on businesses to make them provide products of higher quality, better customer service, and lower prices. If there are a few buyers and plenty of sellers, then buyer power is high. If buyers can easily find the product or service elsewhere, buyer power is high.

3. Competitive rivalry. Competitive rivalry is a type of competitive strategy in marketing which has some advantages and some disadvantages for businesses. It is a kind of a measure of the extent of competition among them. Intense rivalry can limit profits and lead to competitive moves, including price cutting, increased advertising expenses, spending on service or product improvements and innovation. 

4. Threat of substitution. It means the availability of a product which can be bought from outside an industry. If you set a limit on prices, substitute products or services will not allow an industry to grow. If you cannot improve the quality of the product or somehow make a difference (for instance, by creating a noticeable marketing strategy), the industry will suffer in both income and development. Obviously, if substitute products’ producers can offer better price-performance trade-off, the industry’s profit potential will be limited. Model of price competition may help a product or service compete in the marketplace. In price competition, two goods which are substantially similar are judged by potential consumers on their respective pricing, with the purchase made mostly on the cheaper basis.

5. Threat of new entry. To create a defense against the threat of new competitors’ appearing, companies depend on so-called barriers within an industry, such as customer loyalty (clients prefer using services of existing companies), product differentiation (encouragement of the consumer to choose one brand over another), market share (a part of the market which is controlled by existing company), and cost advantage (existing companies can afford to lower price on its product).