What is competitive strategy and knowledge of competitive strategy?

Competitive strategy was put forward by Michael Porter, a famous strategic management scientist at Harvard Business School. They are: cost leading strategy, differentiation strategy and centralization strategy. Enterprises must choose one of these three strategies as the leading strategy. Either control the cost at a lower level than the competitors; Either form distinctive features in enterprise products and services, so that customers feel that you provide more value than other competitors; Either the enterprise is committed to serving a specific market segment, a specific product category or a specific geographical scope.

First, the type of cost leadership strategy

Cost-leading strategy, also known as low-cost strategy, refers to a strategy for enterprises to reduce costs through effective ways, so that the total cost of enterprises is lower than that of competitors, even the lowest cost in the same industry, thus gaining competitive advantage. According to the different ways for enterprises to gain cost advantages,

1, the cost leadership strategy can be summarized as the following main types:

(1) Simplify the product-based cost leadership strategy; Is to simplify the product, that is, to cancel all the patterns added in the product or service.

(2) Improving the cost leadership strategy based on design;

(3) the leading strategy of saving material cost;

(4) Cost-leading strategy to reduce labor costs;

(5) Production innovation and automation cost leading strategy;

2. Applicable conditions and organizational requirements of cost leadership strategy.

(1) The price competition among existing competitive enterprises is very fierce;

(2) The products in the industry where the enterprise is located are basically standardized or homogenized;

(3) There are few ways to realize product differentiation;

(4) Most customers use products in the same way;

(5) The switching cost of consumers is very low;

(6) Consumers have great bargaining power.

3. Other skills and resources

Enterprises to implement the cost leadership strategy, in addition to the above external conditions, enterprises themselves must also have the following skills and resources:

(1) continuous capital investment and access to funds;

(2) production and processing skills;

(3) serious labor inspection;

(4) designing products that are easy to manufacture;

(5) Low cost distribution system.

4. Benefits and risks of cost leadership strategy

The benefits of adopting the cost leadership strategy are as follows:

(1) resist the confrontation of existing competitors;

(2) the ability to resist the bargaining of buyers;

(3) handle the price increase behavior of suppliers more flexibly;

(4) forming barriers to entry;

(5) Establish competitive advantage with substitutes.

5. The risks of adopting the cost leadership strategy mainly include

(1) Excessive price reduction leads to lower profit rate;

(2) New entrants may catch up;

(3) Losing the ability to foresee market changes;

(4) Technological change reduces the utility of enterprise resources;

(5) Vulnerable to external environment.

Second, the types of differentiation strategy

The so-called differentiation strategy refers to a strategy adopted to make the products of enterprises and competitors have obvious differences and form distinctive features. The core of this strategy is to gain some uniqueness that is valuable to customers. Enterprises have four basic ways to highlight the differences between their products and competitors:

(1) product differentiation strategy

The main factors of product differentiation are: characteristics, working performance, consistency, durability, reliability, maintainability, style and design.

(2) service differentiation The differentiation of strategic services mainly includes delivery, installation, customer training, consulting services and other factors.

(3) personnel differentiation strategy

Well-trained employees should be able to embody the following six characteristics: competence, courtesy, credibility, reliability, quick response and good communication.

(4) Image differentiation strategy

1. Applicable conditions and organizational requirements of differentiation strategy

(1) There are many ways to create the difference between the products of enterprises and competitors, and this difference is considered valuable by customers;

(2) Customers' demands for products and requirements for use are varied, that is, customers' demands are different;

(3) There are few competitors who adopt similar differentiation approaches, which can truly guarantee the "differentiation" of enterprises;

(4) With the rapid development of technology, the market competition mainly focuses on the continuous introduction of new product functions.

2. The following internal conditions must be met

(1) Strong research and development ability, and researchers should have creative vision;

(2) The enterprise has a reputation of leading in product quality or technology;

(3) the enterprise has a long history in this industry or absorbs the skills of other enterprises to become a whole;

(4) Strong marketing ability;

(5) There should be strong coordination between R&D, product development, marketing and other functional departments;

(6) Enterprises should have material facilities that can attract senior researchers, creative talents and highly skilled employees;

(7) Strong cooperation among various sales channels.

3. Benefits and risks of differentiation strategy

The significance of implementing differentiation strategy lies in:

(1) Establish customer loyalty to the enterprise;

(2) forming strong barriers to industrial entry;

(3) Enhance the bargaining power of enterprises to suppliers. This is mainly because the differentiation strategy improves the marginal income of enterprises;

(4) weaken the bargaining power of buyers. Through the differentiation strategy, the enterprise makes the buyer lack of comparable product selection and reduces the buyer's sensitivity to price. On the other hand, through product differentiation, buyers have higher switching costs and rely on enterprises;

(5) Because the differentiation strategy enables enterprises to establish customer loyalty, substitutes cannot compete with them in performance.

4. Differentiation strategy also contains a series of risks.

(1) may lose some customers. If the competitor who adopts the cost-leading strategy reduces the product price, then the product price gap between it and the manufacturer who implements the differentiation strategy is very large. In this case, in order to save a lot of money, users give up the product characteristics, services or images owned by the manufacturers who make the price difference, and choose products with good quality and low price instead;

(2) The product difference factors of user demand are reduced. When users become more and more sophisticated and have no obvious understanding of the characteristics and differences of products, differences may be ignored;

(3) A large number of imitations narrowed the perception difference. Especially when the products develop to maturity, it is easy for manufacturers with technical strength to reduce the differences between products through realistic imitation;

(4) excessive differentiation.

Third, the types of centralized strategy.

Centralized strategy, also known as focus strategy, refers to the strategy that the business activities of an enterprise or business department focus on a specific buyer group, a certain part of a product line or a certain geographical market. The core of this strategy is aimed at specific user groups, subdivided product lines or subdivided markets. Specifically, the centralization strategy can be divided into product line centralization strategy, customer centralization strategy, regional centralization strategy and low occupancy centralization strategy.

1. Applicable conditions, benefits and risks of centralized strategy

Under the following four conditions, it is appropriate to adopt a centralized strategy:

(1) has completely different user groups, and these users either have different needs or use products in different ways;

(2) In the same target market segment, other competitors do not intend to implement a centralized strategy;

(3) The resources of an enterprise do not allow it to pursue a wide range of market segments;

(4) There are great differences in the scale, growth rate and profitability of various sub-sectors in the industry, which makes some sub-sectors more attractive than others.

2, the benefits of centralized strategy are mainly manifested in

(1) Centralized strategy facilitates the centralized use of the strength and resources of the whole enterprise to better serve a specific goal;

(2) By focusing on a specific part of the market, enterprises can better investigate and study the technology, market, customers and competitors related to products, so as to "know yourself and know yourself";

(3) The strategic objectives are centralized and clear, the economic effect is easy to evaluate, and the strategic management process is easy to control, which brings convenience to management.

3, the risk of centralized strategy is mainly manifested in

(1) Because all the strength and resources of an enterprise are invested in a product or service or a specific market, when customer preferences change, technology is innovated or new substitutes appear, it will be found that the demand for products or services in this part of the market declines, and the enterprise will be greatly impacted;

(2) Competitors have entered the target market selected by the enterprise and adopted a more centralized strategy than the enterprise;

(3) The sales volume of products may decrease, and the demand for products is constantly updated, which leads to the increase of production costs and weakens the cost advantage of enterprises adopting centralized strategy.