Competitive Strategy - Explained
What is Competitive Business Strategy
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What is Competitive Strategy?
A competitive strategy focuses on how a business unit will compete against competitors within the market. Implementing a business unit’s competitive strategy should further the organization-level strategy.
The primary understanding of competitive strategies comes from Michael Porter’s Generic Strategies:
- Cost-Based Strategy
- Differentiation Strategy
- Focus Strategy
The objective of a competitive strategy is to establish some form of competitive advantage within the market.
The primary tool for measuring the competitive position of an organization in the market is Porter’s 5 Forces Model.
How do Competitive Strategies Change Over the Business Lifecycle?
Competitive strategy is about trying to achieve some kind of advantage over competitors.
A firm may be in a position to influence the industry growth rates and the course of the life cycle.
Two main techniques for this are the following:
Pricing strategies in the introductory phase.
An innovator may decide to go for (low) penetration price and high initial growth, or for (high) skimming price and slower initial growth.
Life-cycle stretching and renewal
Firms individually or collectively may extend the life of an industry through innovation and marketing improvements.
In any event, the competitive strategy chosen will seek to take advantage of some characteristic of the entity at that stage of its lifecycle.