Competitive strategy is a system of methods to guide all activities in the market of an enterprise, Most businesses have their own competitive strategy, whether obvious or just hidden competitive strategies.
One competitive strategy Success must determine the right competitive advantage and how to achieve it. The sharing article extracted from Michael E.Porter's knowledge will help readers perceive and choose a competitive strategy that is suitable for resources..
Competitive strategy history
Michael Porter is one of the most learned professors in the history of Harvard University. His classic books like "Competitive strategy” (competitive strategy), "Competitive advantage" (competitive advantage) and "National competitive advantage” (competitive advantage of nations) is a "bed pillow" book of many strategists around the world.
5 factors influencing competitive strategy
5 The following factors determine the level of competition and profit margins of the industry, The strongest factor that will determine the competitive strategic planning.
- Potential competitor's entry into the industry: are new businesses that bring their creativity and resources into direct competition with the desire to win a large market share.
- Pressure from substitute products/services: other products with the same function as the business product, or new products of better quality.
- The power of customers: Customers force prices or bargain to increase quality or increase services, forcing businesses to compete with each other.
- Pressure from suppliers: The supplier requests an increase in the price or a decrease in the quality of the raw materials.
- Competitive intensity of existing competitors: the competitive fronts are more or less, like price, advertisement, marketing…
3 universal competitive strategy
Theo Michael Porter, to solve 5 competitive factors have 3 effective competitive strategy, Helping businesses succeed and lead the industry, including: Low total cost strategy (Low Cost Strategy), Differentiation strategy (Differentiation Strategy), Strategic focus (Concentration strategy). SaigonTV will share about 3 this strategy below with 3 Content: communication, governance and risk of each strategy.
- Low total cost strategy (Low Cost Strategy)
Lowest total production costs in the industry through performance improvement policies and efficient execution plans.
Platform requirements:
- Continuous capital investment and access to large capital sources.
- Have experience and capacity in production
- Well-managed workforce and production processes
- The products are designed to be simple and easy to manufacture
- Distribution model does not cost much
Admin request:
- Close cost control
- Report is established continuously
- Clear division of work and responsibilities
- Create measurable goals with detailed numbers
Risk:
- New technology makes optimal investments no longer effective
- New brands entering the industry imitate or invest in new equipment to optimize costs
- Lack of market and marketing acumen because of too much focus on costs
- Inflation narrows price differentials
- Differentiation strategy (Differentiation Strategy)
Create innovation to possess characteristics that differentiate it from all competitors in the industry, Differentiation strategy can be product or brand.
Platform requirements:
- Creative ability
- Strong marketing team, sensitive
- Having ability, creative product design process
- Good brand equity
- Have an understanding of industry history
- Capturing market demand and cooperating well with distribution channels
Admin request:
- Good coordination between R&D and marketing departments
- Accept subjective assumptions and initiatives rather than numbers
- Inspiring brand culture
- Attract and retain key talent
Risk:
- Customers may not put differentiating factors above the selling price
- Customer demand for differentiators decreases over time as consumers get smarter.
- Opponent's copy
- Strategic focus (Concentration strategy)
The business focuses on a specific customer group or market segment (niche).
Platform requirements:
- The team is responsive and willing to take risks
- Own the governance of low-cost strategy and differentiation strategy, then aim at a specific goal
Admin request:
- Own the governance of low-cost strategy and differentiation strategy, then aim at a specific goal
Risk:
- The price of a cost-optimized competitor may be so good that customers overlook the relevant factor.
- The market is shrinking
- Competitors find a smaller market in the niche in which you operate and are more concentrated than the market you are in.
Summary
Competitive strategy is a system of methods that any business person needs to know and understand. No choice and focus and a specific strategy, this is the reason why these businesses are called "stuck in the middle of the river", deadlock between strategies. These “stuck” businesses will be inefficient and profitable below the industry average.
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Source: Vu Digital
