Competitive strategies for market leaders

He claims that there is a viable middle ground between strategies. Expand the total market strategy: In adopting a narrow focus, the company ideally focuses on a few target markets also called a segmentation strategy or niche strategy.

Depending on the market and competitive conditions hybrid strategy should be adjusted regarding the extent which each generic strategy cost leadership or differentiation should be given priority in practice.

Market leadership is not simple task.

Market Leadership Strategies – Explained!

Diverging the strategy into different avenues with the view to exploit opportunities and avoid threats created by market conditions will be a pragmatic approach for a firm. If your business is able to differentiate its products Competitive strategies for market leaders services in the minds of buyers, it can reap the rewards of higher sales volume based on the perceived value, which your business offers, but your competitors do not.

In particular, Miller [10] questions the notion of being "caught in the middle". Competing with highly aggressive market leaders presents a formidable challenge to all newcomers.

For example, HUL decided to concentrate on its core business areas, that is, soaps and detergents, and has emerged as the clear leader in the toilet industry. Instead, they claim a best cost strategy is preferred. Differentiation drives profitability when the added price of the product outweighs the added expense to acquire the product or service but is ineffective when its Competitive strategies for market leaders is easily replicated by its competitors.

Differentiation strategy is not suitable for small companies. When the leader tries to expand the total market size, it must also continuously defend its current business against enemy attacks. This defence strategy manoeuvre involves the launching of an offence against an enemy before it starts an offence.

If a firm is targeting customers in most or all segments of an industry based on offering the lowest price, it is following a cost leadership strategy; If it targets customers in most or all segments based on attributes other than price e.

This way, Chiquita was able to brand bananas, Starbucks could brand coffee, and Nike could brand sneakers. This is achieved by offering high volumes of standardized productsoffering basic no-frills products and limiting customization and personalization of service.

The least profitable firms were those with moderate market share. Keep in mind that if you are in control of all functional groups this is suitable for cost leadership; if you are only in control of one functional group this is differentiation.

What Are the Four Major Types of Competitive Strategies?

The second dimension is achieving low direct and indirect operating costs. Such diversification into related areas comes under mobile defence strategies.

These should be distinct groups with specialised needs. The leader firm might become weaker or old-fashioned against new entrants as well as existing rival firms. This strategy involves the leader broadening and expanding its territories to new market areas by diversifying.

Large businesses that can make their products cheaply and sell them at a discount while still generating a profit, can drive competitors out of the market by consistently offering the lowest prices. The first approach is achieving a high asset utilization. Though Porter had a fundamental rationalisation in his concept about the invalidity of hybrid business strategy, the highly volatile and turbulent market conditions will not permit survival of rigid business strategies since long-term establishment will depend on the agility and the quick responsiveness towards market and environmental conditions.

Cost Leadership Strategy Cost leadership is a tough strategy for small businesses to implement, because it requires a long-term commitment to selling your products and services at a cheap price. For example, the Japanese increased their car production to enter new countries.

Porter's generic strategies

A differentiation strategy is appropriate where the target customer segment is not price-sensitive, the market is competitive or saturated, customers have very specific needs which are possibly under-served, and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy.

In the mid to late s where the environments were relatively stable there was no requirement for flexibility in business strategies but survival in the rapidly changing, highly unpredictable present market contexts will require flexibility to face any contingency AndersonGoldman et al.

These could include patents or other Intellectual Property IPunique technical expertise e. Cost Leadership Strategy[ edit ] This strategy also involves the firm winning market share by appealing to cost-conscious or price-sensitive customers. Sharing the same view point, Hill cited by Akan et al.

Small businesses can be "cost focused" not "cost leaders" if they enjoy any advantages conducive to low costs. Production costs are kept low by using fewer components, using standard components, and limiting the number of models produced to ensure larger production runs.Sep 21,  · Find new ideas and classic advice for global leaders from the world's best business and management experts.

Competitive strategy. Follow this topic. and its market capitalization soon. Summary: In their book, The Discipline of Market Leaders, authors Treacy and Wiersma argue companies must achieve market leadership for one competitive strategy and perform adequately with the other two (the three being operational excellence, customer intimacy and product leadership).

Three Competitive Strategies for Your Business. / Posted in Articles, Strategy. Note: This is the second article in a series on competitive strategy from FrogDog. To read the first article, click here.

Once you’ve analyzed your competition, you can develop a powerful competitive strategy for your business that you can sustain over the long term. Porter's four major types of competitive strategies focus on offering the lowest prices, targeting a very narrow market, or offering products and services with very unique attributes.

Market leaders can look for new users, new uses, and more usage of its products when the product is in the maturity stage of the product life cycle.

Sustainable competitive advantage allows the maintenance and improvement of your enterprise's competitive position in the market. It is an advantage that enables your business to survive against its competition over a long period of time.

Competitive strategies for market leaders
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