Competitive Strategy

Competitive Strategy is defined as the long term plan of a particular company in order to gain competitive advantage over its competitors in the industry. It is aimed at creating defensive position in an industry and generating a superior ROI.

1. Cost Leadership

Cost Leadership is a term used when a company projects itself as the cheapest manufacturer or provider of a particular product or commodity in a competition. This can be attained through cutting of operational costs which will reduce the total cost of the product.

IT systems like ERP help a company to reduce their internal cost which will reduce the final cost of the product leading to cost leadership. Enterprise Resource Planning (ERP) systems integrate all business processes into one enterprise-wide solution. This is accomplished by having a centralized database that all business functional areas have access to. This reduces the internal cost and reduces the delay.

Another example is Wal-Mart Stores Inc. Walmart has been successful using its strategy of everyday low prices to attract customers. The idea of everyday low process is to offer products at a cheaper rate than competitors on a consistent basis, rather than relying on sales. Wal-Mart is able to achieve this due to its large scale and efficient supply chain management through a SCM Software. They source products from cheap domestic suppliers and from low wage foreign markets. This allows the company to sell their products at low prices and to profit off thin margins at a high volume.

Another example would be the presence of ERP. The ERP software integrates all the internal activities of the firm, enabling them to have proper co-ordination and co-operation leading to reduced variable cost in the firm which helps to reduce the cost of the product.

2. Innovation

Innovation is the process of creating latest ideas and processes which help a business. With the short life cycle of innovation, it is necessary to keep re-innovating as the previous innovation, over a period of time, becomes a necessity. There are many IT innovations which have been a success and have assisted companies to conduct their business in a quicker, cheaper way.

The first example is the existence of the internet. The internet and the users are a large community where there is ease of access of information. Along with information, multiple parties are connected and communication and data sharing is quick and simple.

Examples: With the invention of E-mails, IM. Collaborative application etc. the communication process has been simplified. E-mails and IM’s are instant communication methods and allows the managers to communicate without delay and make quick decisions. Collaborative systems allow people from different locations to work together over the internet and intranet.

3. Differentiation

A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by the customers.

Example: Virgin Airlines uses two differentiation methods to tap the market. The methods are Pricing and Customer service. By reducing the costs associated with air travel, Virgin Airlines is able to remain competitive with the cost-cutting airline companies. The other method is customer retention through extensive CRM practices. They ensure they are constantly connected to the customers and provide customer satisfaction which differentiates them from the other airlines.

Another example would be of the company Apple. With the help of IT, they create differentiated products every six months. They do not focus on the price but on the quality and look.

4. Alliance

Establishing new business linkages and alliances with customers, suppliers, competitions, consultants, and other companies. These linkages may include mergers, acquisitions, joint ventures, formation of virtual companies, or other marketing, manufacturing, or distribution agreements between a business and its trading partners.

Example: An example is Amazon. Amazon is a virtual business which allows the customers to purchase goods without the hassle of stepping out. Amazon has a large network of suppliers and Amazon uses a seller support website which connects all the suppliers through the internet and this allows the sellers to know how each product is doing and know their reorder level. This is with the help of Inventory Management System.

Another example would be how SCM and CRM helps a company create alliances with suppliers and the customers.

5. Growth

Growth could be expansion vertically or horizontal. It could be creating new products or entering new markets. The more a company grows, the higher the range of business is. Growth Strategy can create competitive advantage by being present in multiple location which would lead to them being easily accessible to the customer.

Example: With the use of the internet, many companies are either converting to a virtual company or implementing the bricks and clicks strategy. With this, they have a physical store along with an online store. The users have the choice to either purchase the product in the store physically or order online. With the help of the internet, the company can be easily accessible. Hence, we can state that IT has assisted many companies grow.

An example is Bhatbhateni in Nepal. They have both a locational store along with the online store.

CRM and SCM assists in growth as it connects the firm with the external alliances. This allows them to find the best vendors or sellers.

Marketing Systems also help the company grow by allowing them to get visibility.