A Competition

Introduction

The pursuit of higher profit margins and market share is fast altering the corporate environment, making it more competitive. Businesses are directly competing for one other’s market share as a result of strategy replication or the creation of more effective strategies. As a result, enterprises are driven to invent their own means of assuring survival and profitability. For an entity to design strategies that will improve its ability to compete effectively, it must first understand the makeup of its competitive environment through market structure analysis (Hitt, Ireland & Hoskisson, 2006). This will enable it to develop tailored made strategies which cannot be imitated based on the customers’ specifications, tastes, and preferences.

Types of Competitive Strategies

Depending on the firm’s SWOT analysis and the market structure it operates in, there are various types of competitive strategies it can adopt. They include; differentiation strategy where a firm may add unique features to a product through package, value creation or bundled services in order to be distinguishable from competitors. A low-cost technique is whereby a firm attempts to drive its production down as much as possible in order to offer products at a low price. Mergers and acquisition technique is whereby competing firms merge so as to tame the bargaining power of suppliers and buyers or a firm may acquire another to control the competition. There are other strategies like introducing new products or services frequently, raising entry barriers for new entrants, limiting competitive access to scarce resources and monitoring and mimicking rival’s behavior (Hitt, Ireland & Hoskisson, 2006).

Applicability of Competitive Strategies

The applicability of these strategies will depend on the firm’s ability to use its strengths to limit its weaknesses and protect its vulnerabilities so that it can effectively take advantage of the emerging opportunities as well as the market structure. A strategy necessitates an entity to have particular arrangements in place so it can function in line with the overall firm’s strategy. All firms do not possess similar strengths such as financial and human resources, customer base and loyalty, and systems and processes (Hitt, Ireland & Hoskisson, 2006). Also, there are those strategies which are applicable to perfect competition, oligopoly, and monopoly. Hence, a certain strategy will be effective if it matches an entity’s SWOT elements and the market structure.

Example 1: Perfect Competition

For instance, a company in perfect competition such as Delta Airlines may adopt a differentiation strategy instead of a low-cost technique. Differentiating its products through offering unique services to its customers will enable a company to gain a competitive edge over its competitors. A company may differentiate its products through adding additional benefits which will convince customers to subscribe to it since it offers value and quality that matches the product’s worth (Thompson & Strickland, 2001). A low-cost strategy may disrupt the market if competitors of the same level in a particular industry take the alignment and lower their prices. As such, the precise understanding of the market is essential before the formulation and implementation of a new strategy.

Example 2: Oligopoly

Another example is for companies in an oligopoly market. A company can consider merger and acquisition rather than attempting to limit competitive access to a rare resource. A company may acquire a majority stake in a competing firm or acquire it wholly or merge in order to eliminate competition and dilute the bargaining power of suppliers and buyers. Merger or acquisition will enable competing firms to increase their strengths and capability leading the production of high-quality products or services (Thompson & Strickland, 2001). Whereas attempting to limit access to a scarce resource may be considered as a hindrance to fair competition which amounts to unethical behavior.

References

Hitt, M., Ireland, R. D., & Hoskisson, R. (2006). Strategic management: Concepts and cases. Cengage Learning.

Thompson, A. A., & Strickland, A. J. (2001). Strategic management: Concepts and cases. McGraw-Hill/Irvin.