Competitive Business Strategies

Business Strategies

• Business strategy is crucial for enhancing a company's competitive position in its industry or market.
• Competitive strategies involve specific actions to outperform rivals and gain a distinct business advantage.

Business Strategy Overview

• Business strategies aim to improve competitive standing, adapt to industry dynamics, and ensure long-term profitability and relevance.
• These strategies rely on qualitative insights into a company's strengths and potential advantages.

Key Goals of Competitive Strategies

• Attract and please customers by offering superior value and experiences.
• Withstand competitive pressure by strengthening resilience against challenges.
• Expand influence and presence to strengthen market position in key segments.

Types of Competitive Strategies

• Strategies are either proactive (offensive) or reactive (defensive), tailored to specific market conditions and company resources.

Proactive Strategies

• Counter the actions of key rivals.
• Example: BDO Unibank invests in digital banking to compete with fintech firms like PayMaya.
• Shift resources to areas with growth potential for long-term gains.

Reactive Strategies

• Quickly adapt to changes in demand or competitive pressures.
• Philippine Airlines adjusted pricing and introduced promotional fares in response to low-cost carriers like Cebu Pacific.

Questions in Formulating Competitive Strategies

• Businesses consider cost versus differentiation and whether they should compete on price or unique qualities. -Bench uses stylish designs and cultural relevance to differentiate, while Penshoppe offers affordable fashion.
• Focus on the largest or niche market segments.
  • Generika Drugstore caters to budget consumers with affordable medicine, while Mercury Drug offers premium pharmaceutical products.
• Decide between domestic versus international opportunities.
  • Jollibee Foods Corporation balances domestic dominance with international expansion.

Competitive Strategies in Practice

• Cebu Pacific uses aggressive pricing to dominate the budget airline market, while Shakey's Pizza uses loyalty programs to counter competition.
• SM Supermalls employs cost leadership by offering lower rents to attract both retailers and customers.
• Baguio Craft Brewery differentiates by offering uniquely Filipino craft beer, and The Giving Café focuses on sustainability and supporting local farmers.

Primary Generic Strategies

• Michael Porter's framework identifies lower cost and differentiation as primary strategies, tailored to specific market segments.
• Strategies are implemented based on top management priorities and resource availability.

Lower Cost Strategy

• Focuses on reducing operational costs to offer products at the lowest price while maintaining acceptable quality.
• Depends on operational efficiency, economies of scale, and resource optimization.

Differentiation Strategy

• Involves offering unique products or services that stand out through innovation, branding, quality, and exceptional customer experiences.

Alternative Approaches to Competitive Strategies

• Price-Based: Emphasizes competitive pricing, often through cost-efficient operations. -SM Supermalls uses competitive lease contracts and retail pricing.
• Product-Based: Uses product innovation, quality, and design enhancements. -Bench uses stylish and culturally relevant apparel for Filipino and international markets.
• Market-Based: Adapts product, pricing, or marketing to specific market areas.
• Mang Inasal provides affordable meals to target families and budget-conscious diners.

Specific Generic Approaches

• Overall Low-Cost Provider: Offers products at the lowest price while maintaining quality standards.
• Focused Low-Cost: Targets a specific market niche with lower-cost offerings.
• Broad Differentiation: Offers unique features or branding to appeal to a wide audience.
• Focus Differentiation: Specializes in offering distinctive products or services to a narrow market segment.
• Best-Cost Provider Strategy: Combines cost-efficiency with differentiated offerings for the best value.

Practical Considerations

• Economic challenges, cultural sensitivity, and infrastructure limitations can affect strategy execution.
• Cultural sensitivity is the alignment of differentiation strategies with Filipino values and preferences.

Overall Low-Cost Provider Strategy

• Achieves competitive advantage through lower market prices via efficient design, production, and marketing compared to competitors.

Core Concepts of Cost Leadership

• Minimizes costs at every operational stage while maintaining acceptable quality to achieve broad market appeal.

Key Features of Cost Leadership

• Efficient scale facilities.
• Cost reductions across R&D, marketing, and service.
• Control overhead and operating costs.

Competitive Advantages of Cost Leadership

• Provides a defense against competitors by maintaining low costs.
• Acts as a barrier to entry for new competitors.
• Leads to increased market share with competitive pricing.
• Cebu Pacific operates budget-friendly flights, optimizing aircraft turnaround time, and offering optional add-ons.

Key Requirements for Low-Cost Leadership

• Cultivate a cost-conscious culture and encourage employee participation in cost control efforts.
• Frontline staff and middle management should proactively identify cost-saving opportunities.

Methods to Achieve Low-Cost Strategy

• Open a sustainable cost advantage that competitors can't easily replicate.
  • Jollibee: Sources local ingredients and leverages economies of scale to keep prices low while maintaining quality.
• Under-price rivals to gain market share.
  • Generika Drugstore: Offers lower-cost generic medicines to budget-conscious consumers.
• Increase profit margins by selling at market prices.

Keys to Achieving Low-Cost Leadership Strategy

• Identify cost drivers for each activity and manage them effectively.
• Reengineer processes to eliminate unnecessary steps and costs.
• Scrutinize cost-related activities to identify inefficiencies.
• Cut low-value-added activities from the value chain and focus resources on high-impact areas. -SM Retail streamlines its supply chain to offer competitive pricing.

When Low-Cost Strategy Works Best

• Price competition is intense.
• Example: Cebu Pacific thrives in the price sensitivity focused airline industry.
• Products are standardized.
• Mercury Drug is able to offer standardized pharmaceutical products to offer reliable yet affordable medicine.
• Buyers have bargaining power.
• Buyers incur low switching costs.
• Few differentiation opportunities exist.

Pitfalls of Low-Cost Strategy

• Easy imitation by rivals.
• Over-focus on cost at the expense of quality.
• Declining sensitivity to price over time.
• Technological breakthroughs by rivals.

Differentiation Strategy

• Creates unique or superior value perceived by buyers, setting the product or service apart from competitors.
• Can involve product quality, innovative features, branding, customer service, or dealer networks.

Key Features of Differentiation Strategy

• Focus on Uniqueness.
• Lower Sensitivity to Price, Increased Buyer Loyalty, Creates a Barrier to Entry, and achieves Higher Profit Margins -Penshoppe uses celebrity endorsements and high prices to differentiate its clothing.

Objectives of Differentiation Strategy

• Incorporate Unique Features that cause buyers to prefer the firm's product over rivals.
• Jollibee: Offers signature dishes that use Filipino flavors.
• Serve Diverse Market Segments and Build a Distinct Corporate Image.
• San Miguel: Offers various types of beers to suit diverse consumers.
• Ayala Corporation: Projects a sophisticated image through innovative real estate projects.

Keys to Success in Differentiation Strategy

• Create Unique Value with features or experiences that cannot be easily copied. -Baguio Craft Brewery: Offers artisanal craft beers using local ingredients.
• Balance Costs and Premium Pricing to ensure costs are outweighed by the price premium buyers will pay.
  • Giving Cafe: Justifies its higher prices by sourcing from local farmers.

Appeal and Advantages of Differentiation Strategy

• High Command Premium Pricing to lead to higher perceived value. -Penshoppe: Uses premium pricing for fashionable clothing.
• Increase Unit Sales to appeal to a broad or specific customer base.
• Build Brand Loyalty to ensure customers remain loyal due to the product's value.
  • Culture: Uses products celebrating local craftsmanship to appeal to tourists and local consumers. -Oishi: Stands out with its innovative snacks that earn long-term consumer loyalty.

Approaches to Achieving Differentiation-Based Advantage

• Lower Buyer Costs: Offer product features that reduce buyers' overall usage costs. -PLDT: Offers telecom services by providing bundled intener and cable TV which lowers combined service costs.
• Raise Product performance or Enhance Buyer Satisfaction --Honda Phillipines: Incorporates fuel efficent engines in motorcycles -- Tanduay Distillers: Uses regional branding to evoke nostalgia and pride in Filipino consumers
• Capitalize on Superior Service: Offer exceptional customer support. -Metrobank: Sets aside their competition with personalized financial advice and robust customer service.

When Differentiation Strategy Works Best

• Multiple Ways to Differentiate. --Jollibee: Excels with localized menu items like local dishes.
• Diverse Buyer Needs -Globe Telcom: Provides pre-payed plans to business clients.
• Few Rivals Pursuing Differentiation or Rapid Technological or Product Innovation.
• Mang Inasal: Emphasized native cuisine in fast-food settlings.
  • MyPhone: Diffrentiates with budget-friendly smart phones with local users.

Pitfalls of Differentiation Strategies

• Irrelevant Features if buyers do not see the value of them. -Over-complicated smartphone interfaces might not appeal to tech-illiterate users.
• Over-Differentiations to add excessive features without considering buyer needs -Luxury vehicles: Do not function well in budget markets.

Focused or Niche Strategy

• Targets a narrow market segment based on geographic, demographic, or product-specific criteria.
• Aims to meet the specialized needs of a niche market more effectively than competitors.

Core Concepts of Focused or Niche Strategy

• Involves tailoring products, services, and marketing efforts to a specific customer group or segment.
• Focuses on a unique and smaller segment where customers exhibit specific preferences or demands.

Two Types of Focus Strategies

• Cost Focus: Offers low-cost products/services to a specific niche market, excluding broader segments.
• Differentiation Focus: Provides unique/specialized products/services to meet the preferences of a narrow target group.

Philosophy of Focus or Niche Strategy

• Requires identifying distinctive needs and developing specialized capabilities. -Example: Angkas uses a cost strategy to offer quick rides for an urban commuting company.
• Echo Store: Targets environmetal with a unique focus.a

Evaluating a Niche Market

• Profitability and growth potential.
• Plant based food niche in the Philippines is expanding with more sustainable diets.
• Non-critical to industry leaders.
• Barriers to Multi-Segments Competitors.
• Availability of Resources and Capabilities.
• Limited Competition
• Defensibility

Why Focus or Niche Strategy Works

• Customized Offerings that deeply resonate with customers. Philippine Example:Adobo Connection focuses on provinding affordable Filipino comfort food.
• Reduced Competition and Premium Pricing Potential Hireya Chocolate: Creates artesanal chocolates using native caucua.

When Focused Strategies Work Best

• There are distinctive ways to serve niche markets.
• Few rivals are pursuing the same stratgeies that reduced competition pressure. buyer needs and prefferecies are high speciifc to the market.

Pitfalls of Focused Strategies

• Over-specialization on a small segment.
• Entry of Competitiors can grow too large for companies.
• Dependencieis between neiche size may make it hard to grow the market.
• Limited Scalablility is only possible in certain markets.

Best-Cost Provider Strategy

• Unique strategie that combines elements of the lowe cost provider
• Best cost prvider stategy is to deliver super valuable product or serveice for its cost.It can range from performance to high competition,

Core Characteristics of the Best-Cost Provider Strategy

• Dual Emphasis of leadership aith a high emphasis as prices go up.
• Deliver supieror value, use coist advatage nd provide good quality products at highly compatattive pricing,

Competitive Strength of Best-Cost Provider Strategy

• Competitor edge, c apabiltiy and skill dependencie, and abrod apeal.

Address Diverse Needs

• Stander features don't satisfy buyers, and the many customer are not both price-sensitive and value focused.

Risks of the Best-Cost Provider Strategy

• Squezed betweeen strategeis- Firmas punsirng this strategy may find themselved caught betweenl ow casy and higher end differtiators.
• Risk of leosion gmarke swhares

Keys to Success in Best-Cost Provider Strategy

• Dleiver super values that ensure prodcut attirbtes exceed buyer expecatations
• Use Knoleg to drive efficiecny to drive better competivness
• Beat Competitors in the mrkrets.

When Best-Cost Provider Strategy Works Best

• Value sensitiicty when buyers prioriotiez balanace of the costs
• Standarized prodcuts, if the buyers are demanding prodcut that caters to specicial specific applications
• Market diversity wherebuyers have varyne ndeds creating opriutes for balanced value.

Offensive Strategies

• Companies undertake aggressive measures to gain competitive advantage, debilitate rivals, command the market, and broaden their market presence.

Types of Offensive Strategies

• Frontal Assault: Direct competition with a rival via similar products, pricing, distribution, and promotions. Requires substantial resources to succeed.
  • The local telecom company Globe battling head-to-head with local telecom company PLDT.
• End Run Offensives: Bypassing direct confrontation, focusing instead on untapped or less competitive markets.
  • Mango Iansal focusing instead on a cassual dining enviroment to avoid direct competition with major players.
• Guerilla Warfare: Leveraging surprise and hit-and-run tactics for smaller companies aiming to unsettle larger competitors. -Wendy's Launches aggresssiver sales in an attempt to distract markets from large corpreatiosn/ .

1. Launching a new service that the company do.
2. Laucnhgin compaies that will have a lot of competitiors

Options and Objectives in Offensive Strategies

• Throw Rivals of balances by force to reactiviley dovert focus.
• Spineter COmpetitprs attention launch silmous initiatives in varuis market segments.
• Force deployment compel rivals to defrnd mtipule ronts sraint their cabablities.

Key Considerations

• Culture senstivity of offfenist stategios must alilg ewith local tastes end prferneceis
• Resuorce constrainsts to what small and medium entrepts will do.
• Tecbologoiacl gaps tht leverges localize soluitions

Defensive Strategy

• Are actions companies take to protect their markets from potential attacks.

Basic Approaches in Defensive Strategy

• Block Avenues Open to Challengers: Businesses proactively build barriers
• Signal Vigorous Retaliation to discouraage attakcs.

Objectives of Defensive Strategy

• The defeneisve straegeys are designed aim to forfit fmrs preenist positons otu suuatinc capabtliity to prtect.

Sepcific Defenise Optioins

• Raiee srutucral barrirs to creagt reat sbaatctles witho any expectionos of compateiting/
• Offer Full Rage of Prodcuts withy competiting

Actions

• Exclusive agreements with Distriubters to limities compaatitons
• Raising buyers swithiing otcs to tainer uomte sronem sroe
• Lwering cost or trial users that atttacck users
• Paternts procttiions and tehgnologies .