In business, competition is inevitable. You’ll always face other companies vying for a share of the same market, no matter what kind of business you operate. The more money there is to be made, the more competition there will be, and it can be difficult to stay ahead. Businesses that are ahead of the competition have something known as a competitive advantage. A competitive advantage is where a company is doing something different that allows it to produce better results. This could be a more efficient production process or better customer service.
If you run a business, your aim should always be to develop and maintain a competitive advantage. This is done through setting a competitive strategy, a set of policies and procedures that will help your company gain an edge. You can learn more about this in the following guide or for more in-depth knowledge, take a competitive strategy certificate.
Why is Competitive Strategy Important?
A company may not be able to achieve a competitive edge over its rivals unless it has a competitive strategy. It affects not only the competitive advantage, but also the overall strategies of the business. It’s also crucial for finding new ways of doing business, innovating, and growing the company.
By developing a successful competitive strategy, a company can potentially increase customer loyalty by providing better products and services, exploring new business opportunities, and keeping up with new technologies and how they impact the market.
Types of Competitive Strategy
There are several different types of competitive strategy, not all of which will be relevant or possible for your business. Each one is used to achieve the same goal, creating a competitive advantage, but the way they work is different. Here are some of the main types of competitive strategy:
Cost Leadership
Cost leadership is usually the most common type of competitive strategy. It involves being a leader in terms of low prices. By keeping prices lower than the competition, a business has a greater chance of encouraging customers to use its product or service. This is most common in industries where there’s high price elasticity or where a product is sold at a loss in order to upsell another product or service.
Product Differentiation
Product differentiation involves emphasising specific features or advantages of the product or service offered compared to the competition. When two products on the shelf are very similar, consumers will normally purchase the one they’re most familiar with. Differentiation allows a brand to stand out and increase sales among a specific target market.
Customer Relationship Management
By creating more positive interactions with their customers, a company can dramatically increase customer loyalty and improve their results compared to the competition. A customer who has had a positive buying with a particular brand is always far more likely to purchase from that company again. This can be used to gain a competitive advantage.
How to Implement Your Strategy
Implementing a successful competitive strategy isn’t easy, but it can be broken down into steps. Follow these steps to successfully implement your strategy:
Understand the Market
Knowing which strategy to choose is vital, and the best way to know this is to understand the market and the needs of your target audience. Is there room for differentiation and specialisation, or would it be better to focus on the customer experience?
Evaluate the Competition
If you want to get ahead of the competition, the first step is knowing what they do and how it’s different from your own business. Look at their strengths and weaknesses and the processes they use to achieve results.
Implement Your Plan
Once you’ve decided on a strategy, it’s time to implement it. Ensure that all of your employees understand the plan and its goals. Monitor the results carefully and make changes where needed.
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