Competitive strategy of the company. Basic strategies of the company in competition

1) Cost leadership (dominant for new products)

2) Substitutes (goods-substitutes)

3) consumer fatigue from standard products

Differentiation strategies:

1) Range expansion

2) merchandising

3) Active marketing (expensive, dependence on unpredictable creativity)

4) Innovation

5) Market segmentation strategy (calculation to meet the specific needs of a particular client)

6) Immediate response to market demands

A firm challenging the market environment must be strong enough, but not in a leadership position. The main strategic goal of the growth of such firms is to capture additional parts of the market by winning them from other firms. In the transition to the implementation of this goal, the company must clearly determine for itself from whom it is going to win a part of the market. There are two choices:

attack on the leader;

attack on a weaker and smaller competitor.

A firm can start an attack on a leader only if it has clear competitive advantages, and the leader has disadvantages that the firm can use in competition. In this case, the firm does not necessarily have to choose an open frontal attack on the leader; various detours can be used. There are five possible approaches to conducting an attack on the leader.

The first approach is that the firm makes an open direct attack on the leader. In this case, the competition is based on the principle<сила на силу>. The firm attacks not in the direction of the leader's weaknesses, but in the direction of the strengths, in order to crush him where he is considered strong and where he leads. In such a fight, the one who has more resources and who has strong advantages usually wins.

In the second approach, the firm carries out a flank attack on the leader. In this case, the attack goes in those directions in which the leader has weaknesses. Typically, these areas are either a region in which the leader does not have a strong position, or a need that is not covered by the leader's product.

The third approach is characterized by the fact that the firm undertakes an attack in all directions. In this case, the leader has to defend both his forward positions, and the rear, and flanks. This type of attack requires much more resources from the attacking company to successfully complete, since it involves its promotion to all markets where the leader is present, and for all types of products manufactured by the leader.

The fourth approach is a bypass attack. In this case, the firm does not attack the leader directly, but creates new market, which then lures the leader out and, having advantages in this market, defeats him. The most common types of circumvention attack are the creation of a replacement product or the opening of new geographic markets. A bypass attack is widely used in the form of the development and implementation of new technologies for the production of a product.

A fifth approach to competitive leadership is guerrilla warfare. Typically, this type of struggle is resorted to by small firms that cannot afford other methods of attacking the leader. In guerrilla warfare, the firm chooses markets where the leader is weakest and launches rapid attacks on him in order to gain some advantage. Guerrilla warfare involves the use of unexpected moves by the firm and the implementation of very quick actions that take the attacked by surprise. At the same time, it is very important for the company to have constant readiness both to start an attack and to stop it.

After studying Chapter 7, the student should:

know

• concept of competitive strategy;
• classification of competitive strategies of the enterprise;
• methodological approaches to the formation of competitive strategies of the enterprise;

be able to

• determine the role and importance of the competitive strategy of the enterprise in its activities;
• analyze the possibility of implementing a competitive strategy in the functional strategies of the enterprise;

own

• skills in developing functional strategies for the enterprise;
• a mechanism for implementing the competitive strategy of the enterprise.

Competitive strategy: concept and classification

Strategy is necessary because the future is unpredictable.

R. Waterman

Competitive strategy is a generalized model of actions and a set of rules that an enterprise should be guided by when making decisions in order to achieve and maintain long-term competitiveness.

The strategy sets a certain framework to identify and evaluate changes in external and internal conditions development of the system and the need for its improvement due to these changes.

The strategy, as a means to achieve long-term goals, focuses on the forecast of the behavior of the external environment and, in this regard, the analysis of the possibilities for the functioning and development of the enterprise. The strategy is adaptive to changes in the external environment and mobilizes the resources of the enterprise, directing them to achieve the goals.

Currently, there is a wide variety of strategies that can be represented in the form of a classification shown in Fig. 7.1.

In accordance with the above classification features, the following are distinguished.

By possibilities of using identify strategies typical And original.

Depending on the management level There are strategies: corporate, business, functional and operational.

Corporate strategy is the overall strategy of the corporation as a whole.

Business the strategy aims to establish and strengthen the long-term competitiveness of the enterprise in the market.

functional the strategy is implemented across the enterprise in selected functional areas: marketing, personnel, finance, etc.

operating room the strategy is implemented on the scale of individual divisions of the enterprise: advertising, cost centers, etc.

Rice. 7.1.

Depending on the type of functioning, competitive strategies of commuters, patients, violents, explerents, litalents are distinguished, which reflect a specific type of biological behavior of the enterprise and have a corresponding analogy with the behavior of biological systems.

commutators, or "Gray mice"- small, flexible enterprises, easily adapting to changing market demand. Often they offer goods (services) - imitators, goods (services) - fakes, are not firmly tied to a specific field of activity, easily move from one market to another. Possess low stability in the market. Flexibility and adaptability form the basis of this competitive strategy.

Commutators can be medium or small enterprises that have experienced the peak of their efficiency, more focused on stable limited demand and services than on innovation and individualized approach to customers.

Patients or "Cunning Foxes"- highly specialized enterprises with quantitative growth (personnel, communications, divisions) that have mastered well one of the niches (areas of needs) of the market. Not very large enterprises that have been producing goods and services of a certain type for many years. The competitive strategy is based on narrow specialization, low costs and high quality of goods (services).

Violenti, or "Elephants", "Lions",- giant enterprises that have achieved the most stable position in the market and control a significant market share. Competitive strategy - low costs due to the large scale of activities and the satisfaction of mass customer demand.

Explerents, or "Moths",- start-up, emerging enterprises, whose competitive advantage is innovation, new technologies and goods (services). They are weakly connected with the market, do not have enough funds for its development, wide marketing activities. Operate effectively as venture arm units large enterprises or their subsidiaries. The basis of activity is new ideas, external financial support.

Litalenty, or "The Dying",- these are enterprises with an overly complicated, inefficient structure, a decline in financial performance. They need a quick re-profiling to a new business, new technologies, new markets, a focus on destructuring and refinancing.

Identify strategies based on company's position in the competition: offensive, defensive.

offensive strategy is typical for enterprises that base their activities on the principles of entrepreneurship. A fundamentally new product (service) or technology that brings competitive advantages is designed and implemented.

defensive the strategy is aimed at maintaining the competitive position of the enterprise in the already developed sales markets. The main function of the strategy is to activate the cost-benefit ratio with own benefits and benefits for buyers. Competitive struggle with such a strategy is not based on the originality of the product (service) or technology, but on their price, supply volumes and quality.

On based on analysis of the forces of competition Michael Porter identified three basic competitive strategies with universal applicability, with the help of which an organization can secure competitive advantages: cost leadership, differentiation, focus.

• 1. Cost Leadership creates protection against the action of all five forces of competition:
  • the company is able to make a profit at the lowest possible price for competitors;
  • low costs create an entry barrier for new competitors and substitute products;
  • low costs protect the enterprise from the actions of strong suppliers, providing greater flexibility in case of price increases by them;
  • strong consumers are not able to achieve price reductions below the level acceptable to the strongest competitor.

Low cost leadership is effective under the following conditions:

• price is the dominant competitive force;
• industry product - standardized, easy to manufacture;
• lack of opportunities for differentiation;
• "big" buyers have significant trading power.

Low cost leadership has the following risks:

• technological changes that devalue previous experience and investments;
• the ability to copy the competitive advantages of leadership in terms of costs by competing enterprises;
• inability to timely make changes to the product due to an exaggerated attention to costs.
• 2. Product differentiation is aimed at buyers who are willing to pay more, but for a higher quality or for a wider choice of consumer qualities of a product (service).

Differentiation can be horizontal (differences in goods or services in terms of individual characteristics, the price is approximately the same) and vertical (the offered characteristics of goods or services, their prices and the average solvent income level of consumers are different).

Differentiation also protects the enterprise from the five competitive forces, but in a different way:

• in relation to competitors, differentiation reduces the possibility of replacing a product, increases consumer brand loyalty, reduces sensitivity to price, and thereby increases profitability;
• distinctive properties of the goods and the won loyalty of clients protect the enterprise from goods-substitutes;
• increased profitability increases resilience to possible price increases by a strong supplier.

Differentiation is attractive under the following conditions:

• there are many ways to differentiate a product;
• the organization has know-how in the field of production or marketing;
• the needs of potential consumers differ;
• few competitors in the industry follow a similar path of differentiation;
• demand is price inelastic;
• the industry market has a complex structure.

Differentiation may include the following:

• the gap in prices for a differentiated product (service) relative to competitors with low costs is so large that it is not possible to maintain brand loyalty;
• the role of the differentiation factor decreases as the product (service) becomes familiar;
• the perception of differentiation is reduced under the influence of fakes and imitations.
• 3. Focusing- focusing efforts on any segment of the market, consumer niche, characterized by special needs, in order to better satisfy them than competitors. This strategy can be based on cost leadership or differentiation, or both, but within the target market segment.

Focusing is attractive when:

• for most competitors it is too expensive or difficult to master this niche;
• the company does not have enough resources to develop broad market segments;
• industry segments differ significantly in size, growth rates and intensity of pressure from competitors;
• there are relatively small groups of clients with non-standard needs that are not fully satisfied.

Focus risks include:

• the gap in prices in comparison with non-specialized products of competitors becomes very large;
• differences in the requirements for the goods of consumers of the target market segment and the market as a whole are reduced;
• competitors enter even narrower sub-segments within the target segment.

Depending on the life cycle of product (service) or enterprise development distinguish the following strategies: concentrated growth, integrated growth, diversified growth, targeted reduction.

Concentrated growth strategies. This group of strategies includes:

• a strategy for strengthening a product position with an already mastered service (or a package of services) in an already mastered market, for example, through additional marketing or advertising efforts;
• a strategy for finding new markets for an already produced service (service package);
• strategy for developing a new service (service package) in an already developed market.

Integrated growth strategies. This group of strategies includes:

• feedback strategy vertical integration(integration with suppliers of resources necessary for the production of services);
• forward integration strategy (integration with distributors, resellers and trade organizations).

Diversified growth strategies. Here, strategies with the following types of diversification are distinguished:

• a strategy of concentric diversification (search for additional opportunities for the production and sale of new services on the existing base of the old business; it remains at the center of the business);
• horizontal diversification strategy (production and sale of new service packages that are different from those used in the already developed sales market);
• conglomerate diversification strategy (the organization expands through the production and sale of new packages of services that are technologically unrelated to those already produced; new services are sold in new markets).

Targeted reduction strategies. These strategies are used when an organization needs to regroup forces after a long period of growth due to the need to increase efficiency during market downturns and dramatic changes in the economy. Their use is not painless for the enterprise. At the same time, individual variants of these strategies are considered as business renewal strategies. Substantially distinguish:

• a "harvest" strategy (reducing procurement and labor costs, maximizing short-term revenues from the sale of existing services);
• downsizing strategy (closing or selling divisions or businesses that do not fit well with the remaining ones);
• cost reduction strategy (development of a number of measures to reduce costs);
• business liquidation strategy.

“In order for a company to generate a stable growing income, it needs to achieve leadership in one of three areas: in a product, in price, or in a narrow market niche,” said Michael Porter, presenting his theory of effective competition to the whole world. In the article, we will consider the basic competitive strategies of an enterprise according to Porter and propose an action plan for a company that has not yet determined strategic direction business development. Each type of competitive strategies we have considered is actively used in marketing around the world. The presented classification of competition strategies is very convenient and suitable for a company of any size.

A leading professional in the field of competition strategy is Michael Porter. Throughout its professional activity he was engaged in the systematization of all models of competition and the development of clear rules for conducting competition in the market. The figure below shows the modern classification of competitive strategies according to Porter.

Let's understand the concept and essence of a competitive strategy for business. A competitive strategy is a list of actions that a company undertakes in order to obtain higher profits than competitors. Thanks to an effective competitive strategy, the company attracts consumers more quickly, incurs lower costs for attracting and retaining customers, and receives a higher rate of profitability (marginality) from sales.

Porter distinguished 4 types of basic competitive strategies in the industry. The choice of the type of competitive strategy depends on the capabilities, resources and ambitions of the company in the market.

Porter's matrix of competitive strategies is based on 2 parameters: market size and type of competitive advantage. Market types can be broad (a large segment, an entire product category, an entire industry) or narrow (a small market niche accumulating the needs of a very narrow or specific target audience). There are two types of competitive advantage: low cost goods (or high profitability of products) or a wide variety of assortment.

Based on such a matrix, Michael Porter identifies 3 main strategies for a company's competitive behavior in the industry: cost leadership, differentiation and specialization:

A competitive product leadership or differentiation strategy means creating a unique product in an industry;
Competitive cost leadership strategy or price leadership means the company's ability to achieve the lowest level of costs;
Competitive focus strategy or niche leadership means focusing all of the company's efforts on a certain narrow group of consumers.

This classification of Porter's competitive strategies is very general and suggests that businesses choose the type of competition that will become the basis for making decisions in the field of assortment, prices, packaging, promotion and distribution of goods. After choosing the key direction of the competitive strategy, it is necessary to develop the principles of the strategy.

A firm that does not choose a clear direction for its competitive strategy is "stuck in the middle", does not operate efficiently and operates in an extremely unfavorable competitive situation. A company without a clear competitive strategy loses market share, manages investments poorly, and earns a low rate of return. Such a company loses buyers interested in a low price, so it is not able to offer them an acceptable price without losing profit; and on the other hand, it can't get buyers interested in specific product features because it doesn't focus on developing differentiation or specialization.

If your company has not yet decided on the vector of competitive strategy, then it's time to rethink the key goals and objectives of the business, evaluate the resources and capabilities of the company and go through 3 consecutive steps:

1. Make a fundamental decision and choose one of the directions of the strategy, based on the capabilities, strengths and weaknesses of the product.
2. Develop sustainable competitive advantage or USP of the product, which will emphasize the chosen direction of competition.
3. Identify key competitors from whom it is planned to take market share, and competitors that pose a threat to the company; and form a tactical action plan to increase the competitiveness of the business.

Competitive Advantage Strategy

Competitive strategies are the key to market success. Therefore, in order to win a better market position, establish a brand and achieve advantages in relation to competitors in the market, one should use the strategy as a basis in obtaining the benefits of competitive advantage.

To create competitive advantages, there are the following strategies.

Cost leadership strategy. In this case, the development and production of the product in the center of attention are the costs. This strategy is also known as Price Leadership.

It is a strategy based on internal competitive advantage, which is based mainly on the organizational and production know-how of the firm.

To create price advantages practice:

Reducing unit costs by increasing production volumes, thus achieving economies of scale.
Rational business management, optimization of intercompany communications.
Savings on diversity in the production of various products.
Integration of distribution networks and optimization of supply systems.
A branch network, which, due to the convenient geographical location of the company, allows to reduce the cost of production through the use of local features.

Cost leadership strategy, its advantages and disadvantages: This strategy can be used by large companies that have large market shares.

A company that chooses this path must achieve leadership in one of the following ways:

Establish cost-effective scale production facilities;
reduce costs based on experience gained;
tighten control over production and overhead costs; * avoid small transactions with customers;
obtain special access rights to sources of raw materials;
minimize costs in areas such as research and development, service, distribution system, advertising and other marketing communications.

This strategy provides the company with the following benefits:

Protection from suppliers;
protection from buyers of products (they can bring down prices only to the level of competitors' prices);
an obstacle to entry into the market of competitors;
advantageous position relative to substitute products.

The disadvantage of the strategy is that there is a serious problem of further price increases while maintaining the size of the captured market. There is also the danger that competitors will take advantage of the leader's technology or cost-management methods and emerge victorious. The strategy may be an effective response to the actions of competitors, but it does not provide a guarantee against defeat.

Differentiation strategies. When they try to give a product certain distinctive features, some unusual functional properties, unique characteristics that the buyer may like, have demand, value for the consumer and what he is willing to pay for, even if similar products of competitors will cost more.

These are strategies stemming from external competitive advantage, its superiority in identifying and meeting the expectations of buyers dissatisfied with existing products. In other words, they are aimed at putting on the market goods or services that are more attractive in the eyes of consumers than competing products.

It is impossible to create a competitive advantage through pricing strategy alone. There should be a certain pricing limit below which it is impossible to fall in order to avoid financial losses and maintain profitability. While the quality of a product can be improved indefinitely, if only it would be more advantageous in quality from similar products.

However, it should be understood that the cost leadership strategy and the differentiation strategy should be carried out independently of each other, it is not necessary to implement them simultaneously. Most often, companies use a differentiation strategy to raise prices, because differentiation leads to higher production costs. As a result, profits increase slightly, but not necessarily.

Whereas price-maintaining differentiation always increases sales through the number of products sold or through stabilization consumer demand.

Differentiation strategy, its advantages and disadvantages. Differentiation can be carried out in various forms or combinations of them:

Design or brand prestige;
special technology;
functionality;
terms of service for consumers;
dealer network;
other options.

In this situation, consumers develop loyalty to a particular brand, and it is not easy to find a replacement for the products offered by firms that adhere to a differentiation strategy. Financial reserves are also emerging to search for alternative sources of inputs.

But for all the attractiveness of this strategy, it has a number of drawbacks. Differentiation requires a certain increase in costs, which arise for the following reasons:

Increased investment in research and development;
increased costs for design and customer service;
more expensive raw materials are purchased;
customer tastes and preferences may change over time.

Focus strategies or focusing on the interests of specific consumers. This is a strategy in which an enterprise purposefully focuses on a certain group of consumers, or on a limited part of the product range, or on a specific geographic market.

This strategy is appropriate if there is a goal to satisfy some unusual need of a certain group of people by creating and marketing a specialized product. It is also possible to create a specific system for accessing a product, such as an innovative system for selling or delivering a product, and thus create a competitive advantage.

Similarly, this strategy can be "strengthened" by a pricing strategy and a differentiation strategy, but not made related.

Production diversification. This strategy includes:

Simultaneous expansion of types of production that are not related to each other,
- expanding the range of products manufactured at one enterprise,
- expanding the market activity of the enterprise,
- using your own financial resources not only to maintain and develop the core business, but also for the development of new activities, the creation of new industries.

Diversification of production contributes to the transformation of the company into a complex multifunctional complex, as a result of which the enterprise acquires greater resistance to market fluctuations, improves and adapts its products to changing conditions and demand, provides required level profitability.

Pioneer strategy. The essence of this competitive advantage is that a particular entrepreneur is the first and only manufacturer or supplier of goods or services in a particular market, region or area.

In order to become a "pioneer" it is not necessary to create a new product "from scratch". It is entirely possible for an old product to develop and implement new technologies, upgrade existing tools or mechanisms, or quickly understand and respond to new customer needs and demands.

Stuck in the middle position. The company can choose any of the strategies. Porter believes that each of them is a spectacular way to counter competitors, but advises to stop at only one. Otherwise, the company risks becoming stuck in the middle, which will inevitably lead to loss of market share, low profits, conflicting organizational structures and weak motivation.

Enterprise competitive strategies

A competitive strategy is a generalized model of actions and a set of rules that an enterprise should be guided by when making decisions in order to achieve and maintain competitiveness in the long term.

The strategy sets a certain framework that makes it possible to identify and evaluate changes in the external and internal conditions for the development of the system and the need for its improvement due to these changes.

The strategy, as a means to achieve long-term goals, focuses on the forecast of the behavior of the external environment and, in this regard, the analysis of the possibilities for the functioning and development of the enterprise. The strategy is adaptive to changes in the external environment and mobilizes the resources of the enterprise, directing them to achieve the goals.

In accordance with the above classification features, the following are distinguished.

When possible, strategies are distinguished - typical and original.

Depending on the level of management, strategies are distinguished: corporate, business, functional and operational.

Corporate strategy is the overall strategy of the corporation as a whole.

The business strategy aims to establish and strengthen the long-term competitiveness of the enterprise in the market.

The functional strategy is carried out across the enterprise in selected functional areas: marketing, personnel, finance, etc.

The operational strategy is implemented on the scale of individual divisions of the enterprise: advertising, cost centers, etc.

Depending on the type of functioning, competitive strategies of commuters, patients, violents, explerents, litalents are distinguished, which reflect a specific type of biological behavior of the enterprise and have a corresponding analogy with the behavior of biological systems.

Commutators, or "Grey Mice", are small, flexible businesses that easily adapt to changing market demand. Often they offer goods (services) - imitators, goods (services) - fakes, are not firmly tied to a specific field of activity, easily move from one market to another. Possess low stability in the market. Flexibility and adaptability form the basis of this competitive strategy.

Commutators can be medium or small enterprises that have experienced the peak of their efficiency, more focused on stable limited demand and services than on innovation and individualized approach to customers.

Patients, or "Cunning Foxes", are highly specialized enterprises with quantitative growth (staff, communications, divisions) that have mastered well one of the niches (need areas) of the market. Not very large enterprises that have been producing goods and services of a certain type for many years. The competitive strategy is based on narrow specialization, low costs and high quality of goods (services).

Violenti, or “Elephants”, “Lions”, are giant enterprises that have reached the most stable position in the market and control a significant market share. Competitive strategy - low costs due to the large scale of activities and the satisfaction of mass customer demand.

Explerents, or "Moths", are start-up, emerging enterprises whose competitive advantage is innovation, new technologies and goods (services). They are poorly connected with the market, do not have enough funds for its development, extensive marketing activities. Effectively operate as venture divisions of large enterprises or their subsidiaries. The basis of activity is new ideas, external financial support.

Litalenty, or "Dying", are enterprises with an overly complicated, inefficient structure, a decline in financial performance. They need a quick re-profiling to a new business, new technologies, new markets, a focus on destructuring and refinancing.

There are strategies determined by the position of the enterprise in the competitive struggle: offensive, defensive.

An offensive strategy is typical for enterprises that base their activities on the principles of entrepreneurship. A fundamentally new product (service) or technology that brings competitive advantages is designed and implemented.

The defensive strategy is aimed at maintaining the competitive position of the enterprise in the already developed sales markets. The main function of the strategy is to activate the cost-benefit ratio with own benefits and benefits for buyers. Competitive struggle with such a strategy is not based on the originality of the product (service) or technology, but on their price, supply volumes and quality.

Based on the analysis of the forces of competition, Michael Porter identified three basic competitive strategies that have universal applicability, with the help of which an organization can secure competitive advantages: cost leadership, differentiation, and focus.

1. Cost leadership provides protection against all five forces of competition:
the company is able to make a profit at the lowest possible price for competitors;
low costs create an entry barrier for new competitors and substitute products;
low costs protect the enterprise from the actions of strong suppliers, providing greater flexibility in case of price increases by them;
strong consumers are not able to achieve price reductions below the level acceptable to the strongest competitor.

Low cost leadership is effective under the following conditions:

Price is the dominant competitive force;
industry product - standardized, easy to manufacture;
lack of opportunities for differentiation;
"big" buyers have significant trading power.

Low cost leadership has the following risks:

Technological changes that devalue previous experience and investment;
the ability to copy the competitive advantages of leadership in terms of costs by competing enterprises;
inability to timely make changes to the product due to an exaggerated attention to costs.

2. Product differentiation is focused on buyers who are willing to pay more, but for a higher quality or for a wider choice of consumer qualities of a product (service).

Differentiation can be horizontal (differences in goods or services in terms of individual characteristics, the price is approximately the same) and vertical (the offered characteristics of goods or services, their prices and the average solvent income level of consumers are different).

Differentiation also protects the enterprise from the five competitive forces, but in a different way:

In relation to competitors, differentiation reduces the possibility of replacing a product, increases consumer brand loyalty, reduces price sensitivity and thereby increases profitability;
distinctive properties of the goods and the won loyalty of clients protect the enterprise from goods-substitutes;
increased profitability increases resilience to possible price increases by a strong supplier.

Differentiation is attractive under the following conditions:

There are many ways to differentiate a product;
the organization has know-how in the field of production or marketing;
the needs of potential consumers differ;
few competitors in the industry follow a similar path of differentiation;
demand is price inelastic;
the industry market has a complex structure.

Differentiation may include the following:

The gap in prices for a differentiated product (service) relative to competitors with low costs is so large that it is not possible to maintain brand loyalty;
the role of the differentiation factor decreases as the product (service) becomes familiar;
the perception of differentiation is reduced under the influence of fakes and imitations.

3. Focusing - focusing efforts on any market segment, consumer niche, characterized by special needs, in order to better satisfy them than competitors. This strategy can be based on cost leadership or differentiation, or both, but within the target market segment.

Focusing is attractive when:

For most competitors, it is too expensive or difficult to master this niche;
the company does not have enough resources to develop broad market segments;
industry segments differ significantly in size, growth rates and intensity of pressure from competitors;
there are relatively small groups of clients with non-standard needs that are not fully satisfied.

Focus risks include:

The gap in prices in comparison with non-specialized products of competitors becomes very large;
differences in the requirements for the goods of consumers of the target market segment and the market as a whole are reduced;
competitors enter even narrower sub-segments within the target segment.

Depending on the life cycle of the development of a product (service) or an enterprise, the following strategies are distinguished: concentrated growth, integrated growth, diversified growth, targeted reduction.

Concentrated growth strategies. This group of strategies includes:

A strategy to strengthen a product position with an already mastered service (or a package of services) in an already mastered market, for example, through additional marketing or advertising efforts;
a strategy for finding new markets for an already produced service (service package);
strategy for developing a new service (service package) in an already developed market.

Integrated growth strategies. This group of strategies includes:

Strategy of reverse vertical integration (integration with suppliers of resources necessary for the production of services);
forward integration strategy (integration with distributors, resellers and trade organizations).

Diversified growth strategies. Here, strategies with the following types of diversification are distinguished:

The strategy of concentric diversification (search for additional opportunities for the production and sale of new services on the existing base of the old business; it remains at the center of the business);
horizontal diversification strategy (production and sale of new service packages that are different from those used in the already developed sales market);
conglomerate diversification strategy (the organization expands through the production and sale of new packages of services that are technologically unrelated to those already produced; new services are sold in new markets).

Targeted reduction strategies. These strategies are used when an organization needs to regroup forces after a long period of growth due to the need to increase efficiency during market downturns and dramatic changes in the economy. Their use is not painless for the enterprise. At the same time, individual variants of these strategies are considered as business renewal strategies.

A "harvest" strategy (reducing procurement and labor costs, maximizing revenue in the short term from the sale of existing services);
downsizing strategy (closing or selling divisions or businesses that do not fit well with the remaining ones);
cost reduction strategy (development of a number of measures to reduce costs);
business liquidation strategy.

Competitive strategy of the firm

According to the so-called biological approach proposed by the Russian scientist L.G. Ramensky, there are strategies for ensuring the competitiveness of an organization: violet, patient, commutative, explerent (table below).

Violet strategy assumes mass production and the supply to the market of products of acceptable quality to consumers at low production costs, which allows manufacturers to set low prices based on a significant amount of demand. The violet strategy is typical for large companies that dominate the market and outperform competitors due to low production costs (and, consequently, low prices) and high labor productivity, which is possible when organizing mass (large-scale) production of goods targeted at the average buyer. A violent strategy can be pursued by large organizations with a stable reputation, which have gradually mastered significant market segments.

Characteristics of types of competition according to L.G. Ramensky:

Characteristics of the strategy	Strategies
	violet	patient	commutative	explerent
Needs Oriented	mass standard	relatively limited, specific	local limited	innovative
Type of production	mass, large-scale	specialized, serial	universal, small-scale	experimental
Company size		large, medium, small		medium, small
Level of competition
Company stability in the market environment
Relative share of R&D spending			absent or small	high, dominant
Competitive Advantage Factors	high productivity, low unit costs	benefits from product differentiation	flexibility	advance in innovation
Development dynamics	high, medium
Type of innovation	improving	adaptive	absent	breakthrough, cardinal
Range				absent

The patent strategy is to serve narrow market segments with specific needs based on the organization of specialized production of products with unique characteristics, designed to conquer and retain relatively narrow market niches within which exclusive special-purpose goods of very high quality are sold. Manufacturers and sellers of such goods sell them on the market at high prices for wealthy buyers, which makes it possible to receive significant profits with small sales volumes.

Competitiveness is achieved by the sophistication of the product that satisfies delicate tastes and requests, quality indicators that surpass the quality of similar products of competitors. The switching strategy is designed to satisfy not rare, but rapidly changing, short-term needs of consumers in goods and services. The switching strategy is aimed at adapting to the limited demand of the local market, meeting rapidly changing needs, and imitating new products. Therefore, the commutation strategy is primarily characterized by high flexibility, which imposes special requirements on the restructuring of production for the production of periodically updated products. Typically, such a strategy is followed by non-specialized organizations with fairly versatile technologies and limited production volumes, when the implementation of this strategy does not aim to achieve high quality and sell at high prices.

An explerent strategy is focused on radical innovation and entering the market with a new product. The exploratory strategy is based on the achievement of competitive advantages of the organization through the implementation of constructive and technological innovations that allow them to stay ahead of competitors in the production and supply of fundamentally new types of products to the market, by investing in promising but risky innovative projects. Such projects, if successfully implemented, allow not only to surpass rivals in terms of the quality of products presented on the market, but also to create new markets where for a certain time they may not be afraid of competition, since they are the only producers of a unique product. The implementation of such a strategy requires a significant initial capital, scientific and production potential, and highly qualified personnel. The introduction of innovations is one of the radical means of obtaining competitive advantages, contributing to the monopolization of the market. Discoveries, inventions and other innovations create a new market with a future rapid growth and great opportunities for the company. The vast majority of modern market leaders appeared precisely as a result of the development and use of innovations that lead to revolutionary changes in the market situation. An example is the leaders in the aviation, automotive, electrical, computer and software industries that emerged from small pioneer enterprises whose innovations literally "blew up" existing markets at one time.

The main advantage of the innovation strategy is blocking the entry of competitors into the industry (for a certain time) and guaranteed high profits. The lack of substitute products and the high potential demand for innovation create favorable market conditions for the innovator company.

However, as experience shows, due to the high risks caused by the unwillingness of the market to accept innovations, and in some cases, technical and technological imperfection and lack of replication experience and other reasons, 80% of these companies fail. But the prospects of becoming a leader in the industry, in the market and the associated economic benefits create an incentive for development innovation activities.

Enterprises implementing an exploratory strategy usually have highly qualified personnel, project management structure, venture business organization at the initial stages of the innovation process.

Prerequisites for the application of such a strategy: lack of analogues (products, technologies, etc.); the presence of potential demand for the proposed innovations.

Benefits of an exploratory strategy:

Blocking entry into the industry during the validity of the rights to innovation;
the possibility of large volumes of sales and obtaining excess profits. Exploratory strategy risks:
great uncertainty in the commercialization of the innovation;
danger of imitation, rapid development of similar products by competitors;
unwillingness of the market to accept innovation;
lack of distribution channels for new products;
design, technological and other flaws in the innovation.

Development of a competitive strategy

Competitive strategy is a tool in the hands of enterprise managers to achieve the intended goal. In order for the competitive struggle to be conducted deliberately, it is necessary to develop a competitive strategy, draw up a plan for its implementation and analyze the results of the implementation of the plan. The developed plan for the implementation of a competitive strategy helps all employees of the organization to clearly understand what function they should perform when working with each market segment and how to behave in case of certain actions of competitors. In other words, it creates conditions for the coordinated work of managers of various departments to achieve common corporate goals. And in the market, the company's actions become interconnected and purposeful.

The general idea of ​​developing a competitive strategy is a program of action that allows you to get a positive economic effect due to the fact that the company is in a stronger competitive position.

The function of competitive strategic planning in an enterprise is carried out using the basic principles, that is, the rules for the formation and implementation of a strategy in the market:

Succession and accumulation;
the sequence of steps (stages) to be performed;
cyclicity.

The continuity of the competitive strategy lies in the fact that the company, even before developing a strategy, must analyze previous experience, find out what actions were useful in the competition and check their relevance at the moment. In addition, the study of past experience will allow the company to avoid old mistakes when developing a new strategy.

The sequence is caused by the dependence of the subsequent stage on the results obtained at the previous one. This will help avoid mismatch between the competitive strategy and market conditions, mistakes that have already taken place in the past, and evaluate the results obtained during the implementation of the strategy.

Competitive strategy is an important tool in the hands of managers, as it is aimed at solving a number of tasks and problems that the company faces:

Firstly, the available analytical material, obtained and structured during the formation of the strategy, allows both management and performers to clearly see the situation on the market, the position of the company on it, the reality of the goals and ways to achieve them.
- Secondly, approved by the company's management, the competitive strategy acquires the force of an organizational and administrative document, that is, it allows you to concentrate forces in the required direction.
- And finally, thirdly, by analyzing its activities in past periods, the company can constantly improve and expand its scope of activities, adequately respond to market changes, strengthen its market position and conquer new markets.

Currently, practitioners often have to deal with a situation where there is a gap between the theory of competitive strategies and the practice of its application in the enterprise.

According to the proposed algorithm, the development and subsequent implementation of a competitive strategy is carried out by sequentially performing eight main stages:

1. Mission and corporate development strategy of the enterprise.
2. Formulation of tasks in the competitive struggle in the market.
3. Collection and analysis of information about the external and internal environment of the enterprise.
4. Choice of competitive strategy of the enterprise in the market.
5. Analysis of the chosen strategy.
6. Implementation of the competitive strategy through the developed plan.
7. Analysis of the results of the implementation of the strategy.
8. Correction of the existing strategy or development of a new more effective strategy that will be able to implement the tasks set by the general corporate strategy of the enterprise.

It is important to note that since the competitive strategy is lower in the strategic planning hierarchy than the general corporate development strategy of the enterprise, it makes sense to start developing a competitive strategy after the completion of work on the general corporate development strategy of the enterprise.

Due to the fact that the development and implementation of a competitive strategy affects various services and functional units, it is logical to divide the algorithm into phases.

All eight stages are divided into three phases:

Preparation phase (stages 1 and 2).
Development phase (stages 3, 4, 5).
Implementation phase (stages 6, 7, 8).

The preparation phase is the responsibility of the Strategic Planning and Corporate Development Department, or the functional unit responsible for these areas (stage 1). The developed general corporate strategy of the enterprise is submitted to the protection of the management and owners of the enterprise, who, as a whole, finally determine the priority tasks in the competitive struggle for the enterprise (stage 2). Preliminary tasks in the competition in the market are formulated in accordance with the corporate goals and directions of development of the enterprise.

At this stage, it is necessary to determine the nature of the competition (for example, offensive or defensive), who exactly needs to be squeezed out on the market, to whom (for example, competitor "A") can be forced to divert their resources from market "a" by switching it to this market and weakening its position in the strategically important market "b"). This approach allows you to compete globally through local clashes with specific competitors. At the same time, it must be remembered that only the hierarchy of strategic planning at the enterprise (general corporate strategy - competitive strategy in the market) allows you to effectively conduct global competition. This approach has become especially relevant right now - a global market has formed, and interstate borders have become practically transparent for capital, goods, and labor resources. As a result, a change in the situation in one market can affect another market, and, accordingly, its participants.

In the development phase, the tasks that were formulated by the company's management are communicated to the functional unit responsible for marketing and sales. In the future, analysts of this division analyze the market, while the key positions of the analysis are the intensity of competition in the market and the competitive position of the enterprise (stage 3). Based on the analysis, a suitable competitive strategy is selected (stage 4). Further, this strategy is analyzed from the point of view of compliance with the corporate objectives that were formulated by the management, as well as from the point of view of the enterprise's capabilities. The marketing competitive strategy, as noted above, is determined based on external factors (analysis of environmental conditions) and internal factors(available company resources). In order to get a clear assessment of the internal capabilities of the enterprise and the situation on the market, you can use the SWOT analysis.

The use of SWOT-analysis is necessary to systematize the available information and subsequent management decisions. Therefore, SWOT analysis can be called an intermediate link between the formulation of a competitive strategy for an enterprise and the development of a competitive plan (stage 5).

Everything happens in the following sequence:

1. Determination of the main competitive strategy of the enterprise in the planning period.
2. Comparison of the internal forces of the enterprise and the market situation in order to understand whether the enterprise will be able to implement the chosen competitive strategy, and how this can be done (SWOT analysis).
3. Formulation of goals and local tasks, taking into account the real capabilities of the enterprise (development of a competitive plan).

As another criterion for evaluating and adjusting the chosen competitive strategy, managers need to consider the corporate goals of the enterprise, which are based on the mission and overall development strategy. This coordination is necessary to ensure that the chosen competitive strategy in a particular market does not have a negative impact on the development of the enterprise as a whole. For example, an attack on competitors (in order to force them out of the market) or the absorption of some of them can significantly increase the company's market share, but at the same time exceed the antitrust laws or the costs incurred will not be able to pay off.

If the competitive strategy satisfies all the requirements, the process of developing a competitive strategy moves into the implementation phase. In this phase, the developed strategy is put into practice - marketing and sales specialists of the enterprise act in the market in accordance with the approved strategy (stage 6). The main difficulty at this stage is that it is necessary to competently implement the developed strategy and then evaluate its effectiveness.

The implementation of this task can be helped by a plan for implementing a competitive strategy, the structure of which is proposed below:

1. Summary. This section of the competitive plan is the last to be drawn up and, when completed, should begin with the formulation of goals, a description of the strategy and short plan actions to achieve the set goal and implement the strategy. A summary that helps management quickly understand the main points of the plan.
2. Description and analysis of the current market situation. Brief political and economic situation of the region/country market. Analysis of the market and consumers of goods in a given region/country.
3. Description and analysis of competition in the market. Analysis of competitors' activities. Analysis of the competitive position of the enterprise in the market. Assessment of the intensity of competition in the market.
4. Results of the past period. Actual and planned results of the previous period. Analysis of the results of the past period. Description of the reasons for non-fulfillment or overfulfillment of the plan.
5. Setting goals and describing the chosen strategy. The competitive strategy is determined based on the results of a study of the competitive environment and the position of the enterprise in the market.
6. Evaluation of the chosen competitive strategy. The assessment of the chosen strategy is based on the analysis of the external environment and internal capabilities of the enterprise (SWOT analysis). In addition, the selected competitive strategy must be considered for compliance with corporate goals. Here you should also characterize the chosen competitive strategy, give a description necessary conditions successful implementation of the competitive plan and possible reasons that could interfere with its implementation.
7. Plan for the implementation of the chosen competitive strategy.

This section should state:

A. Quantitative goals that determine absolute sales volume and relative growth rates. At the same time, these indicators must be expressed both in the number of units of goods (attracted new customers) and in monetary terms. Another important base indicator of the planning period is the company's market share, which is planned to be taken by the end of the period.
B. A set of measures and actions to achieve the goals. Competitive strategy is considered in accordance with the marketing mix (four "I" - product, price, distribution, promotion). This circumstance allows it to be successfully implemented by accurately distributing tasks and functions between various departments of the company, and subsequently to analyze the effectiveness of the competitive strategy after the planned period. In the activities, it is necessary to take into account such points as the need for testing, standardization, presentations, business trips of specialists for specific purposes (market research, negotiations, participation in exhibitions, provision and development of after-sales service, etc.). Each event is assigned deadlines, as well as specific performers.

8. Budget for the planning period.

The required amount of funds allocated for the implementation of the competitive strategy is analyzed.

It is well known that any activity must begin with planning, long before the first step in the chosen direction is taken. The main task of the competitive plan is not only to indicate the direction, but also to describe the route, the procedure for achieving the set goals - conducting research on competitors, preparing response actions and their implementation. Thus, the competitive plan discussed above is an applied tool for the development and implementation of competitive strategies in the enterprise.

At the end of the reporting period, the results obtained during the implementation of the competitive strategy are analyzed, and the effect obtained is determined (stage 7). At this stage, the main role is played by the competitive plan, which, in fact, is the source of experience accumulation by the enterprise. By analyzing its activities in past periods, an enterprise can constantly improve and expand its scope of activities, adequately respond to market changes, strengthen its market position and conquer new markets.

Key questions to be answered:

Correctness of the chosen strategy?
competitor reaction?
the correctness of the planned activities and to correlate the results obtained and the planned ones?
the effectiveness of the tasks?
highlight successful and unsuccessful approaches, methods, ideas?

If the competitive strategy turned out to be effective and has positive results for the company, then the issues of its adjustment and relevance are considered in the following reporting period. After that, an updated competitive plan with new goals is developed (stage 8). If the competitive strategy did not have a positive effect or had negative consequences, the reasons are determined and a new competitive strategy is developed.

Often a competitive strategy is something isolated in the strategic planning of an enterprise, meanwhile it is directly integrated into it and is an integral part of it. The presented step-by-step algorithm for developing a competitive strategy and the plan for implementing the developed strategy make it possible to establish a closed cycle of competitive strategic planning.

Competitive Strategies

Competition is a given that any business has to take into account. The competition for the end customer in the market is constantly going on, it uses all possible tools and resources of the company. A company that does not compete, does not oppose competitors, is doomed to lose market share. In the article, we will analyze in detail the concept of "competition" and talk about the most common strategies and methods of competition in the market. Consider both price and non-price methods of competition in the industry.

Competition is actions aimed at maintaining and increasing the company's market share. The minimum goal of competition is to keep current customers and prevent them from switching to competitors. The maximum goal of competition is to select buyers from the main competitors of the company.

In order to effectively resist competitors, it is necessary to consistently go through all stages of competition:

Determine the target audience and main competitors;
Determine competitive advantage and develop a strategy for its strengthening and development;
Approve the main competitive strategy in the industry;
Develop tactics to counter major competitors.

The basic rules of competition are in 3 sentences: do not harm the market, do not harm yourself, work within the law. All actions directed against competitors should not lead to a collapse and decrease in the volume of the market in which your company operates. All actions directed against competitors should not lead to a decrease in the profitability of your business in the long run. You must use legal means of competition and abide by legal regulation countries.

So, let's move on to a description of all possible tools of competition. Competitive struggle does not always mean aggressive methods of work and tough confrontation. Competition can be either active or passive. In relation to competitors, a company can use 2 main tactics of competitive struggle: preemptive (offensive) actions, or passive actions.

Types of competitive strategies	Description of strategies
offensive strategies	Actions aimed at actively confronting the main competitor in order to capture market share. By choosing this way of competing, the company focuses on confronting certain group competitors and takes any action to attract buyers of competitors to its product.
Passive Strategies	Actions aimed at a peaceful existence in the market and an increase in the profitability of the company with a slight increase in market share. Having chosen this type of competition, the company begins to look for ways to peacefully exist with large competitors and focuses on small free niches in the market.

The way in which a company decides to confront competitors depends on the size of the business and on the resource capabilities of the firm. In the article, we will consider the main types of competition with which any company can win even in the face of the fiercest competition in the industry.

As we have said, the goal of pre-emptive or offensive competitive strategies is to challenge the market leader and subsequently capture its market share. In global practice, there are 5 offensive strategies for competitive struggle: frontal attack, flank attack, encirclement, focus on niches and bypass. Let's consider each of them in more detail.

Frontal attack. A frontal attack strategy means using against a key competitor the same means that it uses itself in the development of its product, but with greater intensity. Higher intensity allows you to achieve superiority over competitors (in price, product, advertising), which should later be translated into a competitive advantage. Not used for frontal attacks. weak sides competitor.

In other words, if your competitor attracts the majority of new customers through advertising, you start using the same communication channel in order to make him less visible or completely invisible in this channel. If your competitor releases a new product, you release an alternative offering that is better than the competitor's product.

Flank attack. Flank attack strategy - using one of the weaknesses of the leader to achieve competitive advantages. For example, increased activity in a particular region, distribution network, where a competitor has a weaker position. A common example of a flank attack is to offer a product comparable to the leader, but at a lower price. Environment. The environment strategy involves the gradual accumulation of advantages by studying the weaknesses of the main competitor. It is very long in time, but ideal for small companies. Encirclement is very comparable to a flank attack, but is carried out more consistently and discreetly.

Concentration of forces on separate segments. Such a strategy implies focusing all efforts on segments that are not attractive to key players. It is usually unprofitable for large leaders to concentrate their efforts on such segments, due to the loss of the main share.

Bypass. A bypass strategy means avoiding competition by releasing products that do not compete with those of key competitors.

The purpose of passive strategies is a peaceful existence in the market and a conscious division of the market. The actions of passive strategies should not cause a rebuff from the main market players.

Passive strategies are very often used by small firms and have a number of features:

They focus only on certain segments of the market and never aim to cover the entire market;
should focus on the development of technologies only in the direction of reducing costs and basic expenses;
focus on profit rather than sales and market share.

Strategy for copying successful products. Also known as the false mushroom strategy. It consists in creating a “full copy” of a successful product and selling it for more attractive price. Used when a company is able to create a complete copy of a competitor's product.

small market strategy. Strategy means creating an original/unique product for a narrow market segment (comparable to niche leadership strategy in Michael Porter's competition models) Small market strategy is the most commonly used passive strategy. Saving positions. The strategy is to maintain a consistent market activity without attracting the attention of major competitors.

participation strategy. Participation strategy means the involvement of the company in the production of the product of the main company - competitor. For example, firms producing covers for car companies.

Franchising. The strategy is that a small firm creates a product similar to the product of a large company and enters into a franchise agreement with a large company, while maintaining the ability to exist in the market.

Types of competitive strategies

Any business strategy, to be successful, must be based on the competitive advantage achieved by the company. A company has a competitive advantage if its position is characterized by a better position relative to rivals in the competition and attracting customers. There are many different competitive advantages: the advantage of higher quality products, providing customers with a wider range of services, selling goods at relatively low prices, a more advantageous geographical location, producing products that have no equivalent, producing more reliable and durable products, providing more services. per purchase (combination of high quality, good service and reasonable price). Whichever strategy a company chooses, if it is to achieve a competitive advantage, it must draw the attention of consumers to its products by providing more "value" than the buyer expects. Additional "value" is created in one of two ways: either by providing customers with quality products at lower prices, or by providing products of "better quality" than the customer's estimates suggest, even with a premium markup.

This topic is about how a company can gain and maintain competitive advantage. First, the main types of competitive strategies are considered and how they lead to positions of market advantage.

A competitive strategy is a set of specific steps and approaches that a firm takes or intends to take in order to compete successfully in a given industry. Or the same but more in simple terms, the firm's competitive strategy shows how the company's management tries to soften the blows of competitors and thereby withstand the destructive action of the five forces of competition. Depending on the situation, the strategy may be predominantly defensive or predominantly offensive.

Companies around the world are armed with truly fantastically elaborated all conceivable and unthinkable ways to gain market advantage. In this sense, there are as many competitive strategies as there are competing firms.

However, discarding all the nuances, there are three main strategic approaches to the conduct of competition:

1. The desire to have the lowest production costs in the industry (leading strategy in the field of production costs).
2. Search for ways to differentiate manufactured products from competitors' products (differentiation strategy).
3. Focusing on a narrow part, and not on the entire market (focus strategy, or niche).

The incentive to have the lowest cost of production in the industry is the presence of a large number of price-sensitive buyers in the market. The idea is to gain a sustainable advantage over competitors in terms of production costs and use it as a basis for price dumping and increasing market share, or earning a higher rate of return by selling goods at prevailing market prices. A cost advantage can translate into higher profit margins only when it is not wasted on undercutting competitors' prices in order to increase sales accordingly. Winning a leading position in the field of production costs means making the goal of reducing costs a leitmotif of the firm's overall strategy - although this does not detract from the importance of other success factors.

To have a cost advantage, a firm must achieve the lowest total cost of production.

There are two main ways to gain competitive advantage in this area:

Purposeful work to reduce costs and increase production efficiency;
revision of the overall cost structure and rejection of the most expensive and least efficient technological operations.

Both approaches should be carried out simultaneously. As a rule, low-cost producers try to use every opportunity to reduce costs that presents itself. Their activities fit into a particular administrative culture: spartan equipment, meager tips, low bonuses to managers, zero tolerance for waste, a scrupulous review of the organization's budget, the implementation of a system of broad employee participation in reducing production costs. But even though they are extremely frugal in their spending, companies of this type do not skimp on investing in resource-saving technologies.

A firm that claims to be a low-cost producer must carefully analyze each stage of cost increment.

Then she should use what she has learned about the reasons for the increase in costs and be creative in finding ways to reduce them. Wherever possible, production operations that lead to a sharp increase in costs should be abandoned. As a result of the implementation of such measures, the company can achieve tremendous success in reducing production costs. Illustrative box 10 provides a story of two companies gaining a strong competitive position by redefining the traditional industry cost structure.

Examples of firms successfully pursuing cost reduction strategies include Lincoln Electric for arc welding equipment, Briggs and Stratton for small internal combustion engines, NIR for ballpoint pens, Black and Decker for tools, Manufecchurin Design for dishwashers (famous in market under the brand name CIARS KENMORE), Beard - Pulan - chain saws, Ford - heavy vehicles, General Electric - a variety of household appliances, VOL-MART - retail goods, Southwest Airline - commercial air transportation.

The position of the low-cost producer in the industry offers protection from the five forces of competition:

Compared to competitors, a company with low production costs is in the best position to compete on price, protect against price wars, use the advantage of a lower selling price as a tool to capture the competitor's market, earn above-average profits (due to higher profitability or higher sales volume) in markets where price competition prevails. The producer with low production costs has a decisive voice in setting the price level for the industry's products;
in relation to buyers, a company with low production costs in the industry is protected from the action of strong customers, since buyers are unlikely to bring the price down to the level of survival of the next sellers in the rankings;
with respect to suppliers, a low-cost producer is more protected than competitors from the actions of powerful suppliers if the high efficiency of its own production is the main source of production cost advantage;
With respect to potential newcomers, the low cost producer may use price reduction tactics to make it harder for new competitors to win customers, the price power of the low cost producer acts as a barrier to potential newcomers;
With respect to substitute products, the low-cost producer is in a better position than competitors because it uses a low price against attempts to enter the market with substitute products.

Once price competition becomes the dominant force in the marketplace, firms with relatively low production costs have a significant advantage in attracting buyers whose buying decision is based primarily on price.

A cost-benefit competitive strategy is particularly effective in the following cases:

1. Price competition among sellers is the main force of competition.
2. Industry-produced product - mostly standard, easy to obtain from a wide range of sellers (conditions that encourage buyers to buy at lower prices).
3. Very few opportunities for product differentiation or, in other words, buyers care little about brand differences.
4. The vast majority of buyers use the product in the same way, as a result, a standard set of buyer requirements for this type of product is formed.
5. It costs almost nothing for buyers to switch from one seller to another; this increases the flexibility of buyers' behavior, encourages them to buy products at the lowest prices.
6. Buyers are mostly large and have significant purchasing power.

However, a low cost strategy is risky and has a number of weaknesses. A breakthrough in technology can lead to lower costs for competitors and thereby devalue the firm's investment in lowering production costs, nullifying efforts to improve production efficiency. Competing firms can duplicate the path of a cost-cutting manufacturer relatively easily and inexpensively, thereby rendering any advantage in this area short-lived. A company focusing on reducing production costs becomes fixated on the task of reducing costs so that it often does not respond properly to some emerging significant changes - for example, growing consumer demand for additional services and quality parameters, subtle shifts in the nature of product use, reduction the sensitivity of buyers to the price level - and thus, is losing ground as consumer demand switches to other differentiating features.

Thus, directing the vast majority of capital investments to reduce production costs can lock the company into existing technology and strategy, weakening its immunity to new ones. high technology and growing consumer interest in something other than a low price.

Differentiation strategies are appropriate when the needs and tastes of customers differ too much from customer to customer and therefore cannot be satisfied by producing a standard product. A manufacturer that successfully applies the principle of differentiation carefully studies the behavior and needs of customers in order to ascertain the opinion of customers regarding the value and significance of certain features. After that, the company differentiates its products according to one or maybe several characteristics, thereby stimulating the preference of buyers for the products proposed by the company. Competitive advantage is the result of a company's unique (compared with its competitors) ability to meet the needs of buyers who prefer one or another feature of their products.

Successful differentiation allows the firm to:

Set a premium margin on your products;
sell more products (because more buyers are attracted);
make the firm's brand more popular with customers (because a certain number of customers are strongly attached to differentiating features).

Differentiation promises additional profit if the premium margin can absorb the additional costs associated with differentiating. Differentiation does not bring the desired results if the features underlying product differentiation are not valued by buyers so highly as to recoup the firm's additional costs of differentiation.

Ways to differentiate a company's products from those of competitors can be in many ways: different tastes (Dr. Pepper and Listerine), special features (Jan Ears - on-board stoves with built-in grill), super service (one-night mail delivery by Federal Express), supply of spare spare parts (Caterpillar guarantees the delivery of spare parts in 48 hours anywhere in the world or, in case of failure, free of charge), everything for the consumer (McDonald's), super design and execution (Mercedes in the automotive industry), prestige and originality (Rolex in the manufacture of watches) , product reliability (Johnson and Johnson in children's toys), manufacturing quality (Karastan in clothing and Honda in automotive), level of technological performance (ZM Corporation in bonding and lining products), full service (Merrill Lynch), full range products (Campbell in the soap industry), super image and reputation (Brooks Brothers and Ralph Lauren in the menswear, Kitchen Aid - dishwashers, Cross - writing instrument.

Any actions of the firm to attract the attention of buyers to its products are a potential basis for differentiation. Once the price gouging factors are identified, features that can add value to the product begin to be developed (at a reasonable cost). The firm may also develop features that increase the productivity and efficiency of its products. In addition, it is possible to develop features that cause a feeling of satisfaction of the buyer during the use of the intended product. Opportunities for differentiation can occur anywhere along the production chain. For example, McDonald's has a high rating for French fries, partly due to the company's strict commitment to buying a particular variety of potato. The quality of Japanese cars is due mainly to the ability of the Japanese to work according to a well-established quality control system. IBM enhances the value of its products in the eyes of customers by providing its customers with a comprehensive range of services and technical support. Clients L.L. Bin feel safe ordering goods by mail, as the company takes full responsibility for the delivery of goods to the recipients: "We guarantee that all our products will give you one hundred percent satisfaction. You can return the product you do not like at any time. We will replace it, we will refund the price you paid, we will credit your credit card if you wish." Commercial airlines use vacant seats during off-peak travel (i.e. extra capacity) to reward their loyal customers (free flights).

Differentiation acts as a shock absorber for competing firms' strategies because customers become attached to a brand or model and are willing to pay a little more (and sometimes a lot more!) for the product they love.

In addition, successfully carried out differentiation:

1. erects barriers to entry in the form of customer attachment to the unique nature of the product, which is very difficult for newcomers to overcome,
2. weakens the purchasing power of large customers, since the products of alternative sellers are less attractive to them,
3. Puts the firm in a better position to fend off attacks from substitute manufacturers because customers are loyal to the firm's brand.

To the extent that differentiation allows higher prices and margins, the manufacturer is in a stronger economic position to withstand the pressure from suppliers in the form of higher prices for raw materials and materials. Thus, just as with a cost-cutting strategy, successful differentiation creates a strong line of defense against the five forces of competition.

The most successful types of differentiation strategies are considered to be those whose imitation by competitors requires a significant investment of time and money. Here the presence of exceptional perfection plays a big role.

If the firm has mastery and competence in any area of ​​activity, and it is very difficult for competitors to repeat this achievement, then this factor can be successfully used to differentiate.

Differentiation based on:

technological superiority;
high quality products;
providing consumers with a greater range of related services;
providing consumers with more "value" for the same price.

In general, differentiation strategies are best applied when:

1. there are many possible ways to differentiate products or services, and a significant proportion of buyers perceive these differences as having a certain price,
2. customer needs for this product are different, and the product itself can be used in different ways,
3. A small number of competing firms rely on a similar approach to differentiation.

Buyers very rarely pay a price that is at odds with their subjective assessment of a product or service. In this case, the justification of the additional costs is absolutely irrelevant. Therefore, the premium margin, which is the result of the implementation of a differentiation strategy, is nothing more than a reflection of the actual value and subjective assessment by the buyer of the products offered. The difference between the actual cost and the subjective assessment occurs when the buyer does not have the opportunity to pre-evaluate the proposed product. The lack of adequate information from buyers often forces them to make a decision based on incoming signals in the form of: a verbal recommendation from the seller, the attractiveness of the package, the intensity of advertising, the content of advertising and the created advertising image, forms of presentation of information in brochures and handouts, association associated with the name of the seller, the circle of customers of the seller, the market share of the company offering the product, the duration of the firm's presence in the market, the price charged (where the value of the price indicates "quality"), professionalism, external type and personality of the seller.

These price signals can be as important as the actual value if:

1. the nature of differentiation is subjective and difficult to quantify,
2. buyers are purchasing the product for the first time,
3. a repeat purchase of this product is unlikely,
4. Buyers are not burdened with experience.

A vendor with a very modest true value differentiation strategy but strong price signals will often sell successfully at higher prices than a competitor with a higher intrinsic value but weak price signals.

Attempts to implement differentiation, as a rule, involve additional costs. In order for differentiation to be profitable, it is necessary either to maintain the level of additional costs below the premium margin (as a result, the rate of return on production as a whole increases), or to compensate for the decrease in the rate of return by increasing the amount of profit received (a larger amount of profit can be achieved even with a decrease in the rate of return). if, as a result of the differentiation, the volume of sales has increased significantly).

By differentiating, the firm must strictly control the level of production costs, not allowing it to exceed the level of competitors' costs. Otherwise, the premium markup, based on the amount of additional costs, will be too high for buyers. From a cost point of view, a differentiation strategy is justified if, as a result of its implementation, the firm gains a competitive advantage in the field of production costs or establishes a premium margin that more than covers additional costs.

It can also be effective to use additional features of differentiation, if this is not related to high costs, but contributes to a more complete customer satisfaction - for example, first-class restaurants, as a rule, provide additional services such as a slice of lemon in a glass of water, car parking, etc.

There is, of course, no guarantee that differentiation will lead to a tangible market advantage. If buyers do not properly appreciate the uniqueness of the product offered (that is, the standard product fully satisfies their needs), then the cost reduction strategy can easily overturn the differentiation strategy.

In addition, a differentiation strategy does not bring the expected results if competitors can easily learn from the experience of differentiation. The ability to quickly imitate indicates the absence of true differentiation, as competing firms make similar changes, nullifying all attempts by the manufacturer to achieve uniqueness. Thus, for differentiation to be successful, a firm must find a reliable factor of uniqueness that cannot be easily and quickly imitated.

In addition to these points, the following weaknesses of the differentiation strategy can be distinguished:

An attempt to differentiate on the basis of features that do not reduce costs and increase customer satisfaction as they expected;
too high a level of differentiation, as a result, the price is too high relative to the products offered by competitors, or the level of quality of products and services exceeds the level of customer demand;
an attempt to set a too high premium markup (the higher the markup, the more buyers may be tempted by a competitor's cheaper product);
ignoring the meaning of price signals and emphasizing the meaning of only the actual value;
misunderstanding of the point of view of buyers regarding the valuable qualities of the product.

Concentration begins with the choice of a market niche, characterized by certain requirements and preferences of buyers. A niche can be identified due to geographic location, special requirements for the use of products, or due to specific product properties that satisfy niche consumers. The basis for successful competition when applying a strategy of concentrating in serving a niche is either lower costs than competitors, or the ability to offer niche consumers something different from competitors' products. The success of a cost-reduced concentration strategy depends on having a target market segment whose needs can be met at a lower cost than the rest of the market. The success of a concentration strategy based on differentiation depends on the presence of a target market segment that requires products to have some special qualities.

The concentration strategy is very widely used to significantly reduce costs. Discount brokerage houses have reduced their costs by concentrating on clients who are primarily interested in buying and selling and do not want to use services such as investment research, investment advice, and other financial services offered by full-service firms. It is profitable to reduce costs by applying a concentration strategy if the company finds ways to significantly reduce costs by limiting its client base to a strictly defined segment of customers.

Market segments that are favorable for the use of a concentration strategy should have one or more of the following characteristics:

The segment is large enough to generate profit.
The segment has a high potential for development.
The segment will not bring success to most competitors.
A segment-focused firm has the skills and resources to effectively serve the segment.
A segment-focused firm can protect itself from competitors through established good relations with customers and the best customer service capabilities in the segment.

The use of special methods of concentration in serving the target market niche is the basis of protection against five competing forces. Competitors do not have equal opportunity serving the target clientele of the firm using the concentration strategy. The special techniques of a firm that uses a concentration strategy give it a competitive advantage that prevents entry into its market niche. Her special moves are also a hindrance to those who wish to replace her. To some extent, the failure of powerful clients to close business deals depends on their reluctance to start doing business with firms that are less able to meet their needs.

Concentration works well if:

1. serving a target market niche requires significant costs and efforts from a large mass of competitors;
2. when no competitor tries to specialize in serving the same target market niche;
3. when the company's resources do not allow it to successfully serve a large segment of the market;
4. when industries (segments) have large differences in size, level of development, profitability and intensity of five competing forces that make some segments more attractive than others.

The use of a concentration strategy is sometimes risky. It admits, firstly, the possibility that the broad masses of competitors will find effective ways and be able to oppose themselves to the concentrating firm in serving a narrow target market. In the second case, it is possible that the needs and preferences of niche buyers will gradually shift towards those product qualities that the market as a whole requires; this blurring of differences between buyers of different segments opens the door for a variety of competitors to invade the target market of the firm concentrating on it. In the third case, the attractiveness of the segment becomes so obvious that the segment is flooded with competitors and profits are shared among many firms. Before you realize it, price-insensitive money consumers will have a huge number of firms to choose from, ending your ability to charge a higher price.

In addition to the price pressure of taxes, there is another problem related to the level of costs. The transfer of interest from a broad market to a limited segment usually means a sharp reduction in production volumes. This can lead to extremely high unit costs if you don't cut the overheads that have to match the lower output that is driven by the narrower customer base. This way you can finish your activity. Under pressure from both prices and costs.

Formation of a competitive strategy

In the course of developing a competitive strategy, one should remember about the planning hierarchy - the strategy should reveal the stated goals and objectives of the enterprise. To do this, building a strategy must begin with an analysis of the current situation on the market and your own position on it. After collecting and analyzing information about the market and competitors, response actions are developed - strategies. But it is worth noting that the finished strategy itself is not the result and ultimate goal of developing a competitive strategy, it is very important to analyze its implementation and the experience gained. Subsequently this analysis be the starting point for future strategy development.

Of the many principles, such as the proportionality of production, rationality, scientific character, etc. The author shows that the function of competitive strategic planning in an enterprise, based on the above scheme, is carried out using specific principles, that is, the rules for the formation of a competitive strategy in the market.

The continuity of the competitive strategy lies in the fact that the company, even before developing a strategy, must analyze previous experience, find out what actions had a positive effect in the competition and check their relevance at the current moment. In addition, the study of past experience will allow the company to avoid old mistakes when developing a new strategy.

The sequence is caused by the dependence of the subsequent stage on the results obtained at the previous one. On the basis of which, an algorithm of steps to be taken to develop a strategy is needed, which will allow avoiding mismatch between the competitive strategy and market conditions, mistakes that have already occurred in the past, and evaluate the results obtained during the implementation of the strategy.

The cyclic nature of competitive strategic planning is manifested in the fact that the results of the implementation of a competitive strategy must be analyzed and taken into account in the subsequent development of strategies, since the competitive strategy is constantly adapting to the competitive environment.

Competitive strategy; and its constituent parts are good tool in the hands of managers, because it allows you to solve a number of tasks and problems that the company faces. Firstly, the available analytical material, obtained and structured during the formation of the strategy, allows both management and performers to clearly see the situation on the market, the position of the company on it, the reality of the goals and ways to achieve them. Secondly, approved by the company's management (general director), the competitive strategy acquires the force of an organizational and administrative document. And, finally, thirdly, by analyzing its activities in past periods, the company can constantly improve and expand its scope of activities, adequately respond to market changes, strengthen its market position and conquer new markets.

The main stages of the implemented competitive strategy are:

Definition of the strategic area of ​​the company's management - the mission and strategy of the company;
Preliminary objectives - based on previous experience and corporate strategy.

They set the direction of action in the competitive struggle:

Collection of information about the external and internal environment;
Structuring information and subsequent analysis;
Development of a competitive strategy and selection of strategic alternatives;
Comparison of the developed strategy and initial goals and analysis of the chosen strategic alternative;
Implementation of competitive strategy - competitive action plan;
Monitoring the achievement of goals and the implementation of the plan;
Analysis of the experience gained and the implemented strategy - accumulation of experience.

A sequence of systematic actions can help determine strategies when the stakes are high and the resource costs to the firm are significant. This reduces the risk of missing important issues and reveals the assumptions on which the strategy is based and resources are allocated. The proposed description of the principles of competitive strategic planning is a new approach to the development of competitive strategies and, from the point of view of the author, opens up new horizons for analysts. The new approach lies in the fact that initially agreed with the company's mission, as well as with corporate objectives, the final competitive strategy will be aimed at increasing competitiveness and will not run counter to the company's market ideology.

Competitive Behavior Strategies

Depending on the circumstances, the firm can use any type of competitive behavior:

1. Creative. The system of actions of competitors consists of activities aimed at creating new market relations providing superiority over rivals.
2. Adaptive. It consists in taking into account innovative changes and in attempts to preempt the actions of rivals related to the modernization of production. The entrepreneur copies the achievements of his rivals as soon as possible.
3. Providing (guaranteeing). Such competitive behavior is based on the desire of entrepreneurs to maintain and stabilize their positions in the market for the future by improving the quality of products that attract consumers, modifying the assortment, offering additional services related to warranty service.

All activities of the firm are subject to competitive strategy. The system of actions of the company is subordinated to this concept, aimed at achieving the final goals. Any company uses two strategic settings - the installation of market monopolization (monopolization strategy) and the entry of its activities into a single process of market functioning (integration strategy). According to the first setting, actions are aimed at reducing the number of competitors, the second involves stabilizing one's own position by reducing the degree of risk through long-term and short-term cooperation with other firms in the form of a corporation. The choice of strategy is made depending on the role and content functions of the firm in the process of competitive interaction.

If it's about role function firms, the following types of competitors are distinguished:

1. Leaders. They are forced to repel the attacks of other leaders and use similar methods of frontal, complex, i.e., in several directions at once (advertising, prices, etc.), and flank struggle (in one direction).
2. Applicants for leadership. Detect significant offensive potential. An attack on the positions of leaders can be frontal or flank in nature.
3. "Wingmen". They do not compete with groups 1 and 2, they follow the path beaten by the leaders.
4. Beginners. They aim to find a market niche and consolidate in it.

In accordance with the content function, the following types of competitors are distinguished:

1. Large, highly sustainable mass production companies.
2. Specialized companies fixed in certain niches.
3. Small and medium-sized firms that carry out mass production, thanks to which they are ahead of their rivals.
4. Small universal firms that use the effect of flexibility and high maneuverability in competition with other companies.

Purpose of competitive strategy

The goal of a competitive strategy is to achieve superiority over competitors in providing consumers with products and services that are in demand and thereby gain competitive advantage and market leadership. In addition, competitive strategy includes offensive and defensive actions, the allocation and reallocation of resources to maintain long-term competitive opportunities and advantageous competitive position, as well as tactical actions taken when market conditions change. Businesses around the world are trying to develop unorthodox competitive strategies. Since a company's competitive actions are tailored to the characteristics of its market position and the general situation in the industry, there are countless options for competitive strategies - there are as many competitive strategies as there are competitors. However, in general, differences in strategies are determined by two factors: the goals that the organization pursues in the market, and the basis of competitive advantage - low costs or differentiation.

A competitive strategy is a set of practices and initiatives aimed at attracting and satisfying customers, resisting competitors and strengthening market position. The concept of competitive strategy is narrower than the concept of business strategy, because the latter, in addition to the methodology of competition, includes actions and management plans for solving the entire range of strategic tasks.

The main goal of the competitive strategy is to form a certain level of enterprise competitiveness. Depending on the current market position of a particular enterprise and the production and economic tasks facing it, the strategic goal can be reduced either to increasing competitiveness or maintaining it at the current level. From this in the future depends on the direction of development of specific management techniques and methods. In any case, the objective of the competitive strategy must be in line with common system management used in the enterprise.

The organizational model for the formation of a competitive strategy of an agricultural enterprise involves an assessment of its competitiveness in the context of the basic groups of factors that have a direct impact on it: external and internal.

The next stage of the algorithm for forming a competitive strategy involves the formation of strategic alternatives, which are scenarios for ensuring the competitiveness of an enterprise with the corresponding predictive values ​​of competitiveness indicators.

Development of options for the development of the enterprise and forecasting key indicators allows you to make a possible choice of the motion vector. One of the options for the development of the enterprise is the prolongation of the current position of the economic entity with a corresponding transfer of the existing dynamics of key indicators for the forecast period. Thus, the first scenario is passive in nature, not involving significant changes in the entity's economic activity. An alternative development option provides for the growth of predicted indicators as a result of the implementation of measures aimed at achieving the strategic goal. In turn, such a development scenario is based on strategic goal-setting, is focused on improving the relevant indicators and contains specific recommendations based on the existing “weak points” of the enterprise or based on existing competitive advantages.

When developing a strategy, it is necessary to calculate the predicted values ​​of key indicators. At the same time, the values ​​obtained according to the strategic scenario are taken as target indicators of competitiveness.

The algorithm for forming a competitive strategy provides for the creation at the last stage of a monitoring system for its implementation. The purpose of monitoring the implementation of the strategy is to track the progress towards achieving the set goal through changes in the level of competitiveness of the enterprise.

Monitoring the implementation of measures consists in the analysis of the actual values ​​of the indicators of the implementation of the strategy and their comparison with the target values.

Thus, the algorithm for the formation of a competitive strategy for an agricultural enterprise provides for the consistent implementation of actions to develop the enterprise in the direction of increasing its competitiveness.

Competitive differentiation strategy

Differentiation strategies are strategies derived from external competitive advantage that rely on a firm's marketing know-how, its superiority in identifying and meeting the expectations of customers who are dissatisfied with existing products. They are aimed at putting on the market goods or services that are more attractive in the eyes of consumers than competing products.

According to the canonical theory of M. Porter, a competitive advantage in the market arises on the basis of providing consumers with products that provide greater value for the same cost (differentiation), or providing equal value, but at a lower cost (low Costs).

With differentiation, the main emphasis is on creating a product (a set of tangible and intangible attributes), which is perceived by the consumer as “something unique”. It can be design features or product performance, excellent service maintenance, prestigious brand, etc.

Each manufacturer decides for himself how to position his product, as cheaper, or as more useful, original, high-quality. Combining these two strategies into one whole is almost impossible.

Among marketers, there is even such an expression “The more significant the difference between a product and its competitors, the more justified is every extra zero in its price tag.”

Differentiation focuses on the uniqueness of the product. But it is necessary to differentiate a product not only with the help of its distinctive quality. For these purposes, other strategies must also be used so that the buyer is convinced of the features of the product so much that he is ready to pay for it a price higher than that of similar products from competitors.

"The essence of a differentiation strategy is to find ways to be the only one that offers customers the extra features they want and to maintain that advantage all the time."

As indicated above, product differentiation is not only its distinctive quality. There are several types of differentiation that determine the uniqueness and peculiarity of the product.

Product differentiation - when the features and/or design of the proposed product are better than those of competitors. This type of differentiation is difficult to apply if we are talking about any standardized products (essential food, petroleum products, metal). But when promoting differentiated products (cosmetics, clothing), following this strategy is common.

Service differentiation is the offer of additional services that accompany the proposed product, which the buyer needs in one way or another before or after the purchase. It can be training and consulting, speed and reliability of deliveries, installation, service. For successful service differentiation, related services must be either free, cheaper, or outperform competitors.

Personnel differentiation - when the emphasis is on personnel that perform their functions more efficiently than competitors' personnel. Typically, staff differentiation is most often used in the service industry.

Naturally, a staff that inspires confidence gives the impression of being reliable, responsible and communicative people and is competent in the area of ​​their duties is not easy to obtain. Sufficient time, money and effort must be invested in its training.

Differentiation of the image is to create a certain image of the organization or its products, which distinguishes them for the better from competitors. Also known as branding, this strategy is achieved solely through effective advertising.

Depending on the characteristics of specific products and the capabilities of the company, one to several areas of differentiation can be implemented simultaneously.

Competent differentiation over time gives the following results:

Growth in profits even if market share remains the same.
An increase in market share, which also ensures revenue growth, even if prices are comparable to those of competitors.
A combination of market share growth and revenue growth.
The income received covers the investment costs and costs associated with the creation of a differentiation strategy.

If none of the results were achieved, it should be recognized that the differentiation strategy is unsuccessful, and the investment turned out to be unprofitable.

A company (or a strategic business unit within a diversified company) has a competitive advantage in a particular market of goods/services if the economic profit that its operations consistently generate exceeds, on average, the economic profit of competing firms operating in the same market (it is considered that several companies compete in the same market if the manufacturing, pricing, or marketing decisions of one company significantly affect the level of economic profit that other companies can earn).

Basic Competitive Strategies

There are three types of solo business strategy:

Price leadership;
- differentiation;
- focusing.

These strategies are called basic because all types of businesses or industries follow them, whether they are manufacturing, servicing, or non-profit enterprises.

The characteristic features of the basic strategies are reflected in the table:

	Price leadership	Differentiation	Focusing
Grocery differentiation	Low (mainly for the price)	High (mainly by properties)	Low to high (prices or properties)
Segmentation market	Low (mass market)	High (many market segments)	Low (one or more segments)
Distinctive competence	Production and material management	R&D, sales and marketing	All types of distinctive competence

The main advantages and dangers of basic strategies.

The advantages of the low price leadership strategy are the ability for the leader to offer a lower price than competitors at the same profit level, and in a price war, the ability to withstand competition due to better starting conditions. The price leader chooses a low level of product differentiation and ignores market segmentation. The price leader is protected from future competitors by its price advantage, works for the average consumer, providing a reduced price. The advantage of a price leader is the presence of barriers to entry, since other companies are unable to enter the industry using the prices of the leader. Thus, the price leader is relatively safe as long as it maintains a price advantage.

The goal of a differentiation strategy is to achieve competitive advantage by creating products or services that are perceived by consumers as unique. At the same time, companies can use an increased (premium) price. The advantage of a differentiation strategy is the security of a company from competitors as long as consumers maintain a stable loyalty to its products. This gives it a competitive advantage. The company naturally has no problem with strong customers either: differentiation and broad customer loyalty create entry barriers for other companies that need to do competitive development to do so. Finally, replacement products can pose a threat only if competitors are able to produce products that satisfy consumers to the same extent and are able to break the stable loyalty to a differentiated company. The main problem of such a company is maintaining uniqueness in the eyes of consumers, especially in terms of imitation and copying. The threat may also arise from changing consumer demands and tastes.

Changes in production technology make the difference between price leadership and differentiation strategies less noticeable. Firms can implement differentiation policies at low cost. Another way to reduce costs during differentiation is the widespread use of standard assemblies and parts, limiting the number of models, and using a "just in time" supply chain. With this in mind, some firms are trying to combine the advantages of price leadership and differentiation: they charge a premium price for their products compared to the price of a pure price leader, but which will be lower than that of a pure differentiator, which can provide them with greater profits than companies using pure prices. basic strategies.

The focus strategy selects a limited group of segments. A marketing niche can be distinguished geographically, by type of consumer, or by a segment from a range of products. Having chosen a segment, the company uses either differentiation or a low-price approach in it. If it uses a low-price approach, then it competes with the price leader in a market segment where the latter does not have an advantage. If a company uses differentiation, then it benefits from the fact that differentiation is carried out in one or a few segments. In this case, the distinctive advantage in the form of quality based on competence in a narrow area is most often used.

The competitive advantage of a company pursuing a focus strategy derives from its distinctive advantage, which gives it good competitive power against buyers, since they cannot get the same product elsewhere. In relation to strong suppliers, however, the focusing company is in a worse position because it purchases in relatively small volumes. But as long as it can increase prices for loyal customers, this disadvantage is not so significant. Flexible production systems create new benefits for focusing companies: small batches can be produced at a lower cost. However, in general, the possibility of economies of scale in their production is lower.

Their second concern is that the niche a company operates in can suddenly disappear due to changes in technology or consumer tastes. Since there is a threat that differentiators will create similar products, and the price leader will attract buyers at a low price, a company with a focus strategy must be in a state of constant defense of its niche.
Up

CAPITAL HUMANITARIAN INSTITUTE

Faculty: public service and management

Specialty: Management of organizations

ABSTRACT

SUBJECT: Strategic management.

ON THE TOPIC: Basic competitive strategies.

Student: Pavlyuk Natalya Sergeevna

Contract No. 2M4005

Checked by: Viktor Aleksandrovich Melnichuk

_____________________________

(signature)

"_____" _______________ 200___

Omsk - 2005

Introduction …………………………………………………………………………………3

Competitive strategy of the enterprise……………………………………….………3

Five forces of competition according to M. Porter………………………………………………….5

Choosing a basic competition strategy…………………………………………….10

Model M. Porter……………………………………………………………….….12

Product => market model………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

Innovation strategy…………………………………………….………..17

Strategy for Immediate Response to Market Needs……………….…..19

Conclusion……………………………………………………………...…21

References………………………………………………………..22

Introduction

No enterprise can achieve superiority over competitors in all commercial characteristics of the product and the means of its promotion on the market. It is necessary to select priorities and develop a strategy that is most consistent with the trends in the development of the market situation and in the best way using strengths enterprise activities. Unlike tactical actions in the market, the competition strategy should be aimed at providing advantages over competitors in the long term, estimated at 3-5 years.

Competitive analysis includes two main stages:

Identification of the main competitive forces in the industry;

Formulation of the main options for competitive strategies.

The recognized leader in the development of competitive analysis is Professor M. Porter of the Harvard Business School, the author of the main models for determining the main forces of competition and options for competitive strategies.

Competitive strategy enterprises

It should also be noted that for many small businesses, the meaning of competition is to be like their larger (powerful) competitors. This gives them self-confidence. But to imitate others means to lose any advantage. Lack of competitive advantage is a sure path to bankruptcy. Some enterprises, having a certain competitive advantage, do not make any efforts in order not to lose them. The presence of a competitive advantage must be perceived as a fait accompli, an achieved goal, and this should not stop further search.

Five forces of competition according to M. Porter

Market share, the level of profit of the company are determined by how effectively the company counteracts the following competitive forces

Penetrating into the industry new competitors producing similar products;

the threat from substitute goods (substitutes);

Competitive companies that have already established themselves in the industry market;

influence of sellers (suppliers);

influence of buyers (customers).

1. New competitors. Their appearance in the industry can be prevented by the following entry barriers:

o Economies of scale and production experience of already established firms in the industry help to keep costs at a level that is inaccessible to potential competitors;

o differentiation of products and services, that is, reliance on trademarks that emphasize the uniqueness of the product and recognition by its customers (for example, it is difficult to compete with the unique properties of handicrafts - Palekh, Gzhel. The very appearance of numerous counterfeit goods emphasizes the practical unsurpassedness of these brands);

o the need for capital. Very often, effective competition requires a large initial investment. This barrier combined

o with economies of experience and scale creates, in particular, serious barriers to new investment in the Russian automotive industry;

o reorientation costs associated with changing suppliers, retraining of personnel, scientific and design developments new product, etc.;

o the need to create new system distribution channels. Thus, due to the lack of well-established distribution channels, the Apple company was not able to widely infiltrate the Russian market with its personal computers;

o State (government) policies that discourage market entry, such as imposing high customs duties on foreign competitors or no preferential government subsidies for newcomers.

2. Substitute products. Competition can be aggravated by the appearance of products that effectively satisfy the same needs, but in a slightly different way. For example, butter producers can compete with enterprises producing margarine, which has its own competitive advantages: it is a dietary product with a low level of cholesterol.

Obstacles on the way of substitute goods can be:

Carrying out price competition, which switches the attention of the buyer from the problem of quality to price reduction;

advertising attacks on consumers. Thus, manufacturers of chocolates and bars, feeling threatened by substitutes - dry mixes for light breakfasts, are deploying an aggressive advertising campaign their products;

and the production of new, attractive products. For example, feeling competition from manufacturers sausage products, cheese producers are starting to produce new, original varieties with a variety of additives;

Improving the quality of service in the sale and distribution of goods .

3. Intra-industry competition and its intensity.

The intensity of competition can range from peaceful coexistence to hard and rough ways of surviving the industry. Competition is most intense in industries that are characterized by:

o a large number of competitors;

o homogeneity of manufactured goods;

o barriers to cost reduction, such as persistently high fixed costs;

o high exit barriers (when a firm cannot exit the industry without incurring significant losses);

o maturity, saturation of markets (this situation is typical for the global computer market faced with the saturation of the needs of buyers).

One way to reduce the pressure of intra-industry competition is to use the comparative advantage that the firm has.

* One of the variants of the comparative advantage method was proposed by the Russian economist A. Yudanov. He divided the whole variety of competitive strategies of firms operating in the same market into four types, differing in the nature of their competitive strategy: commuters, patients, violets, explerents. Each of them is reduced to a certain type of biological behavior and has a corresponding analogy.

Commutators (gray mice) - small, flexible, easily adapting to changes in the market demand of the firm. Often offer imitation goods, counterfeit goods. They are not firmly tied to a certain area of ​​activity, they easily seep from one market to another. They have low stability.

Flexibility and adaptability form the basis of a competitive strategy. A type very typical for the Russian market. Many Russian commutators, when conducting an advertising campaign in the media, do not even name the nature of their activities (which, however, is becoming less common), because they are ready to use any new opportunity to make a profit.

Patients (cunning foxes) - highly specialized firms that have mastered well one of the niches (areas of special needs) of the market. As a rule, these are not very large organizations that have been producing products of a certain profile for a number of years. Competitive strategy - based on narrow specialization, low costs and high quality of goods. The Russian market is enriched by the patent type due to privatized highly specialized enterprises.

Violenti (elephants, lions - depending on mobility) - giants, whose power allows them to exercise control over the market, or rather, over its significant share. Competitive strategy - low costs due to economies of scale and meet the mass demand of buyers. IN Russian conditions vulnerable to the emergence of foreign competitors. The government's protectionist policy, while protecting domestic firms, simultaneously suppresses incentives to improve quality and reduce costs for Russian producers.

Explerents (most likely, moths are almost ephemeral creatures) - firms whose competitive advantage is innovation, new technologies and products. Often weakly connected with the market, do not have sufficient funds for its development, extensive marketing activities. They operate more effectively as venture (risk) divisions of large firms or their subsidiaries. *

4. The strength of the influence of suppliers. The company competes, that is, it conducts an economic struggle, not only with its own similar manufacturers, but also with its contractors-suppliers, competitors.

Strong suppliers can:

Raise the price of your goods

Reduce the quality of the delivered products and services.

The strength of suppliers is determined by:

the presence of large supplier companies;

lack of substitutes for the supplied goods;

· a situation where the industry to which supplies are made is one of the non-main customers;

· the decisive importance of the supplied goods among the necessary economic resources;

· the ability to connect the firm-buyer through vertical integration.

5. The strength of the influence of the buyer. Competition from buyers is expressed by:

o pressure on prices to bring them down;

o in higher quality requirements;

o in demands for better service;

o in pushing intra-industry competitors against each other.

Buyer power depends on:

Cohesion and concentration of the consumer group;

Degrees of importance of products for buyers;

The range of its application;

Degrees of product homogeneity;

The level of consumer awareness;

other factors.

Choice of basic strategy of competition.

The basic strategy of competition, which is the basis of the competitive behavior of the enterprise in the market and describes the scheme for providing advantages over competitors, is the central point in the strategic orientation of the enterprise. All subsequent marketing activities of the enterprise depend on its correct choice. This circumstance determines the need for a thorough justification of this procedure. However, some stereotypes that have recently formed in business circles regarding how it is necessary to compete in the Russian market, to a large extent hinder a systematic approach to solving this problem. Before proceeding with the choice of a basic competition strategy, it is necessary to get rid of harmful stereotypes, clichés and mistakes.

First of all, this refers to the misconception about which market is the most promising in terms of competition. Entrepreneurs often believe that attractive markets are those that develop the fastest or use perfect technology. This is wrong.

As practice shows, successful and promising markets have high entry barriers, patronage from the state, unpretentious consumers, a cheap supply chain and the smallest number of alternative industries that can replace them. A business with the latest technology and high efficiency is most susceptible to attacks by competitors, the probability of bankruptcy in such markets is very high.

It should also be noted that for many small businesses, the meaning of competition is to be like their larger (powerful) competitors. This gives them self-confidence. But to imitate others means to lose any advantage. Lack of competitive advantage is a sure path to bankruptcy. Some enterprises, having a certain competitive advantage, do not make any efforts in order not to lose them. The presence of a competitive advantage must be perceived as a fait accompli, an achieved goal, and this should not stop further search.

On the other hand, the desire to be the first in all areas of competition, as well as the pursuit of momentary profits, often forces enterprises to abandon the previously developed competition strategy, which brings chaos to the enterprise and does not allow it to focus on long-term goals in the field of competition.

The question of where to compete, in which market to make a profit is always one of the key questions in the marketing orientation of an enterprise. However, as practice shows, excessive concentration on it to the detriment of other important parameters of the competition strategy often leads to negative consequences. Surveys of employees of Moscow enterprises that sell computer equipment have shown that sales managers, when solving the problem of choosing a target market, often lose sight of how, by what means it is possible to achieve success. The transfer of old, used for other conditions, techniques and methods of competition to new markets does not bring the desired results. The question: how to compete is just as important and critical, and ignoring it means complete absence target orientation in competition.

Insufficient attention is also paid to determining the beginning and end of the period for using the developed competition strategy. The general tendency to shorten the life cycle of a product, an increase in the number of products using technological solutions that quickly replace each other, changes in the demographic characteristics of the market, the political situation in the country and other dynamic factors complicate the correct choice of the beginning of the introduction of a new competition strategy and the period of its use in the market.

A common shortcoming of the competitive strategy development process is its weak personal orientation. Often the strategy is focused on counteracting competing enterprises and to a lesser extent takes into account the peculiarities of managing these enterprises, in particular, the type of behavior of its leaders. At the same time, the education of managers, their approaches to doing business, experience, abilities and other personal characteristics largely determine the possible reactions to market changes. This means that the strategy of competition should consider as an object of rivalry not only the enterprise, but also. his management apparatus with his characteristic leadership style, which will allow him to more accurately and adequately respond to possible countermeasures. In addition, it must be remembered that the fight against competitors is ultimately for the budget of consumers. And therefore, the meaning of competition is not so much in actions against rival enterprises, but in the conquest of specific consumers using the services of competitors.

Model M. Porter.

M. Porter's approach to generating alternative strategies is based on the following statement. The stability of the company's position in the market is determined by: the costs with which products are produced and sold; irreplaceability of the product; the scope of competition (i.e. the amount of market processing).

An enterprise can achieve competitive advantages and strengthen its position by: ensuring lower costs for the production and sale of goods. Low costs refers to the ability of an enterprise to develop, produce and sell a product with comparable characteristics, but at a lower cost than competitors. By selling its product on the market with the prevailing (or even lower) price, the company receives additional profit; ensuring product indispensability through differentiation. Differentiation means the ability of the enterprise to provide the buyer with a product of greater value, i.e. greater use value. Differentiation allows you to set higher prices, which gives you more profit.

In addition, the company is faced with the choice of which "wide front" market to compete: in the entire market or in any part of it (segment). This choice can be made using the relationship between market share and the profitability of the enterprise, proposed by M. Porter.

Enterprises that do not have the ability to gain market leadership should concentrate their efforts on a certain segment and strive to increase their advantages relative to competitors there.

Success is achieved by large enterprises with a larger market share, as well as relatively small highly specialized enterprises. The desire of small enterprises to duplicate the behavior of large enterprises, regardless of their real capabilities, will lead to the loss of competitive positions in a critical area.

For such enterprises, in order to succeed, the rule should be followed: “Segment the market. Narrow the production program. Achieve and maintain the maximum share in the minimum market.

Based on this, to strengthen the position of the enterprise, M. Porter recommends using one of three strategies.

1. Leadership through cost savings:

Enterprises that decide to use this strategy direct all their actions to reduce costs in every possible way. An example is the company "British Ukraine Shipbuilders" (B-U-ES) for the construction of bulk carriers. The manufacture of ship hulls will be carried out by low-paid workers of Ukrainian shipyards. Cheap Ukrainian steel will be used in the production of ships. The filling of the ships will be supplied mainly by British companies. Therefore, it is expected that the cost of new vessels will be significantly lower than the price of similar products from European and Asian shipbuilders. Thus, a PANAMAX-class dry-cargo vessel with a displacement of 70,000 tons is estimated at $25-26 million, while a similar Japanese-built vessel costs $36 million.

Prerequisites: a large market share, the presence of competitive advantages (access to cheap raw materials, low costs for the delivery and sale of goods, etc.), strict cost control, the ability to save costs on research, advertising, service

Advantages of the strategy: enterprises are profitable even in conditions of strong competition, when other competitors suffer losses; low costs create high barriers to entry; the leader in cost savings has more leeway than competitors when substitute products appear; low costs reduce the influence of suppliers

Strategy risks: competitors may adopt cost-cutting techniques; serious technological innovations can eliminate the existing competitive advantages and make the accumulated experience of little use; focusing on costs will make it difficult to detect changes in market demands in a timely manner; unforeseen effects of cost-increasing factors can lead to a narrowing of the price gap compared to competitors.

2. Differentiation strategy

Companies that decide to use this strategy direct all their actions to create a product that has more benefits for consumers compared to the product of competitors. However, costs are not a top priority. An example of a differentiation strategy can be the strategies of Mercedes, Sony, Brown, etc.

Prerequisites: special prestige of the enterprise; high potential for R&D; perfect design; production and use of materials of the highest quality; it is possible to fully take into account the requirements of consumers;

Advantages of the strategy: consumers prefer the product of this enterprise; Consumer preference and product uniqueness create high barriers to entry; Product features reduce consumer influence; High margins facilitate supplier relationships.

Strategy risks: the price of a product can be so significant that consumers, despite brand loyalty, will prefer a product of other firms; imitation of other firms is possible, which will lead to a decrease in the advantages associated with differentiation; a change in the value system of consumers can lead to a decrease or loss of importance of the features of a differentiated product.

3. Segment concentration strategy

Companies that decide to use this strategy direct all their actions to a specific market segment. At the same time, the enterprise may strive for leadership by saving on costs, or to differentiate the product, or to combine one or the other.

Prerequisites: the company must satisfy the requirements of consumers more efficiently than competitors.

Advantages of the strategy: indicated earlier.

Strategy risks: differences in prices for products of specialized enterprises and enterprises that serve the entire market may not correspond in the eyes of consumers to the advantages of products specific to this segment; competitors can specialize their product even more by highlighting subsegments within the segment.

M. Porter's recommendations for developing a strategy are based on the fact that the company already has certain competitive advantages, but it is not clear how and by what means they are achieved. The model is used in case of slowdown in growth and stagnation of industries.

Product => market model

For a growing market, the approach proposed by Igor Ansoff is used.

1. Horizontal diversification strategy- production of new products that require the use of new technology. The new product is focused on the consumer of the manufactured product and accompanies it. An example would be a motorcycle production strategy in an automotive plant.

2. Centered diversification strategy- production of new products using existing technology. The company begins to produce new products, which are included in the manufacturing process manufacturing an old product at stages before or after it.

An example - a manufacturer of linen fabrics organizes the production of clothes from these fabrics.

3. Strategy of conglomerate diversification- production of new products that are not technologically related to already manufactured products. This strategy is the most difficult to implement, because has little in common with the former fields of activity.

An example is the organization of the production of refrigerators at a metallurgical plant.

At present, most foreign concerns (JBM, Coca-cola and DR.) are widely diversified enterprises.

The main danger for a diversification strategy is dispersion of forces, so these strategies can be carried out by large organizations with great potential.

The main disadvantage of this approach to generating alternative strategies is that they are determined depending on the state of two (albeit important) elements: the market and the product. Other important elements, for example, technology, the position of the enterprise in the industry are not taken into account.

Innovation strategy.

The modern world experience of competition irrefutably proves that the vast majority of monopolies that have formed recently have arisen on the basis of discoveries, inventions and other innovations that have made it possible to create a new previously unknown market with broad opportunities and the prospect of accelerated growth. Today's leaders in the automotive, aviation, electrical and electronics industries emerged from small "pioneer" firms. The last decades have confirmed this pattern in the field of computer technology production, software development, and the creation of special types of weapons. And, despite the fact that most scientific research is carried out at large enterprises, most of the known modern discoveries are the result of the activities of small and, as a rule, unknown firms.

Advantages.

Obtaining excess profits at the expense of monopolistically set prices;

blocking entry. industry through monopoly ownership of exclusive rights to products, technology, services, etc.;

Guaranteed profit during the validity of exclusive rights;

Lack of substitute products

· creating an image of an innovator who uses his own achievements in the field of science and technology to fully realize his potential.

o lack of analogues of products,

o the presence of potential demand for the proposed innovations, and large enterprises ready to support the innovation.

high scientific and technical qualification of the personnel,

project (matrix) management structure,

venture business organization at the initial stages of innovation.

Destabilizing factors

o large amounts of funding,

o high costs at the initial stages,

o market resistance to the introduction of innovation,

o illegal imitation (copying) of innovations by other firms,

o high risk of bankruptcy.

Enterprises that adhere to the innovation strategy do not bind themselves with the need to reduce the cost of their products, differentiate them or develop a specific market segment, but focus their efforts on finding fundamentally new, effective technologies, designing the necessary, but still unknown types of products, methods of organizing production, sales promotion techniques, etc. the main objective- get ahead of competitors and single-handedly occupy a market niche where there is no competition or negligible. For obvious reasons, such a revolutionization of the market is a source of large sales volumes and super profits, however, in most cases (80 out of 100) it ends in bankruptcy due to the unwillingness of the market to accept innovations, technical or technological underdevelopment of a new product, employment of distribution channels, lack of experience in replicating innovations and other reasons.

The high risk of following this strategy, explained by the high degree of uncertainty of its results, is comparable to venture risk, which deters many firms from specializing in this business. And, nevertheless, the tempting prospects of being the sole leader in the market do not stop many enterprises from financing and materially supporting projects of this kind.

Strategy for immediate response to market needs.

The presence of effective demand for a particular type of product only in theory automatically creates its supply. In practice, most enterprises are not able to engage in activities that do not correspond to their profile. Unlike such enterprises, firms that implement a strategy of immediate response to market needs are aimed at meeting the emerging needs in various business areas as quickly as possible. The main principle of behavior is the selection and implementation of projects that are the most profitable in the current market conditions. Enterprises that rely on rapid response are ready for an immediate reorientation of production, changing its scale in order to obtain maximum profit in a short period of time, despite the high unit costs determined by the absence of any specialization of their production.

Summarizing the above, it should be noted that the choice of a strategy that is most appropriate to the characteristics of the enterprise and the development trends of the market situation includes a number of procedures:

assessment of the benefits of the strategy and its risks;

conformity analysis market conditions required to implement the strategy, the actual situation on the market;

analysis of the compliance of the features of the organization of production and management at the enterprise with the requirements.

An enterprise that has a clearly defined core business will usually implement it using one of the basic competition strategies presented above. However, this does not mean that it is impossible or dangerous to follow two or more strategies. Moreover, the analysis of practice shows that most modern enterprises with a wide range of products and / or various business areas simultaneously use several approaches for different groups of goods, regions or periods of their development. The main criterion for choosing a strategy is the adaptation of its capabilities to specific market conditions. And in this sense, the basic strategies of competition are the fundamental, general economic basis on which the practical actions of competitors are built.

Advantages.

Receiving excess profits due to high price for scarce products;

high interest of consumers in the purchase of goods;

a small number of substitute products;

· Creation of the image of an enterprise that is ready to sacrifice everything for the immediate satisfaction of the emerging needs of customers.

Necessary market conditions.

o demand for products is inelastic;

o "entry" into the industry and "exit" from it is not difficult;

o a small number of competitors;

o market instability.

Requirements for the organization of production and management.

a small, flexible non-specialized enterprise with a high degree of differentiation;

project structure;

a high degree of staff mobility;

· a marketing service focused only on highly profitable short-term projects.

destabilizing factors.

o high unit costs;

o lack of long-term prospects in a particular business;

o a large number of destabilizing environmental factors;

o lack of guarantees in making a profit;

o high risk of bankruptcy .

Conclusion.

The basic strategy of competition, which is the basis of the competitive behavior of the enterprise in the market and describes the scheme for providing advantages over competitors, is the central point in the strategic orientation of the enterprise. All subsequent marketing activities of the enterprise depend on its correct choice. This circumstance determines the need for a thorough justification of this procedure. Before proceeding with the choice of a basic competition strategy, it is necessary to get rid of harmful stereotypes, clichés and mistakes.

A common shortcoming of the competitive strategy development process is its weak personal orientation. Often the strategy is focused on counteracting competing enterprises and to a lesser extent takes into account the peculiarities of managing these enterprises, in particular, the type of behavior of its leaders. At the same time, the education of managers, their approaches to doing business, experience, abilities and other personal characteristics largely determine the possible reactions to market changes. This means that the strategy of competition should consider as an object of rivalry not only the enterprise, but also. his management apparatus with his characteristic leadership style, which will allow him to more accurately and adequately respond to possible countermeasures. In addition, it must be remembered that the fight against competitors is ultimately for the budget of consumers. And therefore, the meaning of competition is not so much in actions against rival enterprises, but in the conquest of specific consumers using the services of competitors.

Bibliography

1. I.N. Gerchikova, Management - textbook, "UNITI", Moscow, 1995.

There are five basic competitive strategies:
1. Cost leadership strategy - attracting customers by minimizing production costs. It provides for a reduction in the total cost of producing a product or service, which attracts a large number of buyers. There are 2 ways to achieve cost advantage:
- do a better job than competitors by effectively operating in the internal value chain and managing the factors that determine the level of costs in the value chain.
- improving the value chain of the company up to the consolidation of operations or the rejection of high-cost activities in the value chain (modernization, reconstruction, simplification of product development, transfer of production facilities closer to the consumer, use of less capital-intensive rational technology, finding ways to eliminate the use of expensive materials and components) . Example - the joint actions of various departments can provide economies of scale, reduce the time to create a new technology and / or achieve full capacity utilization; reducing specifications for purchased materials; contributing less distinguishing features regarding the goods of competition.
Conditions for a successful cost leadership strategy:
- price competition among sellers is especially strong;
- the manufactured product has standard characteristics that meet the requirements of consumers.
- most buyers use the product in the same way;
- the cost of buyers to switch from one product to another is quite low;
- there are a large number of buyers who have serious power to reduce the price.
Two ways to generate significant additional profit for the cost leader:
- reduce product prices by reducing costs and attract more buyers,
- without changing the price.
Disadvantages of the strategy:
- the strategy is fraught with a protracted price war,
- cost reduction is not always the exclusive property of the company, and competitors can easily repeat them,
- reducing costs, it is necessary to pay attention to other factors: product improvement.

2. Broad differentiation strategy - attracting customers by maximizing the difference between the company's products and similar products of competitors. It becomes attractive when consumer demands and preferences become diversified and can no longer be satisfied with standard products. In order for a differentiation strategy to be successful, a firm must study the needs and behavior of customers, know what customers prefer, what they think about the value of the product and what they are willing to pay for.
Successful differentiation allows a firm to:
- set an increased price for the product/s;
- increase sales volume (because the bulk of consumers are attracted by the distinctive characteristics of the product);
- win customer loyalty to your brand (some customers become very attached to the additional characteristics of the product). An example is the delivery of spare parts around the world in less than 48 hours, in case of violation of the deadlines, delivery is free of charge by Caterpillar.
A differentiation strategy works best in markets where:
1. There are many ways to change products / y, and most buyers recognize these differences as having value,
2.Buyers' needs and/or ways to use the product are different,
3. A small number of competitors take a similar approach to differentiation.
As a rule, differentiation provides a longer-term competitive advantage when it is based on:
- technical perfection;
- quality of products;
- excellent customer service.
Such distinctive features are perceived and valued by customers, and moreover, the skills and experience required to produce these features are difficult to copy and profit from by competitors.
Ways to give the product distinctive consumer properties:
- reducing consumer costs for the use of goods,
- increasing the efficiency of using the product by the consumer,
- giving consumer properties that provide an intangible advantage,
- creation of additional consumer value due to competitive opportunities that competitors do not have and cannot have.
Disadvantages of the strategy:
- there is no guarantee that differentiation will bring competitive advantage,
- it is possible to quickly copy successful distinguishing features.

3. Best Cost Strategy - increase in customer value due to higher quality at prices at the level of competitors and below. By choosing this strategy, the company must reduce costs and, accordingly, prices, while maintaining or improving product quality. It implies a focus on low costs, while providing customers with more than the minimum acceptable quality, service, features and attractiveness of the product. Competitive advantage lies in proximity to the parameters "quality - service - characteristics - attractiveness" and cost superiority over competitors.
Distinctive features of companies that successfully implement the strategy of optimal costs are:
- the ability to develop and implement additional product attributes at a lower cost;
- offer products that are different from competitors' analogues at prices acceptable to the buyer.
The strategy has the greatest appeal in terms of the possibility of competitive maneuvering. It provides an opportunity to create exceptional customer value by balancing low cost and differentiation strategies. Therefore, it allows the firm to leverage the competitive advantage of both one strategy and the other, creating superior purchasing value.
Disadvantages of the strategy:
There is a risk of being between enterprises with the same two strategies,
- cost leaders can force the company out of the segment of price-sensitive buyers,
- those who use broad differentiation pushes the company out of the segment, ullt value quality and custom design.

4. Focused (niche) strategy based on low costs - Orientation of the enterprise to a narrow segment of customers and crowding out competitors due to lower production costs.
5. Focused (niche) strategy based on product differentiation - focusing on a narrow segment of customers and crowding out competitors by offering products that better meet the needs of customers.
Their differences are that they are focused on a narrow part of the market. A target segment or niche can be defined based on geographic uniqueness, specific product usage requirements, or specific product characteristics that are attractive only to that segment. In this strategy, you can achieve an advantage if:
1) have > lower costs than competitors,
2) be able to offer consumers something different from competitors.
A cost-focused strategy assumes that the firm is ahead of competitors due to > low production costs.
A focused differentiation strategy depends on a customer segment that requires unique product features and attributes (generally aimed at high-end buyers who want products with first-class features).
Focused strategies are attractive under the following conditions:
1. the segment has good potential for growth;
2. It is quite expensive and difficult for those operating in various segments to meet the requirements of buyers of a specialized niche;
3. the firm does not have enough resources to serve a wider market share;
4. There are many different segments in the industry, which allows the company to choose its niche according to its strengths and abilities.
Flaws:
- there is a possibility that competitors will force them out of the segment,
- the needs and preferences of consumers can be transformed into the needs and preferences of the majority,
- the segment may be attractive, which will lead to a decrease in profits.