If you find this article helpful, you may wish to read the article titled The Major Elements of the Strategic Management Process.
Introduction
Forming a successful business strategy involves creating a first-rate competitive strategy. Businesses must develop a plan that addresses ways to compete in their respective markets. The first step in accomplishing this is to identify the competition. Once this step has been completed there are several approaches that can be used to create an effective competitive strategy. This article discusses several commonly used methods.
Miles and Snow’s Adaptive Methods
The foundation of the methods created by Miles and Snow is the need for businesses to adapt to a constantly changing competitive environment. Considering this, Miles and Snow identified three good methods of creating a competitive strategy: the prospector approach, the defender approach, and the analyzer approach.
Prospector Approach – this method creates a competitive business strategy that is based on innovation and exploring new market opportunities. The prospector approach is centered on creating new products or services in order to expand the size of the market in which the business competes.
Defender Approach – this method creates a strategy that is based on focusing on a smaller number of products and services. The strategy developed using this method will place greater importance on improving existing products or services. The defender approach concentrates on competing within a smaller market.
Analyzer Approach – this method creates a competitive business strategy that is based on evaluating the successes of competitors. The analyzer approaches focuses on attempts to copy, and make improvements upon, successful products and services provided by the competition.
Michael Porter, of Harvard University, is an important figure in the world of strategic management. In addition to creating a model for internal and external analysis, he has identified two basic methods of creating a competitive strategy: the cost leadership approach and the differentiation approach.
Cost Leadership Approach – this method creates a competitive business strategy that is based on the costs associated with manufacturing the product or providing the service. The cost leadership approach concentrates on keeping costs low. With lower costs, the business can offer prices that are lower than the competition, thus providing greater value to the customer.
Differentiation Approach – this method creates a strategy that is based on providing products or services that are thought to be distinctive. The differentiation approach focuses on offering unique products or unique services that are not offered by the competition. These products or services should meet a customer need that is not being met elsewhere. The theory is that customers will be willing to pay a higher price in order to have these needs met.
Conclusion
Developing a business strategy is essential to the success of the organization. Choosing a method to create an effective competitive strategy is an important step in that process.
Melissa Bushman has published several articles at Associated Content. Please click her name at the top of this page to view her other work.
References
Coulter, M. (2005). “Strategic Management in Action.” (3rd ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
