Strategic Alliances

Competition is understood as a rivalry experienced among business people who intend to achieve ends like profit making, increasing market shares, reaching more customers and expanding their business premises.  In business, competition is always expected especially when different companies are in the same industry. Their products and services target the same customers and the best quality goods and services are meant attract and retain more customers. Additionally, the pricing of goods matter in the success or failure of business transactions (Langabeer & Napiewocki 2000, p.104). This study investigates different strategies employed by companies within a similar industry in order to cope with competition and achieve their set goals.

Innovation

According to Prajogo (2016, p.243) the competitiveness of any company is, to some extent, determined by the efforts it puts in creating and innovating new products. Innovation can also refer to the reshaping of goods, introduction of new marketing strategies that can appeal to clients, and provision of services in a manner that impresses and satisfies the company’s clients. Introduction of new products can only be realized when the company conducts extensive research and invests resources in development of their products. Customers or clients in a particular industry will require quality services and goods for their money and the company that can provide better services while at the same time maintaining affordable prices for their products will be more popular among these clients.

Innovation is required to increase the competitiveness of a company which offers high quality goods and services which can only be afforded by few people because of high prices. A company can get rid of the aspects or elements which make the product to be expensive without having to reduce the quality of the product. This will ensure that the price of the product goes down and more clients will be able to purchase it. Additionally, the company can find cheaper alternatives to production and marketing which will play a role in reduction of the production cost of goods (Kueng & Yang 2016, pp.18-19). For example, in the automobile industry, a company can manufacture cars which will be safe for use but without many features such as cup holders, expensive and extremely powerful engines, and interior decorations. These cars will be cheaper and more affordable than those with these features which may be deemed unnecessary by some consumers. They will be convenient for clients who require them as a means of transport from one place to another.

One of the most important strategies used to respond to competition within an industry is to understand one’s opponents and their methods of producing goods, advertising them and distributing them to clients. Every company in a certain business will have a particular way of manufacturing their goods, packaging them, as well as making them known to their clients (Fingar 2006, p. 24-26). When a company critically examines the strategies of a competitor, they will be able to identify weaknesses and strengths possessed by these competitors and as a result, the former will be able to find ways of providing goods and services which respond to the weaknesses of their opponents.

In order to accomplish this, a company will need to employ a competitive analysis which will include examining various aspects in their opponent company’s strategy. The best way of coping and managing competition from other companies is to find out if there is a strategy your company could apply to provide better goods and services to customers. A company can also choose to use a different strategy or method to offer a particular service or produce, market and sell goods (Fleisher & Bensoussan 2015, p. 4). For instance, an organization can deal with competition by resorting to marketing their goods through various online platforms and offering discounts for purchases above a certain price range. Further, a company can increase its sales and customers by offering delivery services as well as an efficient customer service which will address the needs and complaints of clients and gather information on how their goods and services can be modified to suit their customers’ needs.

The accomplishment of strategic planning in a company’s business should be done by professionals who have experience in business marketing and sales. The management of the company should ensure that these professionals are tasked with this responsibility. In companies where the management takes control of all decisions and does not consult experts business strategies are more likely to be poor. The result of adopting and implementing poor strategies is the collapse of the business through poor sales and little or no profit margins (Suarez, Calvo-Mora & Roldán 2016, p. 534).

Formation of Strategic Alliances

            According to Axelrod (1997, p. 15), individuals can choose to cooperate with each other or work alone. If each person engages in business alone, they will not be able to achieve better results than when they choose to form an alliance. However, there are more benefits when one chooses to exploit the effort of others who have formed an association or group in order to achieve a common goal.

In order to cope with competition and accrue interest from business transactions, companies within the same industry can choose to form strategic alliances. Strategic alliances are agreements or arrangements between companies which resort to share resources in pursuit of a mutual target. In this kind of arrangement, none of the company loses its identity and autonomy and therefore, after achievement of their goals, the agreement ends. One of the advantages to adopting strategic alliances is that companies can achieve their goals faster and with fewer resources. Additionally, this deal increases the chances of increasing the competitive edge of the new union that has been established because there will be sharing of ideas on how to handle business transactions, how to improve the quality of products as well as how to effectively market their products and services (Rothaermel 2015, pp.284-285).

Barney (2014, p. 13) argues that strategic alliances are instrumental in reducing competition in business. When two companies form an alliance of this kind, they cease from competing against each other and work together to adopt new strategies which will enable both of them to provide stronger and tougher competition to rival companies within the same industry. Opportunities for future partnerships are increased because competing companies develop trust in each other and the possibility of joint pursuits are increased. Another benefit of forming strategic alliances is that the companies involved may have an opportunity to market their products in foreign markets which would not have been possible if the companies had decided to compete with each other.

These partnerships, however, have their shortcomings. To begin with, the agreement would require each company to share information, resources, profits and business strategies. Knowledge and skills which include secrets of trade can expose all the strategies and plans of a company and if the strategic alliance does not work, the information can be used against this company (Rothaermel 2015, pp.286).

Improvement of Quality of Goods and Services

Customers will always be attracted or repelled by a company due to the latter’s pricing of goods and services and the quality offered. Companies in businesses with a lot of competition have to find a way of ensuring that their goods are of good quality and are affordable at the same time. Goods and services that are affordable attract a customer but if in the long term they are found to be of poor quality, the clients are more likely to cease from purchasing a company’s products. Good quality goods ensure that clients become loyal to a company (Manuel 2009, p. 2). Any positive experience customers have is most likely to drive them to purchase goods from the same company.

Supply Chain Competitiveness

Companies which seek to compete within an industry will need to ensure that their supply chain is competitive. There should be an efficient flow of goods and services within the company in a manner that will guarantee timely and quality delivery of goods and services to clients. The company should have a system in place where the raw materials for production are stored well, safely transported at an affordable cost, processed, and delivered to customers within a specified timeline (Christopher 2016, p. 152).

            The establishment of a supply chain which improves the competitiveness of a company is a key strategy in ensuring that the organization maintains clients and remains relevant in business it’s involved in.  An effective supply chain ensures proper coordination of various actions whose origin is the point of acquisition of unprocessed supplies to when   processed goods are delivered to clients. An effective supply chain also ensures that goods are sold faster and to the right clients (Lambert & Knemeyer 2004, p. 116). This is made possible by the knowledge of customer needs and the best strategy for manufacture and delivery of goods and services.

            According to Leonard and Davis (2006, p. 227), the adoption of a competitive supply chain in business enables the company to be flexible such that they can adjust to the changing needs of their clients. Moreover, the company can effectively manage its linkages. For example, when a product is examined for possible defects before being delivered to consumers, the company saves resources which could otherwise be used for after sale services. The company also ensures that there is proper coordination in every step of the supply chain process so that unnecessary costs are reduced.

            The supply chain should not have delays if a company wishes to remain competitive. When there is a backlog of orders in a company, there will be delays experienced and as a result, clients will not receive their products in time. The solution to this problem is increasing the capacity for production in a company so that all processing and delivery of goods is done according to schedule (Morecroft 2007, p. 206).

Specialization in One Product

            In response to competition from other companies, an organization can opt to specialize on one product and divert all their resources to its manufacture, production and sale. One of the advantages of adopting this strategy is that the company spends fewer resources in the supply chain and this enables it to save costs. Additionally, the company will have a lean budget which will involve the processing and production of one type of good or a specific service. The number of employees and machinery will be reduced as well (Ferrell & Hartline 2008, p. 178).

According to Law (2014, p. 75), companies that specialize in production and sale of a single product need to ensure that they have a plan for the number of products it needs to produce for some time, preferably, months ahead. These plans should be informed by knowledge of customers’ demands and the quantity of products required. Inventory should be regularly done in order to make sure that the production does not result in excessive goods which go to waste. Inventory will also be vital in determining whether the goods produced are enough to meet clients’ demands.

Adjustment of pricing

            According to Yao and Liu (2005, p. 236), competitive pricing is an effective strategy in dealing with competition in any business. Competitive pricing is characterized by a company setting prices for their goods or services without considering the production cost but rather, the prices set by competing companies. This means that the company will charge the same amount as its competitors on the purchase of goods or provision of services. Brumfitt (2001, pp. 30-31)argues that this kind of pricing strategy usually occurs when a particular good or service has been in the market for a long period of time and there exist a number of substitutes for it. Prices set by companies considered to be market leaders are usually taken to be the standard costs for goods and services and other companies within the same industry adjust their prices to match the market leaders.

            However, if a certain company intends to increase the price of goods or services above the limit set by the market leader, it needs to justify this adjustment in a manner which will make sense to its customers. It can, for example, add more features which will improve the quality of the product or service offered. Some companies may choose to respond to competition by reducing their prices so as to attract more customers. However, this strategy largely depends on the resources of the company and the possibility of making profits from this measure. If the costs incurred during production of the product surpass the financial remuneration after sale, then this strategy should not be adopted (Langabeer & Napiewocki 2000, p.75). Some companies may, however, settle for this strategy if the profit margins are lower than expected. The low margins, according to them, would be better than not making any sales.

            Langabeer and Napiewocki (2000, p.75) further state that companies which set the same prices as the market leaders may add some feature to their products to make them more appealing to customers. This strategy gives the company advantage over its competitors but it may also cost the former more production costs. The introduction of prices lower than those set by other companies is guaranteed to bring more customers to a company and as a result, the profits will be higher. This strategy can be adopted by companies that are new in the industry and which are seeking to make   themselves known to customers. Companies which set a price higher that the already established one are considered to have unique and more quality value goods or services.

            Despite the benefits of competitive pricing, there are shortcomings to this strategy. Firstly, if a company chooses to price their products and services on their competitor’s prices, they may overlook production costs and as a result, incur losses. Secondly, some companies may not have enough resources to lower the price of their goods because a reduction in profit margins may affect other operation of the organization (Federal Trade Commission 2000, pp. 28-29). For example, there may not be enough money generated for covering employees’ salaries, purchasing raw materials for production, and maintaining the resources of the company. This problem is usually experienced in small companies who only rely on sales to raise their capital.

Marketing Strategies

Improvement of marketing strategies is a response adopted by some companies to ensure that their products are chosen by customers. Marketing strategies are intended to attract potential customers, retain those already consuming the product, and ensuring that they are satisfied. Successful marketing strategies are informed by the company’s knowledge of their target clients as well as their needs, the nature of goods and services offered by their opponents, and the market in which the competition for customers occurs (Paley 2006, p.12). According to Adcock (2000, p. 3), knowledge of the needs of the client enables the company to plan on how they will address the concerns of these clients. It will also give the company an opportunity to inform the clients that they are aware of their need and that the company is capable of addressing these needs well Knowledge of nature of goods and services produced by other companies ensures that an organization establishes a marketing strategy which can convince the clients that the company’s goods are better that those of their competitors.

A marketing strategy that can be employed to attract and maintain customers is one which demonstrates to them that a company’s goods are not only good for consumption only, but have more value in the social as well as the economic points of view (Hennig-Thurau & Hansen 2000, p.2). Benefits of the product a company is selling should outweigh the potential risks to the customers. A marketing strategy that is successful in convincing clients that consumption of a particular product is more beneficial work better those marketing strategies which do not add value to the product (West, Ford & Ibrahim 2015, p. 255).

Marketing strategies should also be able to convince them that consumption of a company’s product will help them to achieve other goals in their lives. For example, a company can convince clients that consumption of a certain energy drink would enable them to have peace of mind and more energy to accomplish difficult tasks which require a lot of concentration and energy. The marketing of this product should demonstrate to clients that this product is essential to the accomplishment of their tasks without much strain to the body or mind.

Conclusion

The literature reviewed has identified different strategies or methods employed by companies to respond to competition from other companies within the same industry. Innovation is one of the strategies used by different companies to market its products and attract customers. Innovation can only work when the company has invested in research and utilized resources at its disposal to make its products unique and appealing to customers.  Secondly, companies may form strategic alliances which reduce competition and provide the companies in the deal with more resources, knowledge and skills on how to improve their products. Thirdly, a company may choose to enhance the quality of their goods and services to attract more customers. Additionally, companies may decide to concentrate on improving the competitiveness of their supply chain in a manner which ensures that the production process is flawless and costs incurred are minimal. Moreover, companies can choose to specialize in one product or service, adjust the prices of their products or improve marketing strategies to attract more customers.

The literature reviewed in this study did not propose responses like reduction of man power required to process and produce goods in a company. The adoption of computerized systems can help reduce the number of employees in a company and as a result reduce costs incurred in payment of wages and salaries to these workers.          

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