Competitive Strategy

Running Head: Competitive Strategy
Competitive Strategy
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Competitive Strategy
Competitive strategies are used to explore the most suitable position in the industry in
order to operate both efficiently and effectively in a competitive environment. There are
different tools for strategy formulation, some of them are discussed as follows:
Generic Strategies
There are three Generic strategies which were developed by Michael Porter in 1980 to
help the companies know what different they can do for enjoying the profitability. The
strategies are:
Cost Leadership- The companies can get competitive advantage by focussing more on
efficiency and less on product/service quality. The firm may focus on lowering the variable
cost like salaries which can be done through reducing the permanent staff, training the
employees to work efficiently etc.
Differentiation Strategy- Here, companies have different products for different segments.
Here imitating the products become difficult for the competitors. It also involves high
switching cost to customers hence enhancing their loyalty towards the company. The
focus of the company in this case is on Research and development, Updated technology
and creating a unique product.
Focus- The companies focus more on a small segment of the population which can be
senior citizen group, youth etc. The aim is to serve the best of the products to the targeted
group.
Example: Hotel Corallo- It is situated in Italy and is in the hospitality industry from the last
50 years and still is in the industry performing well. It was incorporated in the early 1960s’.
i. Cost Leadership- Hotel Corallo had the option of switching from 3 star to 4 star
hotel, but it continued as a 3 star hotel, enabling it to provide the best quality food
and lodging at a lower price as compared to other 5 star hotels. Thereby, the hotel
continued to make a good amount of profit.
ii. Differentiation Strategy- This hotel also offers Entertainment in form of live music,
games etc. which use to be organised at hotel and also at the sea beach area. It
has been done for the first time in hospitality industry.
iii. Focus- Hotel focuses on that segment of population who prefer to carry pets with
them. Soundproof rooms, dog baskets, bowls for dog feeding etc are provided by
the Hotel Corallo (Bertozzi, Ali and Gul, 2017).
Porter’s Five Forces
This model was designed to uncover important insights relating competition.
The five forces are as follows:
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Competitive Strategy
Competitive Rivalry- This force helps the company to know how severe the competition
is in the market. This force is considered to be strong if there are many competitors and
customers can easily switch to the other competitor and vice versa.
Bargaining Power of Supplier- This force examines the power of suppliers and examines
how much suppliers are actually there.
Bargaining Power of Customers- Under this force, the power of consumer is low if
sellers enjoy the monopoly the power is high if there are many sellers and less consumers.
Threat of New Entrants- This force concentrates on how easy it is for the prospect
competitors to join the market.
Threat of Substitute product/service- How convenient and easy it is for the consumers
to switch for the substitute product is studied under this force.
Example: Toyota Motor Corporation.
Porter’s Five Forces of Toyota Motor Corporation
i. Competitive Rivalry(Moderate)-
 Automobile industry has already reached to its maturity though it
is wide.
 Greater customer loyalty
ii. Bargaining Power of Supplier(Weak)- The power of suppliers is weak because:
 There are many suppliers
 Required inputs are readily accessible
iii. Bargaining Power of Customers(Strong)-
 Buyers have enough substitutes and can easily switch to other
car brands.
 Customers do not have fear of backward integration
iv. Threat of New Entrants(Weak)-
 Amount of capital required is really high
 Getting economies of scale proves to be tough for new
companies
v. Threat of Substitute product/service-Substitutes available are bicycles, trains,
buses etc. which cannot offer the same kind of comfort (Harvard, 2013).
SWOT Analysis
SWOT framework is prepared to evaluate the external and internal environment of the
organization.
The SWOT stands for:
Strength: It includes the internal factors which act as an asset to the company and could
assist in grabbing the chance and could aid in overcoming threats.
Weakness: These are in house factors resisting an organisation from taking the
opportunities.
Opportunity: The uncontrollable aspects which prove to be beneficial either tangible or
non-tangible are opportunities for the company.
Threats: The threats are the elements that are detrimental and uncontrollable for the
company.
Example: SAMSUNG
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