Competitive Strategy is a long term action plan adopted by an organization to gain a competitive edge over its competitors over a long span of time.
How Competitive Edge can be gained:-
- By providing similar products at lower prices
- Charging high by providing higher quality products
Porter's Generic Strategies
- Cost leadership
- Differentiation
- Focus strategy
Cost Leadership
A strategy in which a company makes products of similar quality at a lower cost.
As a company has the ability to produce similar quality products at a cost lower than average industry price, the company has two options:-
- Keep charging average industry price from customer and reap profits
- Decrease the prices and capture market share
Example
Do you know that Arvind Mills produces 80% of the world's total jeans garment
- Flying Machine
- Newport
- Ruf & Tuf
Arvind Mills Brands (licensed)
- Arrow
- Lee
- Wrangler
- Gant U.S.A.
- EdHardy
- Izod
- Cherokee
- Mossimo
- U.S. Polo Assn.
- Nautica
Further Levis also use Arvind mills garment.
Why Arvind Mills brands are so popular?
Because they make industry-standard jeans clothing at a cost which is lower than the average industry cost. That's why they captured a big chunk of market share.
Differentiation strategy
In this strategy the produces a product with features, design and attributes which gives more satisfaction to customers than by consuming competitors products.
Example
Let's take an example of Apple
iPhone's specifications are similar or lower than other phones available in the market at far lower prices.
So why people are buying iPhones?
Simply, it looks premium and UI is better and unique. People are ready to pay extra for premium looks and better UI.
Focus Strategy
In Focus strategy, a company focuses on a small segment of the whole market and tries to gain a leadership position in that particular segment either via Cost leadership or Differentiation.
Example
Focus Strategy (Cost leadership)
Arvind Mill is again the most suitable example here. They make the cheapest jeans garment at industry average quality standards.
Focus Strategy (Differentiation)
Which coconut you use for your hairs?
Most of the people would say Parachute
Parachute is the hair oil brand by Marico co ltd. They make the best quality coconut oil at industry average price. So they are market leaders in Coconut hair oil segment.
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