Strategies of firms with a weak competitive position. Positions and strategies of firms in competition. Industry Competitive Practices

One of the most important directions for concretizing the strategy is its linkage to the competitive status of the company, and primarily to the degree of its dominance in the market. Consider four possible competitive positions for organizations:

market outsider;

Firms with a weak competitive position;

Firms with strong competitive status;

Market leaders.

market outsider. It is usually not customary to talk about the competitive advantages of an outsider in the market. First of all, we should talk about the directions of finding methods to return the business to a normal state.

1. Radical reorganization of the company and its repositioning in the market by revising the basic competition strategies used. Usually successful reorganization is based on the transition to new methods of competition, the development of the internal environment of the enterprise to find reserves, a merger with another company, a reduction in the range of goods to the most appropriate for their profile.

2. Increasing revenue by increasing prices and marketing costs. This tactic makes sense when demand is price inelastic, buyers are not sufficiently aware of the product, the main source of increasing profitability is increased use production capacity.

3. Cost reduction and all kinds of savings. They are carried out through control over the use of funds, the exclusion of hiring new employees, the modernization of production, the transfer of capital investments to a later period.

4. Reduction of assets. It is carried out when a rapid influx of financial resources is needed. In this case, the most useful for finding cash may be the sale of some assets of the enterprise and the closure of unprofitable industries.

5. Combination of various methods.

Firms with a weak competitive position. In this case, the firm has three alternatives based on the following factors:

1) working with cheap products or using new methods of differentiation;

2) maintaining and maintaining sales volumes, market share, profitability and competitive position at the current level;

3) reinvesting in the business at a bare minimum to generate short-term profits and maximize short-term cash flow.

Firms with strong competitive status. Exist following directions competition strategies for such enterprises:

1) search for an unoccupied niche;

2) adaptation to a specific group of consumers;

3) creating a better product;

4) following the leader;

5) capture of small firms;

6) creating a distinctive image.

Market leaders. Due to the fact that the leader has a proven strategy and a well-known reputation, the main question is how this company will maintain and improve existing competitive advantages. To do this, it is advisable to analyze the capabilities of a leader in at least the following three strategic areas of activity:

1) continuation of the offensive policy;

2) saving the current position;

3) confrontation with competitors.

Competition is rivalry between producers for more profitable terms production and marketing of goods in order to obtain the maximum possible profit on this basis. Competition is the most effective method economic control, as it costs society minimal costs.

Competitiveness of the organization - the ability to implement effective economic activity and its profitable implementation in a competitive market. Competitiveness as a phenomenon is a combination of quality and cost characteristics that ensure the satisfaction of a specific need.

As an example, in fig. 1. A graphical model for comparing the competitiveness indicators of two organizations in eight parameters is given.

Rice. 1. Orientation of competitiveness

The combination of different products on the market and consumers of different orientations allows us to talk about some types of competitors, the main of which are given in Table. one.

To conduct competitor analysis, it is necessary to identify all real and potential competitors and consider them in terms of possible strategies; current position; financial opportunities; entrepreneurial philosophy and culture, and goals.

The study is carried out in three stages, which involve:

• identification of current and potential competitors;
• analysis of indicators, goals and strategies of competitors;
• identifying strengths and weaknesses competitors.

According to P. Doyle's classification, groups of direct competitors using a cost leadership strategy seek to conquer the market with the help of low prices by minimizing all types of production and sales costs. The efforts of the differentiation group are aimed at satisfying to the greatest extent the needs of consumers in terms of the main parameters of the product.

Table 1. Types of competitors

The focus group concentrates its efforts not on the market as a whole, but on its segments, where competitors seek to win over the buyers of the first two groups. However, indirect competitors with their substitute products or similar services often pose no less danger to the organization. In addition, over time, competitors acquire the knowledge and experience that allows them to move into the strategic group occupied by the organization and become direct competitors.

Rice. 2. Strategic groups of direct competitors: A, B, C, D, E, E - competitors

Identification of competitors is carried out on the basis of one of the approaches.

The first approach is associated with an assessment of the needs satisfied in the market by the main competing firms, the second one focuses on the classification of competitors in accordance with the types of market strategy used by them.

In the first approach, competing firms are grouped according to the type of needs that their product satisfies. In the second case, competitors are classified according to key aspects of their orientation in production and marketing activities.

Strategic directions of competition

Competitive advantage is formed as a result of the implementation of one of the competitive strategies: cost leadership, differentiation strategy, optimal costs and focusing. There are two ways to establish cost advantage: 1) do a job better than the competition; 2) correct the structural and functional indicators of costs - value chains (hereinafter - ts).

In a compact form, the necessary information is presented in Table. 2.

Table 2. Factors that determine cost leadership

Cost management	Influence of management	Improving value chains	Cost Leadership Protection
Structural components Economies or losses of scale can be identified or created anywhere along the value chain Learning curve and experience effects (by increasing labor efficiency; creating product modifications that increase production efficiency; retooling the machine park; obtaining private information from suppliers, consultants and former employees of competing firms) Relationship with other activities in the value chain. For example, to identify those moments where both suppliers and companies have high costs, since there is no coordination and joint optimization Sharing of opportunities between different production units within the organization (economy of scale, reduction of time to create a new technology, etc.)	Increase / reduce the number of products offered Add / cut services provided to customers Contribute more/less distinctive features to product quality characteristics Pay more/less employees relative to competitors in similar industries Increase / reduce the number of different distribution channels for marketing the company's products	Simplify product development, remove redundancies Reengineering of the main production processes Use of smarter technology Use of sales to the end consumer and marketing approaches that cut unnecessarily, high costs and profits for wholesalers and retailers (often 50% of the final price paid by the buyer) Transfer of production facilities closer to the consumer/supplier	Cost leadership puts you in the best position to attack, defend, increase sales or gain market share Countering the power of buyers, a low-cost company often maintains profit margins A low-cost company is better protected from supplier dictate if the basis for its competitive cost advantage is better internal organization.
Benefits of vertical integration compared to moving certain activities outside the company (giving significant trading power, reducing costs at the junctions) Dependence on geographic location (the level of salaries of employees, the amount of taxes paid, the cost of energy, the cost of obtaining and shipping products, chartering) Functional components Advantages and disadvantages of early adopters (trademark and incremental costs) Capacity utilization percentage Strategic choices and production decisions	Increase / decrease the level of R&D relative to competitors Spend more/less effort to increase productivity and efficiency relative to competitors Increase/reduce specifications for purchased materials	Achieving a greater economic level of vertical integration compared to competitors Implementing a “something for everyone” approach and focusing on a limited set of goods/services to meet special but important requirements buyer and eliminate unnecessary actions and costs associated with a large number of product modifications	From the point of view of potential market participants, the cost leader can lower the price to make it more difficult for newcomers to win customers. In competition against substitute products, the cost leader is well positioned, because the use of low prices is a good defense against companies trying to introduce similar products to the market.

Characteristics of typical competitive strategies

Low strategy costs are especially important in the following cases:

• price competition among sellers is particularly strong;
• the product produced in the industry is standard;
• differences in price for the buyer are significant;
• most buyers use the product in the same way;
• the cost of buyers to switch from one product to another is low;
• there are a large number of buyers who have serious power to lower the price.

Risks of the strategy to achieve low costs: technological breakthrough of competitors; simple ways to copy the skills of a cost leader; excessive focus on cost reduction and blindness to other areas; change in customer preferences and the desire for better quality goods; short circuit vulnerability in a given technology.

Differentiation strategy becomes attractive as customer preferences diversify. The company must study the requests and behavior of customers. Competitive advantage arises when a large number of buyers will be interested in the proposed attributes and characteristics of the product.

Successful differentiation allows the firm to charge a higher price for the product; increase sales; gain customer loyalty to your brand.

Varieties of differentiation schemes: distinctive taste qualities, specific properties, delivery of small postal items, product delivery within 24 hours, more value for money, prestige and distinctiveness, workmanship, technological leadership, full-scale service, the highest image and reputation. Differentiation is attractive because:

• creates entry barriers;
• smooths out the influence of the power of buyers;
• helps to avoid the threat from substitute products.

Differentiation works best in markets where there are many ways to change the product and the buyer recognizes these differences as having value; the needs of the buyer and the ways of using the goods are different; a small number of competitors take a similar approach to differentiation.

Risks of differentiation strategy. If the buyer sees little value in uniqueness, then the cost strategy will win. In addition, competitors can copy all the innovations.

Optimal cost strategy. The strategy is focused on giving customers "more value" for their money. This implies a strategic focus on low costs while providing the customer with more than the minimum acceptable quality, service, features and attractiveness of the product.

The strategic goal is to become a low-cost, good-to-excellent product manufacturer, and then use the cost advantage to drive down the price of similar products produced by competitors.

The strategy is attractive in terms of competitive maneuvering. An optimal cost company may offer a mid-range product at a sub-average price or a good quality product at an average price.

Focused Strategy low costs and differentiation focused on a narrow part of the market. The goal is to do a better job of customer service target segment.

A focused low-cost strategy is associated with a market segment in which buyers' demand for cost (and hence price) is significant in contrast to the rest of the market space. Costs are reduced through the use of the brand (no advertising, marketing costs), targeting customers who do not research the market (do not pay for consultations).

Focus gives nice results when a company finds ways to reduce costs by limiting the number of buyers in order to well delineate its niche. Focusing is useful when:

• the segment is too big to be attractive;
• the segment has good potential for growth;
• the segment is not critical to the success of most competitors;
• a company using a focus strategy has enough skills and resources to successfully work in the segment;
• a company can protect itself from challenging competitors through customer benevolence and its superior ability to serve segment buyers. Risks of a focused strategy: there is a possibility that competitors will find an opportunity to approach the company's actions in a narrow target segment; the requirements and preferences of consumers of the target market segment are gradually spreading to the entire market;
• a segment can become so attractive that it attracts the attention of many competitors.

Strategic advantages of vertical integration. If vertical integration does not lead to significant cost savings or additional benefits, then it is not strategically justified.

Backward integration leads to cost savings when the required production volume is large enough to provide the same economies of scale as those for suppliers (and vice versa). It also reduces the company's dependence on suppliers.

Forward integration creates a network of committed dealers representing the company's products to the end user (this can result in cost savings).

For producers of raw materials, integration into production can promote greater product differentiation and help avoid price competition with other producers of raw materials.

However, the closer the supplier is to the activities of the manufacturer, the more opportunities the company has to break out of this competitive environment and differentiate the final product due to design, service, quality, packaging, etc.

Strategic disadvantages of vertical integration:

• increases investment in the industry, technologies are conserved;
• limits the firm in the freedom to choose suppliers;
• requires balancing capacities at each stage in the value chain (when the production capacity of one of the links exceeds the needs of another, the surplus must be sold);
• requires different skills, business abilities and the ability to analyze the situation;
• integration with parts manufacturers can reduce a company's manufacturing flexibility (frequent changeovers are costly).

So, the integration strategy has both strengths and weaknesses. The choice depends on the following:

1) whether integration can improve the strategically important areas of the company's work in the direction of costs or increase differentiation;

2) how it affects capital costs, flexibility and responsiveness, administrative costs;

3) whether it is capable of creating a competitive advantage.

Structural analysis of competitors' activities is part of the overall evaluation system and is carried out in such a way that forms and methods are clarified commodity policy competitors; dynamics of price changes of competitors; analysis of means of stimulating sales of competitors.

The most important parameter of competitiveness is the quality of goods. Quality is a set of properties and characteristics of a product that gives it the ability to satisfy stated or implied needs.

This and other parameters of competitiveness allow us to evaluate the organization under study in comparison with competitors. An example of such a comparison is given in Table. 3. Strategic assessment The external environment of the company requires an answer to seven questions. These questions are listed below.

Table 3. Identification of the strengths and weaknesses of the organization in comparison with competitors

Characteristics of competitiveness	Competitiveness Characteristics Parameters	Parameter estimates
		organizations	competitors
Marketing Benefits	Market share Product quality Service level Efficiency of customer contacts Ways of distribution of goods Geographical features of the market
Financial stability	Business profitability analysis Cash flow analysis Analysis of current debt
Efficiency	Cost level Production capacity data Staff technical skills Supply options
Organizational Capabilities	Leadership Potential Employee motivation Ability to adapt Entrepreneurial ability

Factors affecting the situation in the industry

1. What are the main economic indicators of the industry?

Industries vary widely in characteristics such as market size, extent of competition, market growth rates, number of buyer (seller) firms and their relative size, difficulty entering and exiting the industry, degree of vertical integration of sellers, rate of technological changes. These indicators also include the size of economies of scale and the effect of the experience curve, the degree of standardization or differentiation of competitors' products, profitability (profitability).

Factors that need to be studied to determine the main characteristics of the industry:

• market size;
• the extent of competition;
• the growth rate of the market and the stage at which the market is located;
• the number of competitors and their relative sizes;
• the number of buyers and their financial capabilities;
• integration is directed "forward" or "backward";
• directions and pace of technological change;
• ease of entry into and exit from the industry;
• products of competing firms are highly differentiated or almost identical;
• whether companies have the opportunity to realize economies of scale in production, transportation, marketing when conducting promotional activities;
• whether a high degree of capacity utilization is the most important condition for achieving a low level of production costs;
• whether the learning-experience curve in the industry is such that average price products declined as cumulative output grew;
• whether the necessary investments are being made in the industry;
• whether the industry is above or below the average profit margin as a whole.

Example: set of basic economic indicators and strategic importance of key economic characteristics industries.

2. What competitive forces are at work in the industry and what is their impact?

The level of competition is determined by five forces: rivalry between sellers within the industry, the presence of the attractiveness of substitute products, the possibility of new competitors entering the industry, the influence of suppliers, and the ability of consumers to dictate their terms. The task of analyzing competition in an industry is to assess each force, determine the degree of its pressure, and then analyze the competitive strategy that a company should focus on, taking into account the existing “rules” of competition in the industry, which aims to:

a) Isolate the firm as far as possible from the five forces of competition.

b) use the "rules" of competition in the industry for the benefit of the firm;

c) gain a competitive advantage.

Five forces model:

1. Rivalry between sellers:

• low prices;
• improved product characteristics;
• service level;
• terms of the warranty period;
• ways to promote the product to the market;
• new goods (all resources and the strength of competition).

Competition Intensity Factors:

• number of firms;
• growth in demand for products;
• lower prices, increased sales, reduced inventory;
• costs of buyers for change of firms;
• dissatisfaction of some companies with market shares;
• industry profitability;
• the cost of exiting the industry;
• swinging the market due to the difference of companies;
• buying by a large company of another industry of an outsider who could become an industry leader.

2. Entry into the industry of new competitors (barriers):

• economies of scale in production (it is difficult to produce large volumes at once, risk, overproduction);
• impossibility of access to know-how and technologies (special knowledge and experience are needed);
• learning curve effect (production experience);
• consumer commitment to brands (discounts, quality, service);
• the size of capital investments (% on loans, winning a client);
• cost inequality (cheap raw materials, know-how, experience curve, geography, % credit);
• access to sales channels (wholesale, retail, advertising, dealers);
• actions of regulatory authorities (licensing, environmental protection);
• tariffs and non-tariff restrictions (government restrictions).

3. The influence of substitute products - competition with firms in another industry:

• affordable prices;
• product quality and characteristics;
• complexity of switching for consumers;
• the complexity of retraining employees, technical assistance;
• time spent on reliability and quality checks;
• psychological costs.

4. Competitive strength of suppliers:

• significance for the consumer;
• standardization of supplier products;
• amount;
• the severity of the need;
• volume of a consignment of a substitute product;
• close relationships with suppliers;
• the share of the supplier's products in the production price;
• the impact of the supplier's products on quality;
• the cost of switching to another supplier;
• suppliers' propensity to make concessions;
• possibility of vertical integration.

5. Competitive strength of buyers:

• size of buyers;
• sentence;
• impact on prices, quality and service levels.

The strategic meaning of the five forces is the structure of forces and the nature of the struggle.

The structure of competition in an industry is unattractive if the rivalry between sellers is high; market entry barriers are low; competition from substitutes is high; sellers and buyers can benefit significantly from participating in transactions.

Ideal competitive environment: suppliers and buyers are in a weak position; there are no good substitutes; entry barriers are high; competition between sellers is moderate.

The strategy must do the following:

1) isolate the company from the five forces;

2) influence competition in a direction favorable to the firm;

3) secure a strong position in the competitive game.

3. What causes changes in the structure of competitive forces in the industry and the environment?

The driving forces are changes in the industry's long-term economic growth trends; changes in the composition of consumers; introduction of new products; market entry or exit of large firms; globalization; changing cost structure and productivity; the transition of consumer preferences to standard products from differentiated ones; the impact of changes in legislation and government policy; changing social values ​​and lifestyles, reducing uncertainty and risk.

There are usually 3-4 main driving forces. The driving force analysis aims to:

1) determine which driving forces have the greatest impact;

2) establish the extent and consequences of influence;

3) adapt the strategy to the action of driving forces.

4. Which companies have the strongest (weakest) competitive positions?

To answer this question, a map of strategic groups is being developed. Rivals belonging to the same or closely spaced strategic groups are close competitors.

Algorithm for mapping the structure of groups (Fig. 3):

• establish the full range of characteristics (price/quality level, geographic scale of activities, degree of vertical integration, product range, distribution channels used, range of services);
• put companies on the map;
• to unite the firms which have got approximately in one space;
• draw a circle (the diameter is proportional to the share of the group in total sales).

• map field variables should not be strongly correlated;
• variables should show large differences in the positions occupied by firms in the competitive struggle;
• variables must be neither quantitative nor continuous;
• the use of circles of different diameters makes it possible to reflect the relative sizes of each strategic group;
• several maps give different representations of competitive positions.

You can draw arrows indicating the movement of groups to other positions.

Attempts by competing firms to enter a new strategic group almost always lead to an increase in the intensity of competition.

The closer the groups on the map are to each other, the stronger the competition.

From the map, you can determine if the differences in potential profitability are related certain categories groups with a strong or weak position of each of them.

Rice. 3. Map of competitive positions in the furniture sales market: the levels of quality-price ratio (Q/C) are marked vertically; horizontally - assortment set in the furniture sales market in Vladimir; the diameter of the circle is proportional to the share in the sales volume; the numbers indicate the furniture sellers

5. What is the competitor's next most likely strategic move?

This analytical step includes determining the strategies of competitors, identifying strong (weak) rivals, assessing their competitive capabilities, predicting their next steps. Well-organized reconnaissance activity to collect information about the enemy makes it possible to predict his actions.

The firm cannot outplay rivals if it does not monitor their actions. It is important to determine the structure of competitors: their position in the industry; goals; basic approaches to the conduct of competition.

a forecast of the next steps of competitors is necessary: ​​an understanding of their strategic intentions; assessment of their position in the market; awareness of how much they need to strengthen their financial position; analysis of public statements; competitor flexibility; understanding the mindset of leadership; reconnaissance activities.

6. What are the key factors for competitive success?

Key success factors (KSF) are the actions to implement the strategy, competitive opportunities, performance that the company must provide in order to be competitive and achieve financial success.

Key success factors are actions and competitive opportunities that need to be given special attention: capacity utilization, commercial network, advertising, level production costs, location of consumers. In different industries, CFUs are different, but there are rarely more than 3-4 of them.

7. Is the industry attractive and what are its prospects for achieving a high level of profitability (above the average in other industries)?

If it is concluded that the industry is attractive, then an aggressive strategy is usually adopted to create a strong competitive position, increase sales and invest in the development of the production base and equipment renewal.

If the industry is relatively unattractive, then:

a) companies outside the industry and considering joining it may decide negatively and start looking for other opportunities;

b) weak companies can merge with competitors or be taken over by the latter;

c) Strong companies may limit further investment and focus on cost reduction and/or innovation strategies (release new products) to improve long-term competitiveness and profitability.

Variants of the competitive position of the company can be characterized as follows.

A very strong or leading company (usually an oligopoly, or, as they say in the West, a dominant company) has a wide range of strategic opportunities that can be freely used. This allows you to dictate the rules of the game to others.

Strong. The relative share of the company in the market exceeds the share of the nearest competitor by at least 1.5 times, which ensures its independence and a stronger position compared to most competitors.

Signs of a strong competitive position are:

large volume and high quality of assets, including intangible ones;

having a significant and growing market share;

concentration of activities on its fastest growing segments;

having a sound strategy and at the same time the ability to benefit from the situation;

knowledge of consumers and markets;

the ability to outperform competitors in terms of product quality;

high degree of production diversification;

low costs;

significant creative potential and innovative activity. Vikhansky O.S. Strategic management - M .: Gardariki, 2001 - S. 204.

Average. This type of business has a safe niche, certain competitive advantages (but without noticeable dominance), which in the future allows it to become a leader.

Weak. The business currently has a number of vulnerabilities that prevent it from being profitable and generating cash. So usually he can't live on his own. Signs of a weak competitive position include:

the small size of the firm, making it unable to withstand the threat of takeover;

reduction in market share, the precariousness of the situation in promising areas;

the presence of serious shortcomings in the sphere of production, marketing, management;

high costs, slow income growth and lack of financial resources;

low quality of goods;

reputation deterioration;

lack of qualification of staff and managers.

5. Defective. There are no strengths either in the present or in the future, so a company with such a position has the right to exist only as long as it brings at least some profit. Positioning involves the creation of a marketing program that involves solving problems related to the choice of a range of goods and services, methods of their distribution, promotion, pricing policy, as well as a system of appropriate strategies. Zabelin G.V., Moiseeva N.K. Fundamentals of strategic management: textbook - St. Petersburg: PETER, 2001. - p. 102.

offensive, focused on capturing the market as a whole, individual segments or involving positioning next to a competitor with its subsequent displacement;

defensive, associated with the protection of the existing position of the company, most profitable areas activities;

flexible, based on product differentiation, stimulating consumer loyalty and reducing their price sensitivity. Busygin A.V. Effective management. M.: Finpress, 2000.- S. 325-326

Firms that occupy a strong competitive position in the market use different strategies.

Leaders whose positions are very strong, essentially dominant, and whose main goal is to maintain them (which is more difficult than conquest), implement three main types of strategies:

an aggressive offensive strategy with the aim of creating ever new competitive advantages (in the field of image, low costs, creating products that have no analogue). This requires constant innovation, improving the quality of product and service, reducing costs, and stimulating demand. Aggressive-minded leaders try to develop even “faster than the market”, and their activity in all directions makes rivals defend;

strategy of aggressive defense and strengthening of positions. It aims to make it difficult for other firms to enter the market or increase their presence in it while strengthening their own competitive advantages and strengthening their positions.

This implies pressure on competitors in the maximum number of areas, in particular:

raising the entry barrier to the market and closing market niches that are attractive to rivals;

expanding the range of goods and services;

increasing the level of service, individualization of service;

rising costs for research and implementation the latest technologies and goods;

maintaining reasonable prices and an attractive image of the product;

establishment of demand services;

conclusion of contracts with the best suppliers and dealers;

intensive investment in profitable production;

show of force. Bowman K. Fundamentals of strategic management. M.: Banks and stock exchanges, UNITI, 2003.- S. 256

Such a strategy is suitable for firms that have achieved a dominant position or want to maximize the opportunities provided to them, since there are no prospects for further growth (it cannot outpace the expansion of the market itself), there is a risk of exposure to antitrust authorities;

3) a strategy of competitive pressure on pursuing firms, which is carried out with the aim of turning them from aggressive contenders for leadership into obedient followers. For this, two approaches are used.

The first is to prevent opponents from carrying out offensive actions, for which active price policy, work with buyers, suppliers and distributors, in particular:

development of alternative options and expansion of the range of products to fill market niches;

offer similar to competing models at lower prices;

ousting competitors from distribution networks, including through discounts to marketers;

providing various benefits to customers, such as training in the use of a technically complex product;

reduction of delivery and service time;

purchase lending;

attracting the best suppliers;

excessive purchases of raw materials and components;

boycott those who work with competitors, etc.

The second approach involves "intimidating" rivals to prevent their offensive actions through public announcements about future strategy, innovations, pricing policies, creating financial reserves, etc.

Firms - followers of the leader, having a strong position, but being in the "second row", are heterogeneous.

Some of them are potential aggressive rivals that threaten him (including due to superior control). Such companies may resort to a direct attack on the leader or try to occupy a special niche. To do this, a direction is chosen where he has weak or poorly defended positions.

Confrontation with the leader requires strengthening one's own competitive advantages or imitating his actions, but rarely leads to success.

To increase market share, either a strategy of price reduction or differentiation based on quality and service, technological superiority and innovation can be used.

2) the "specialist" strategy, according to which the company (usually small in size) concentrates on individual goods and services or directs activity to a small market segment (a narrow group of customers with special needs), where you can not "get confused under the feet of leaders" .

Competitive advantages are created here due to the uniqueness of the range, the high quality of goods, the provision of special services to customers;

the “we have better than them” strategy, which implies a focus on the production of unique or elite high-quality goods with rare or new properties, individualization of sales, maintaining close contacts with customers;

the obedient follower strategy is chosen by firms operating in segments with little competition. They refrain from initiative actions and obvious attempts to lure buyers away from the leader, more often they are on the defensive. At the same time, strategies are used that do not violate the interests of stronger rivals;

the strategy of "growth through acquisitions", which involves strengthening the company's position by merging with weaker firms in the industry;

strategy of "high image", achieved through highest quality products and services.

Firms playing second role stand a good chance if:

provide a technological breakthrough and constantly innovate;

skillfully use any failures of leaders;

attract competitors' customers to their side, providing them with higher quality goods and services for reasonable prices; special service etc.

Advantages for such firms arise when it is more profitable to follow the leader and use his experience; technological change so fast that the first investment quickly depreciates; buyers do not always remain faithful to the pioneers; experience and know-how are easy to copy. Wissema X.A. Strategic management and entrepreneurship M.: Finpress, 2000 - S. 256-257

The third "step" is occupied by followers of leaders with a weak or medium strength competitive position, avoiding direct competition.

If funds are available, they fight to maintain sales share, profitability, etc. For this, an aggressive counteroffensive strategy (either based on cost reduction or product differentiation), a strategy of defense and strengthening of positions is used; retreat or withdrawal from the market.

In addition, a "harvest" strategy (minimize investment, focus on current operations until profits come in, and then exit) can be used. It is suitable for the final phase of the firm's operation, when prospects are sacrificed for the current increase in profits.

This strategy is applied in the following cases:

* the industry is unattractive in the long run;

Other firms are satisfied with second roles (“persistent followers”), as they receive stable profits. Their actions are determined by the characteristics of the industry, the possibility of economies of scale.

In general, followers of a leader can implement:

1) the strategy of "vacant niche", which implies a concentration on consumers who are not interested in large companies.

As part of the "harvest" strategy, the current budget is reduced; reinvestment, costs for new equipment, promotion of goods are reduced to a minimum; quality is imperceptibly reduced; non-essential services are curtailed; slightly higher prices. The main efforts of the company are focused on finding a new field of activity. Although such a strategy leads to a reduction in sales, but if costs fall faster, then profits will increase. Finally, in the most difficult position are firms in a crisis situation, occupying a flawed strategic position.

The reasons for falling into this position can be:

a large amount of debt;

reassessment of growth prospects;

the onset of a stronger competitor;

high level of costs;

irrational use of production capacities;

lack of resources for a major breakthrough;

failures in the development and implementation of new products;

management errors. Utkin E.A., Strategic planning, M .: Ekmos, 2002 - S. 203

Let us consider, in more detail, how the position of the company in the industry and in the market, the correspondence of the internal and external environment to the business. At the same time, the positions themselves can be: defensive, conservative, aggressive and competitive.

Aggressive positions:

"Leader". It has strong competitive advantages in an adequate environment and a promising industry, which allows you to fully control your business.

"Aggressor". The firm is not in the lead, but operates in an adequate environment and has a fairly good competitive edge in an attractive industry and is able to fully control the conditions of its business.

Master Candidate. The firm has good strategic potential and operates in an adequate macro environment. However, she either good benefits in an unattractive industry, or weak ones in an attractive one.

"Hope". The firm operates in a fairly attractive industry with competitive advantages and opportunities and can control the macro environment.

"Not yet a husband, but no longer a boy." A firm with sufficient potential, adequate to the macro environment, but operating in a not very attractive industry or with insufficient competitive advantages.

"Colleague". A firm with a high competitive advantage in an attractive industry but little internal potential or unstable macro environment.

"Test". A firm in a reasonably attractive industry with good

competitive advantages, but with insufficient capacity or in an unfavorable environment.

"Difficult child". A firm in an unattractive industry or with weak competitive advantages but with the potential to neutralize negative impacts environment.

Conservative strategic positions:

"Conservative". A firm with a very strong potential, able to fully control the environment, but in an unattractive industry and without strong competitive advantages.

"Stingy Knight". Has a very high strategic potential,

works in favorable conditions, but has low competitive advantages in an unattractive industry.

"Own among strangers - a stranger among his own." A firm with high strategic potential and business adequacy to the macro environment, but with low competitive advantages or operating in an unattractive industry.

Such firms need to increase current profitability, reduce costs, and liquidate part of the assets.

The following strategies can be used for this:

global economy;

imitation of innovations;

transition to the production of cheap products;

a sharp drop in prices;

leaving by becoming a subsidiary of the client, selling off part of the assets or completely liquidating;

"harvesting";

combining efforts;

strengthening long-term competitiveness.

In any case, clear and well-thought-out positioning strategies (like any other) create a firm good reputation and strengthen its position, are a reliable condition for obtaining long-term profits. At the same time, the frequent change of strategies, aimed at the use of momentary opportunities, brings only temporary results.

Fist". A firm in an unattractive industry with no competitive advantage, but with high strategic potential to control macro-environmental conditions.

"Middle class". A firm in an unattractive industry with low competitive advantage, but with the strategic potential to withstand environmental change.

"Ugly duck". A firm with the strategic potential to fully control changes in a favorable macro environment, but in an insufficiently promising industry and with undeveloped advantages.

"Farmer". A firm engaged in an unattractive type of business and not having competitive advantages, but its strategic potential allows it to neutralize the effects of the external environment to a certain extent.

"Lumpen". A firm whose strategic potential is either not high enough in a favorable macro environment, or is spent on overcoming the negative impact of external conditions. The industry is unattractive and there are no competitive advantages.

"Black Jack". The position of the firm in an industry that is not attractive enough or has not yet achieved the necessary competitive advantages. However, the strategic potential is high and allows you to resist the environment.

Defensive positions:

"Bankrupt". A firm operating in adverse external conditions with a complete lack of strategic potential, competitive advantages in an unfavorable industry.

"Living Dead". A firm with a low competitive status in an unattractive industry, with little strategic potential that does not allow it to withstand the adverse effects of the macro environment.

"Oblomov". The firm is in an unattractive industry with low competitive advantages, the strategic potential is minimal, the macro environment is absolutely unfavorable.

"Dry leaf". A firm with low strategic potential, operating in an unattractive industry with no competitive advantages, and therefore completely dependent on the macro environment.

"Vane". A firm with low strategic potential in an unpromising industry, heavily influenced by an unfavorable macro environment.

"Box". A firm in an under-attractive industry with little competitive advantage and very little potential to offset the adverse effects of the macro environment.

"Collective farmer". A firm in an unattractive industry; it has no competitive advantages at all, and its strategic potential does not allow to completely neutralize the unfavorable influence of the environment.

"Gypsy". A firm in an unattractive industry with low competitive advantages and potential to offset significant environmental impacts.

Competitive strategic positions:

"Children of fate". A firm that has the highest possible competitive status in one of the most attractive industries under adverse macro-environment conditions and lack of potential.

"Chichikov". A firm in a fairly attractive industry with a good competitive status, but an unfavorable macro environment and lack of potential.

"Don Quixote". A firm with low competitive advantages and insufficient potential to withstand the environment in an insufficiently attractive industry.

"Nouveau riche". A firm with a very attractive business and a high competitive status, but with little strategic potential, which does not allow it to neutralize unfavorable environmental conditions.

"Cocoon". A firm operating in an attractive industry with significant competitive advantages, but weak strategic capability to withstand the macro environment.

"Drone". A firm operating in an attractive industry with low competitive status, or with a high competitive status in an unattractive industry in an unfavorable macro environment.

"Rising change". Firm with strong advantages in a very attractive industry, but with low strategic potential, which does not sufficiently resist the environment.

"Intern". A firm with good competitive advantages in a fairly attractive industry, but macro-environment impacts are not offset by potential.

"Dog". A firm with negligible competitive advantages whose strategic potential does not allow full control of the macro environment in an insufficiently attractive industry. Theory of system management / Ed. ed. V.G. Yanchevsky. M.: INFRA-M, 2001.- S. 405.

Introduction

Analysis of the dynamics of the market situation

Determining the Competitive Status of the Base Firm

Definition of competing firms

Justification of the choice of competitive strategy of the base firm

Literature

Introduction

The purpose of this calculation and analytical task is to identify and analyze the dynamics of the market situation on the example of a market consisting of 4 firms. When performing this calculation work, it is necessary to determine the sectors occupied by these firms in terms of market shares, according to the nature of the change in their competitive position. In addition, the competitive status of each of the proposed firms should be determined and possible scenarios for the development of events in the competitive struggle should be established.

Based on the results of the calculations, as a conclusion, in relation to the market shares of the base firm to other firms, it is necessary to determine the range of changes in the ratio of the firm's market shares and the degree of competition in the market and find out the prospects for competitive relations between the base firm and market rivals. As a result, you should choose the development strategy that is most suitable for the base company.

The required input data are presented in table No. 1 according to the option individual task.

Table 1 Initial data

Service Market Entities	Capacity of sold products, thousand tons
	First year	Second year
Base Firm A

Analysisspeakersmarketsituations

An analysis of the retrospective situation on the market makes it possible to simulate the "starting" position of the base firm and other firms operating in the market, and allows you to establish the nature competitive behavior firms in terms of increasing their business activity during the considered period of time. We begin the analysis of the retrospective situation on the market by determining the capacity of niches sold by firms in the market as a whole:

where and - the capacity, respectively, of the realized market niche and the market for the services of its individual subjects; i - company code.

where i is the company code;

Table 2 Analysis of the retrospective situation on the market (first given year)

The purpose of the further solution is to determine the market sector that each firm from among the considered ones is striving for, which makes it possible to confidently assess the degree of strength of the market position already won by this firm.

The task is solved according to the algorithm, which provides for the implementation of the following steps:

1. The values ​​of the indicators of the market share of the company are arranged in order of increase and a sequence is built:

D 1 ≤D 2 ≤…≤D i ≤…≤D m ,

where i is the company code (); D i is the market share of firm i.

D C ≤D B ≤D D =D A;

18%(C) ≤24%(B) ≤29%(D) =29%(A).

2. The arithmetic mean of the market share of firms operating in the market is found:

to the left of which, firms with lower market shares are identified, and to the right with higher market shares.

3. The considered set of firms is divided into two subsets (s) according to the rule:

Obviously, the subset includes firms whose market share is in the interval, and the subset will include firms with a market share from the interval.

Thus, we get:

D B< 18%<25%

D B< 24%<25%

D G > 29% > 25%

D A > 29% > 25%

4. The procedure for differentiating firms by market share continues now within the subsets and. For this purpose, for the corresponding intervals of change in the market shares of firms and are determined by the arithmetic mean values

5. Boundary values ​​of the indicator of the market share of firms are fixed for the formation of sectors M I - M IV:

18%; 21%; 25%; 29%; 29%

6. Firms of the entire considered population are distributed by market sectors according to the rule:

where: M I - firms - market leaders;

M II - firms with a strong competitive position;

M III - firms with a weak competitive position;

M IV - firms outsiders of the market.

Based on the results obtained, Table 3 is formed, which reflects the market positions of firms with an indication for each relevant market sector.

Table 3 Market positions of firms in the first year

Based on the results obtained, we can draw some conclusions about the initial position of the firms under consideration.

The "starting" market position of the base firm (A) is strong, as it is in the M I market sector and, accordingly, is the leader. But in terms of market share, base firm A is not inferior to firm D, which is also the market leader, with a market share of 29%. Firm G can be called a real competitor to firm A, which poses a threat to the latter, since their market shares are the same.

As for the other two firms B and C, these are firms with a weaker market position. Firm B has a small share of the market, but operates without leaving it. Its role status is characterized by dependent competitive status and weak competitive positions in this market. Firm B is an outsider in the market.

The above analysis of the situation in the considered market gives an idea of ​​its state at the beginning of a given period of time. Now we need to consider the nature of its development throughout the entire period in order to determine the trend in the indicator of the market share of firms operating in the market, and to determine how their market positions changed (improved, worsened).

The algorithm for determining indicators for analyzing the situation on the market throughout the entire period is similar to the above algorithm, so we summarize the main results of the calculations in tables 4 and 5.

Table 4 Analysis of the current situation on the market (for the entire given period)

Table 5 Market positions of firms at the end of the period

Based on the results obtained, we can draw some conclusions about the current position of the firms under consideration.

The current market position of the base firm (A) is strong, as it is located in the M I I market sector and, accordingly, is a firm with a strong competitive position. But in terms of market share, the base firm A is only in second place, while the first place, the place of the undisputed market leader, is shared between firms B and D. As for firms C, this is a firm with a weak competitive position in the market. Firm B has a small share of the market, but operates without leaving it. Its role status is characterized by dependent competitive status and weak competitive positions in this market.

The affiliation of firms to sectors by the nature of the change in competitive position is determined by following algorithm:

1. Determine the values ​​of the indicator of the growth rate (positive, negative) of the market share of firms. An example of calculating the growth rate is given for firm A. The results for the rest of the firms are summarized in table 6:

where: market shares of the firm і, respectively, in the first and last years of a given period of time;

n is the number of years in the period under consideration, we take n = 3 years;

2. The arithmetic mean value of the growth rate of the market part of firms is found:

where: growth rate indicator of the i-th firm;

m is the number of firms considered on the market, pcs;

3. The considered firms are divided into subsets according to the rule:

Obviously, the subset includes firms whose market share growth rates are in the interval, and the subset will include firms with a market share from the interval. Thus, we get:

T A< -13,8%<0,28%

T V< -2,0%< 0,2%

T G > 3.0%<0,28%

T B > 13.9% > 0.28%

4. The procedure for differentiating firms by market share continues now within the subsets and. For this purpose, for the corresponding intervals of change in the market shares of firms, arithmetic averages are determined:

5. Boundary values ​​of the market part of firms are fixed for the formation of sectors N I - N IV:

6. Firms in the considered set are distributed by market sectors in accordance with the indicator of the growth rate of their market share according to the rule:

where: N I - a firm with a rapidly improving competitive position;

N II - a firm with an improving competitive position;

N III - a firm with a deteriorating competitive position;

N IV - a firm with a rapidly deteriorating competitive position.

7. Based on the results of the implementation of the described algorithm, table 6 is formed, which displays the nature of changes in the competitive position of all firms that operate in the market:

Table 6 Competitive positions of firms

Thus, from the above calculations, it can be seen that over the past certain period of stay of firms in the market, according to our condition of 3 years, the base firm has worsened its position in comparison with the initial positions in the market and is an outsider in terms of growth rate in the amount of (-13.8% ).

As for firm B, its position has improved over 3 years and is currently operating with a rapidly improving competitive position with a growth rate of 13.9%.

Firm G showed a slight increase (3.0%). Company B has significantly reduced its competitive position and continues to reduce it, being a company with a worsening competitive position (-2.0%).

Determining the Competitive Status of the Base Firm

The results of the calculations performed in the first part give a clear idea of ​​the position of the considered firms in the market, which characterizes their competitive status. All these results are combined into a competitive market map, presented in the form of Table 7, which fixes the competitive status of all given firms by relating each of them to one of the model provisions 1-20:

Table 7 Competitive market map

With this layout of firms in the market, both a one-sided scheme and a two-sided scheme are implemented. In the first case, with a unilateral scheme, the leader firm B experiences opposition from firms with a weaker competitive status.

The two-sided scheme of relations is typical for the other three firms, each of which is opposed by rivals with both stronger and weaker competitive status.

Firm G is characterized by a positive development trend, which serves as an impetus for strengthening its status, for firms "B" and "A" - the opposite trend.

Core firm A must resist the pressure of strong competitors and prevent other firms from penetrating its niches and trying to improve its position at the expense of its closest competitors.

This firm tends to rapidly deteriorate with a weak market position. Firm "B", on the one hand, will seek to attack the closest rivals with a stronger status, and on the other hand, fight weaker competitors. Firm "B" should direct its efforts to strengthening its position, preventing other firms from penetrating into their realized niches.

Definition of competing firms

The essence of this task is to determine specific firms and the degree of competition between these firms and the base firm.

This problem is solved by comparing the market share of the base firm with the market share of each of the firms that operate in the market in question.

Possible ratios of market shares are in the interval, which can be divided into sub-intervals according to the severity and competitive activity of firms.

The five subintervals are presented in Table 8.

Table 8 Subintervals of possible market share ratios

Estimated subintervals	Range of changes in the ratio of market shares of firms	The severity of firm competition	Initiators of competition in the market
		Virtually zero
		Weak with possible growth	Competitor firm
		borderline sharp	Both firms
		Weak with possible extinction	Base firm
	1.76 - 2 more	Almost zero

To solve the task, it is necessary to find the ratio of the market shares of firms K D according to the formula: where - the market shares of firms A, B, C and D, respectively,%;

The results obtained are recorded in table 9, which also indicates the initiators of competition in the market.

Table 9 Identification of competing firms

Compared to the first year, the base firm A has worsened its position in the market, so it does not compete with firms B and D. Competition with firm "B" is practically zero, so there is no competition between firms. missing. Competition with firm G is also weak, but competition between them may increase in the future, as firm G improves its position in the market and in the future is a threat to the functioning and existence of firm A in the market. Strong competition between firm A and firm B takes place due to the almost identical position of these firms in the market. Both firm A and firm B have a weak market position and are characterized by its further deterioration. Therefore, between these firms there is a struggle for survival in this market. Firm A will try to improve its position at the expense of its closest competitor, which is Firm B.

Justification of the choice of competitive strategy of the base firm

The choice of the firm's competitive strategy is directly related and may even be predetermined by a specific goal that is relevant to it at the moment or period in question. In the generalized statement of the purpose of the functioning of firms, there corresponds a certain level of their economic condition, the achievement of which firms consider necessary to maintain and / or strengthen their positions in the market.

The underlying firm (A) has a low market share. To strengthen the position in the market, the company is invited to achieve a specific increase in market share over a certain period of time, i.e., the choice of a strategy for gaining leadership in market share. Such a strategy becomes a priority goal for firms seeking to secure long-term profits while minimum prices for your goods.

At the beginning, it was presented as the company with the largest market share, but after 3 years the company showed a sharp deterioration in its condition and competitiveness in relation to companies C and D, which had a starting position worse than that of company A.

Firm A needs to follow a strategy "ensuring survival". Such a strategy becomes a priority goal of the company when competition sharply intensifies in the market (especially when demand for the products of this company falls) or the consumer needs of the clientele change significantly. In both cases, the firm is forced to reduce the price of its products (up to the level of production costs) with the hope that such a step will increase the number of customers. When taking into account the "life" of the company for 3 years, it is not very good at winning and improving its position in the market, therefore the described strategy is the only correct option for the further existence of the company.

Conclusion

In this paper, an analysis of the dynamics of the market situation was carried out on the example of a market consisting of 4 firms. The sectors occupied by these firms were determined by market shares, by the nature of changes in their competitive position. For firms, the competitive status was determined and possible scenarios for the development of events in the competitive struggle were established. In relation to the market shares of the base firm to other firms, the range of changes in the ratio of the firm's market shares and the degree of competition in the market were determined. We found out the prospects for competitive relations between the base firm and competitors in the market. As a result, the development strategy of the base company was derived, the priority goal was to strengthen market positions in terms of market share.

Literature

1. Choosing a competitive strategy for the firm. Methodical instructions for practical lessons of the discipline: "Actual problems of the theory of competition". Magamadov A.R., Reshetkov D.M.

2. Abstract of lectures on the discipline "Actual problems of the theory of competition".

Tutoring

Need help learning a topic?

Our experts will advise or provide tutoring services on topics of interest to you.
Submit an application indicating the topic right now to find out about the possibility of obtaining a consultation.

As stated in Chapter 3, the definition of a business includes addressing the following questions:
- What needs of consumers will be satisfied by the activities of the company?
Which consumer groups will be affected?
- How will these needs be met (the distinctive competencies of the firm)?

Consumer needs are related to product differentiation, which is the process of using distinctive advantages in designing products to meet specific consumer needs. Marketing segmentation is a way of dividing the market into groups of consumers based on existing differences in their needs. A company may focus on one or more segments.

In general, the clarity of product/market/distinctive competence provides the basis for strategy at the single business level (SBS).

7.2. Choosing a basic competitive strategy for a single business

There are three types of strategies:
- 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 Table 7.1.

The advantages of the low-price leadership strategy are the ability for the leader to offer a lower price than competitors at the same level of profit, and in a price war, the ability to better withstand competition due to better starting conditions.

Table 7.1

Key Features of Basic Strategies

	Price leadership	Differentiation	Focusing
Product differentiation	Low (mostly by price)	High (mainly by properties)	Low to high (prices or features)
Segmentation market	Low (mass market)	High (many market segments)	Low (one or few segments)
Distinctive competence	Production and materials management	R&D, sales and marketing	All types of distinctive competence

The price leader chooses a low level of product differentiation and ignores market segmentation. It works for the average consumer by providing a reduced price. The price leader is protected from future competitors by its price advantage. Its lower prices also mean that it is less sensitive than its competitors to increased pressure from suppliers to enter and buyers to exit. Moreover, since price leadership usually requires a large market, its position in "trading" with suppliers is strengthened. When replacement products enter the market, the price leader can lower the price and maintain market share. 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 he maintains a price advantage. The fundamental danger for him is that competitors find ways to reduce their costs (for example, when changing technology).

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. For example, powerful suppliers are rarely a problem for such a company, as it is more price-focused than cost-focused. The company, of course, has no problems with strong buyers. Differentiation and broad customer loyalty create entry barriers for other companies that need to develop competitive designs 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 (for example, the advent of GPS) make the difference between price leadership and differentiation strategies less noticeable. Firms can implement differentiation policies at low cost. Other ways to reduce costs during differentiation are the widespread use of standard assemblies and parts, limiting the number of models, and the use of a "just in time" supply chain. With this in mind, some firms are trying to combine the benefits of price leadership and differentiation. They can charge a premium price for their products over the pure price leader, but which is lower than the pure differentiator, which can provide them with higher profits than companies using pure base 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 made in one or a few segments. In this case, a distinctive advantage in the form of quality based on one's competence in a narrow area is most often used.

The competitive advantage of a company pursuing a focus strategy derives from its distinctive advantage. This 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, as it purchases in relatively small volumes. But as long as it can increase prices for loyal customers, this disadvantage is not so significant. Potential new firms need to overcome the loyalty barrier, which also reduces the threat of replacement products. The advantage is also a closer relationship with consumers and the ability to better take into account their needs. Management is also simplified compared to companies that adhere to a differentiation strategy.

Flexible production systems create new advantages 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.

If companies do not clearly define their strategy, they tend to perform below average and suffer as competition intensifies.

7.3. Choosing an investment strategy

Investment strategy refers to the amount of resources, human and financial, that should give competitive advantage. Basic strategies provide competitive advantages, but they must be developed and maintained. Differentiation from this point of view is the most difficult, as the company invests resources in many functions (R&D, marketing) to develop distinctive advantages. When making investment strategy decisions, companies must consider the return on investment given a given competitive strategy. Two factors are critical in choosing an investment strategy:
- company's competitive position in the industry,
- stage life cycle industries.

The competitive position of a company in an industry is determined primarily by the market share controlled by the company and the presence of its distinctive advantages (for more details, see 6).

Each stage of the industry life cycle has different investment requirements. Tab. 7.2 summarizes the relationship between life cycle stage, competitive position, and investment strategy for a single business.

At the inception stage, large investments are required, as the company creates its competitive advantages. It invests in R&D, sales, service. If a company has invested in creating competitive advantages, it will take a strong competitive position. Companies with a weak competitive position at all stages of the life cycle may choose to exit to stop their losses.

In the growth stage, the growth strategy of the company with the expansion of the market is natural. Companies require significant investments to maintain their success. At the same time, companies are trying to consolidate existing marketing niches and enter new ones. Therefore, companies must invest resources in marketing, in addition, they must finally choose their basic strategy (for example, weak companies - focus).

Table 7.2

Choosing an investment strategy in a single business

stages vital cycle		Strong competitive position	Weak competitive position
	Origin	Market Creation	Market Creation
	Growth		Market Concentration
	Growth retardation	Market Growth	Market Concentration or "harvest"/liquidation
	Maturity	Support or profit collection	"harvest" or liquidation / stripping
	recession	market concentration, "harvesting", decrease in activity	Full turn, liquidation, stripping

When growth slows, competition increases and companies with a strong competitive position need resources to expand the market at the expense of the share of weak companies. The nature of investment depends on the strategy of firms. For example, for a price leader with the threat of a price war, it is important to invest in cost management, and when differentiating, it is necessary to strengthen the product range and distribution networks.

At the stage of maturity, companies in the face of increasing competition seek to protect their positions. Therefore, investments are made to support the strategy. At this stage, companies are willing to recover their past investments. While new profits were reinvested in the business, dividends were small, and now companies can choose a strategy to maximize shareholder returns.

7.4. Industry Competitive Practices

In competitive struggle, you can follow offensive and defensive strategies. Any competitive advantage is continuously attacked by competitors, especially those rich in resources. To defend its advantage, a firm can use one of six main offensive methods:
- attacking the strengths of a competitor,
- attacking his weaknesses,
- general attack
- offensive in one direction,
- partisan actions,
- preemptive strikes.

There are two main reasons to go hand-to-hand with competitors, opposing competitive advantages, prices, models, and promotion tactics to each other. The first is an attempt to win market space by surpassing strengths weaker opponent. Attacking a weaker opponent at the time of his greatest strength brings a decisive victory and a leading position in the competition. Another reason is the need to negate the competitive advantages of one or more competitors. The criterion for the success of such tactics is the comparison of the costs of the attack with the benefits obtained.

The usual way of the aggressor is to put on the market a product of the same quality at a reduced price. However, how much this strategy increases profits depends on the gain in sales volume.

Another type of tactic is to achieve a low price lead and then attack the competition at a reduced price. Without cost advantages, an attack can succeed if the attacker has more financial resources and can draw rivals into a price war.

When attacking a competitor's weaknesses, the attacker redirects their strengths and resources directly to the opponent's weaknesses.

They may be:
- geographical regions where the rival controls a small part of the market;
- customer segments that are neglected and/or underserved by the competitor;
- situations where the competitor is lagging behind in the quality and use of the product and there is a potential to switch the most sensitive consumers to better quality products;
- situations where rivals cannot provide adequate service and it is relatively easy to provide a higher level of customer service;
- places where the level of promotion is lowered and the market presence of competitors is ambiguously clearly indicated;
- failures in the product lines of market leaders, which makes it possible to develop them into new large market segments;
- situations where market leaders miss some of the needs of buyers.

AT general case attacks on competitors' weaknesses are more likely to succeed than attacks on their strengths.

With a general offensive, the aggressors seek to unbalance the competitor's activities in many directions. Such an offensive has the best chance of success when the firm has outstanding market leadership resources and competitive advantages.

An offensive in a specific general direction includes such actions as the capture of geographically new markets, the creation of new segments while introducing product differentiation and better satisfaction of consumer needs, and the introduction of new technologies. The general idea is to gain a significant pioneering edge in a new field.

Guerrilla actions are typical for small entrepreneurs with few resources. They use the principle of "hit and run", attacking in those places and at such times that create better opportunities than large-scale competitors. It can be:
- focusing the attack on a narrow, well-defined segment, poorly protected by a competitor;
- attacking the front, where the enemy scattered his resources;
- small scattered attacks on the leader using individual price imbalances, insufficient activity in promoting competitors, antitrust laws, patent omissions, etc.

Preemptive strikes include a preemptive attack to maintain positions of advantage that the enemy cannot duplicate.

They may be:
- expansion of product opportunities in the market in order to prevent the same attempt by a competitor,
- using better raw materials and/or more reliable suppliers instead of long-term contracts or back integration,
- protection of the best geographical positions,
- service to prestigious consumers,
- gaining a psychological image and position among consumers,
- providing the best distribution channels in this area.

In the market, all firms can be attacked by competitors (including new market entrants and firms seeking to improve their position). The goal of a defensive strategy is to reduce this risk. There are several ways to do this:
- attempts to block attackers (filling gaps in product lines, improving product models, maintaining low prices, good relations with trade, etc.);
- signaling real threats (public appeals to firms operating in the market, plans to create adequate production capabilities, leakage of information about new developments, changes in technology, the introduction of new products, etc.);
- attempts to reduce the profitability of the attackers' business by creating trade barriers.

7.5. Common strategic mistakes

These include:
1. Imitation of the actions of leaders or strong competitors, when there is no place on the market for similar products and such competitors.
2. Savings on marketing and promotion in an attempt to solve all problems based on the quality and exploitation of the merits of the product.
3. Taking many weak positions in the market instead of one strong one.
4. Using credit to fund cost-reducing investments in new equipment and then falling into the trap of high fixed costs due to small cash flows to repay a loan.
5. Applying R&D efforts to market weak products instead of strong ones.
6. Attacking market leaders without significant competitive advantage or adequate financial strength.
7. Aggressive attempts to capture a part of the market, such that they provoke rivals to retaliate in full measure and a price war.
8. Start dropping prices to capture additional markets without cost advantage.
9. Entering the best expensive part of the market without an appropriate reputation among buyers for well-known prestigious goods.
10. Appeal to cosmetic improvement of the product instead of real innovations in essential consumer properties.

These mistakes usually occur as a result of desperation, poor analysis of industry and competitive conditions, and/or overestimation of their capabilities.

7.6. Summarizing conclusions on the topic of chapter 7

The choice of competitive strategy (low cost, differentiation, focus) is determined by the specific competitive advantages of the firm.

A low-price strategy is advisable to apply in situations where:
- the products of the industry differ greatly from individual suppliers,
- the market is dominated by price competition,
- there are few ways of product differentiation that is essential for buyers,
- most buyers use the product in a similar way,
- switching costs for buyers from one seller to another are low,
- there are many buyers and there are significant barriers to entry.

The differentiation strategy is based on technological superiority, quality, service and big money. She is good:
- in the presence of many ways of differentiating a product / service that a consumer can evaluate,
- the ability of the buyer to diversify products/services;
- the absence of many competitors following similar strategies.

The competitive advantage of focus is used to achieve a lower cost in a target market niche or to develop the ability to offer something different from competitors to buyers in a niche. Such a strategy can be applied:
- if the needs or ways of using the product differ;
- the absence of rivals trying to specialize in the same market segment;
- the loss by the firm of the opportunity to enter a wide market;
- segments of buyers that differ in size, growth rate, profitability and intensity of the five competitive forces, which makes some segments more attractive than others.

Various offensive strategic actions allow you to protect competitive advantages. A strategic offensive can be carried out either on a competitor's strengths or weaknesses. They include an offensive in a chosen direction or along the entire front, guerrilla actions or preemptive strikes. The target of such actions may be a market leader, its successor, or the weakest firms in the industry.

Strategic approaches to defending a company's position are usually carried out in the form of strengthening the company's market position, preventing competitors from disturbing the situation, discouraging competitors from attacking intentions.

Previous