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Five Competitive Business Strategies You Should Know

by Amanda Pestana

Art by Małgorzata Nowak

There are a ton of business strategies that can be implemented to get your business expanding. However, specific strategies work best with certain kinds of industries, and better yet are tactics that are developed for your particular niche.


Here are five competitive strategies you should be aware of when securing your competitive advantage in your market. You might have seen these strategies in action without realizing the thought-process behind their implementation tactics.


Low-Cost Provider Strategy


This strategy focuses on obtaining more customers by providing a lower overall cost in comparison to others within the same industry. However, with this low-cost strategy, there is an additional financial analysis that needs to take place to ensure strategy viability.

  • Cost of Production

  • Cost of Buying Material

  • Cost of Labor & Business Operational Expenses

  • Time of Production

  • Demand

  • Product Quality

Two reasons to implement this tactic would be to underprice competitors or maintain prices using the lower-cost edge to earn high-profit margins. Two significant avenues exist when applying this method: (1) performing value chain activities which are more cost-effective than others within the industry, and (2) revamping the firm's overall value chain eliminating cost activities.


This method works best when the price competition within the market is vigorous, the products of others within the same industry are identical, there are limited ways to find differentiation, and buyers will incur minimal costs when switching sellers. This strategy can also be implemented during specific seasons in which the need for your product is higher than others allowing the price to offset other expenses.

Things to take into consideration while executing this approach:

  • Too aggressive with the price; cutting and ending up with lower profitability.

  • Reducing costs that can be easily copied by others within the same industry.

  • Too much fixation on reducing costs forgetting to focus on other procedures.

Also, do keep in mind that although this approach is well-known, many times, clients prefer paying more for quality and excellence. Therefore, focus on the type of clients you are attempting to attract towards your business and analyze if it will be worth decreasing the price of your service or product.


Broad Differentiation Strategy


This idea seeks to differentiate the company's product or service appealing to buyers, which is a common strategy implemented by businesses. The essence of this tactic is to offer UNIQUENESS as an attribute attracting a wide range of buyers. There must be a dynamic analysis in understanding buyers' needs, behaviors, and expectations before adding this strategy as part of the business process.


This business plan allows firms to do the following:

  • Provide Premium Prices

  • Increase unit Sales

  • Gain Buyer Loyalty to its brand

A few angles to take into consideration with the differentiation approach:

  • Quality

  • Reliability

  • Technology Leader

  • Design

  • Superior Service

  • One-stop-Shop

  • Multiple Features

  • Unique Taste, Style, Presentation, Service, Package, etc.

Uniqueness Driver for Your Business


This can have a lasting effect and powerful one for your business. Customer Value is an essential part of the differentiation strategy giving meaningful experiences impacting customer value. Your business is preaching a continuous message to your clients. What is the message you will convey?


Ways of enhancing this tactic are the following:

  • Emphasizing human resources management

  • Pursuing continuous quality improvement

  • Improving customer service

  • Striving for innovation

  • Continuously seeking high-quality inputs

How to crack this approach?

Decide what the value you want to deliver to your customers is and what does your customer value. This includes product attributes and features, performance, enhance satisfaction tactics, and uniqueness. These tend to work best when there are diverse buyer needs when the value of the product of the service is already regarded with profit by the buyers in the industry, when other firms have a similar approach, and when technology is included within the innovation process of the business approach.


The reasons why the differentiation strategy does not work:

  • Buyers see little value in the unique attributes being providing by the company.

  • The company is overspending efforts on differentiating that aren't adding value or uniqueness. Instead, it is overwhelming and busy.

  • The attributes can be easily copied by others within the same industry.

Things to take into consideration:


A low-cost strategy can defeat a differentiation strategy when buyers are satisfied with an original product and don't seek any uniqueness, quality, or other additional services that could be added.


Defining your Business Niche


Knowing your business niche gives you competitive advantages when establishing your approaches and understanding your clients. It will help define your marketing strategy, your branding, your services, products, and everything that makes your business your business. When strategies focus on your niche, they serve segment-specification, facilitating client acquisition.


Focused Low-Cost Strategy


This concept focuses on a market niche outcompeting others within the market through low costs serving niche members at a lower price point. This strategy has excellent advantages when attracting specific buyers limiting your customer base, especially when this strategy brings lower costs to the firm. Innovate ways are sought to offset the limited customer base. The difference between this strategy and the low-cost strategy is that it is attracting a limited number of customers, whereas, the inexpensive has a broader range of clientele.


Focused Differentiation Strategy


Niche members are offered customized attributed meeting their tastes and requirements better than products of competitors. This encompasses world-class attributes attracting customers. Examples of businesses that use this strategy are the following:

  • Louis Vuitton

  • Gucci

  • Chanel

  • Four Seasons Hotels and Resorts

They built a focused differentiation tactic targetting affluent buyers desiring products and services with world-class attributes in which the value of the price comes with quality service and customer experiences.


This segment focuses on price premium aimed towards the price pyramid. Attracted reasons for adding this plan to your business model is when the target market is big enough to bring a profit, industry leaders are not competing against you, it is difficult for others in similar industries to compete with you, the industry has diverse niches, and only a few businesses within the same sector are attempting or doing something similar to what your business is doing.


The risks associated with this segment of strategy are that competitors can match or provide similar experiences, products, or services to what you are currently offering. There is an excellent potential for preferences shift over time, adding financial hardship to your business, and lastly, this segment is inundated with competitors intensifying rivalry.


Best-Cost Provider Strategy


When providing customers more value for their money by satisfying buyers' expectations on critical performances, services, features, or qualities were beating price expectations while enhancing attributes. This tactic is also recognized as the hybrid-strategy giving low-cost providers and differentiation strategies an aim at satisfying expectations and retaining clients.


The essence of the best-cost provider strategy is providing customers more value for their money with appealing features and lower price attributes in comparison to others within the same industry. To profitability employ this approach, a superior value chain configuration needs to be evaluated, the efficiency of managing activities cannot be matched easily by others, and the core competencies allowing differentiation needs to be emphasized and highlighted throughout.


When a company incorporates excellent product performance, appealing features, at a lower cost in comparison to others within the same industry, than clients can enjoy the best cost status in which they obtained the most for their money. The best-cost provider strategy works best in markets where product differentiation is the norm, mainly when value-conscious buyers can be induced to purchase midrange products.


The most significant vulnerability in applying this strategy is when companies don't have requisite core competencies and efficiencies in managing value chain activities supporting the differentiation strategy and implementation practices.


Strategies need to consistently reevaluated. The method should match the internal situation and leverage resources, effectively increasing profit margins and client acquisitions and retention.


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