The Five Key Competitive Strategies

A few weeks back, I encouraged you to assess your company’s competitive position and find out whether you’re positioned for success or if your competitive position is in dire need of improvement.  If your position happens to need some help, read on . . .5KeyCompetitiveStrategies

Your competitive strategy consists of the approaches and initiatives you take to attract customers, withstand competitive pressures, and strengthen your market position.  According to Arthur Thompson and A.J. Strickland in Strategic Management: Concepts and Cases, there are five competitive strategies you should consider:

  • A low-cost leader strategy: striving to be the overall low-cost provider of a product or service that appeals to a broad range of customers (a couple of examples are Sam’s Club and Southwest Airlines).
  • A broad differentiation strategy: seeking to differentiate the company’s product offerings from rivals’ in ways that will appeal to a broad range of buyers [a couple examples are Nordstrom (known for customer service policies and personnel) and Whole Foods (emphasis on health foods and organic groceries)].
  • A best-cost provider strategy: giving customers more value for the money by emphasizing both low cost and upscale difference, the goal being to keep costs and prices lower than those of other providers of comparable quality and features (a couple of examples are the Honda and Toyota car companies with customer satisfaction ratings that rival those of much more expensive cars).
  • A focused, or market-niche, strategy based on lower cost: concentrating on a narrow buyer segment and outcompeting rivals on the basis of lower cost (The Gap is a good example).
  • A focused, or market-niche, strategy based on differentiation: offering niche members a product or service customized to their tastes and requirements [examples are Rolls-Royce (sells limited number of high-end, custom-built cars) and men’s big and tall shops (sell mainstream styles to a limited market with specific requirements)].

So, which one of these strategies is best for your business?

9 thoughts on “The Five Key Competitive Strategies

  1. Aw, this wwas a really good post. Taking the time and actual effort tto create a uperb article… but
    what can I say… I procrastinate a lot and never manage
    to get nearly anything done.

  2. Landed here on a Google search. Was curious about the competitive pricing strategy for e-commerce stores and saw your low cost provider statement. I just Googled “Sams Club” and looked up a couple items. Even compared to Google Shopping / Amazon results, they still have the lowest price on some high ticket items. Pretty impressed. I think being the low cost provider is incredible difficult to do, especially for most e-commerce stores. I’d say it’s borderline impossible for re-sellers as a whole (drop ship, etc)

    1. I disagree with the “borderline impossible” aspect, you stated, regarding being a low cost provider. Their increased sales puts them at the same level, if not higher, with their competitors even though their prices are lower. So, in any market, it’s a matter of “what’s being offered” that determines the success of the low-cost provider. I would look at the “mergers and acquisition” approach for becoming a “low-cost” provider. Find a product or service that can outsell at a lower rate to gain a good revenue, then merge with a bigger business and reap the residual income.

  3. This is a very educative post clearly differentiating different generic strategies that are at times difficult to distinguish. Thank you Dr.

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