A typical market is occupied by multiple firms competing for the position of the market leader. Marketers always want to occupy a well-known place in the minds of the consumers, and as you can guess – they compete for it. In today’s competitive world, it has become absolutely imperative to not only address competition through the use of competitive strategies but also to gain sustainable competitive advantage but nonetheless, one can be confused as to what strategies to effectively use against competitor strategies.
Here lies the answer:
- 1 Competitive Strategies Tailored To The Market Position
- 1.1 Market Challenger Strategies
- 1.2 Market Follower Strategies
- 1.3 Market Nicher Strategies
- 1.4 Bottom Line?
Competitive Strategies Tailored To The Market Position
A competitive strategy is a long-term action plan devised to make the company gain a competitive advantage over all its competitors.
Since the markets are overflooded with alternatives, it is important for a brand to devise its own competitive strategy. Here’s a detailed guide explaining the competitive strategies according to the market positions of the challenger, follower and the nicher.
Market Challenger Strategies
In a pure frontal attack strategy, the attacker matches the opponent’s product, advertising, price and distribution. In a modified frontal attack, the competitor can reduce the prices if the leader doesn’t respond in the same way and if the competitor can convince the market that the product is equal to that of the leader’s.
Example – Amul used this strategy when it launched Amul Kool and Amul Masti Dahi at a low price but the same level of the quality as that of other competitors in the Indian market.
A flanking strategy identifies shifts in the market that create gaps in order to develop strategies to fill those gaps. It means attacking the competitor on its weak points. Here, the market challenger determines the weak areas of the competitor in terms of two strategic dimensions i.e. Geographic and segmental and then pushes its product in that area.
Example – L.G has successfully made use of this strategy by introducing the colour television “Sampoorna” for the rural people in India and outshine the other coloured TV players who had a less focus on these areas.
Encirclement attempts to attack the leader or competitor from all fronts simultaneously. Here, the market challenger launches several offensive campaigns i.e. surrounds the competitor with a varied brand and forcing the competitor to defend himself from all the sides simultaneously.
This strategy makes sense when the challenger commands superior resources. The FMCG industry is a classic example of this where HUL and ITC use this extensively.
Bypassing means avoiding the enemy altogether to attack easier markets. This involves three lines of approaches: diversifying into unrelated products, diversifying into new geographical markets or developing new technologies to gain an advantage over competitors.
Example – Pepsi used this when it launched Aquafina nationally in 1997, purchased Tropicana and Quaker Oats Company where it diversified into unrelated areas.
Guerrilla attacks consists of small, conventional or unconventional sporadic attacks which may include selective price cuts, intense promotion or occasional legal action to harass the opponent and attempt to secure footholds. This attack can prove to be expensive but must be backed by a strong complementary attack to beat the opponent.
Example – When Coca-Cola was the official partner of the World Cup, the Pepsi counter attacked it by using the punch line “Nothing official about it”. This led to legal action by Coca Cola.
Market Follower Strategies
The cloner copies the leader’s products, name and packaging with slight variations. Technology companies are often accused of being cloners.
Example – Ralston Foods, owned by ConAgra, sells imitation of name brand cereals in look-alike boxes as part of its “Value + Brands” platform.
The imitator copies some things of the leader but differentiates on some fronts such as packaging, advertising, location and pricing. Here, generally, the leader does not mind the imitator as long as the imitator is not launching an aggressive attack.
Example – Telepizza chain by Fernandez Pujals look Domino’s idea to Spain and is now the market leader.
The adapter takes the leader’s product and makes improvements to it but the basic value proposition remains similar. The adapter starts with tapping different markets but has often been seen developing into a strong challenger.
Example – Tech companies like Dell and Sony adapt and launch new products making improvements to the competitor’s product on a continuous basis.
A duplicate of the leader’s product is made and sold in the black market through disreputable dealers. This can be contrasted with the other strategies as this is the only illegal follower strategy where the culprit can be penalized.
Apple and other luxury brands have been long plagued with this problem, especially in Asia.
Market Nicher Strategies
Single Niching is where the company is targeting a particular niche market and is sticking to that niche market by offering a high-quality product. A premium can generally be charged in exchange but a disadvantage is that the niche may dry up or get attacked. The company is then stuck with highly specialized resources with limited alternative uses.
In multiple niching, the company focuses on two or more niche markets. This increases the chances of survival because the risk here is diversified and the specialized resources may have alternative uses.
Example – BMW can be seen as a company making carefully crafted automobiles for high-end customers. This is called serving a single niche market. BMW also started making high quality and high-end bikes which can be seen as a strategy to diversify the risk by following the multiple niching strategies.
So, as we can see that companies are increasingly adopting strategies to address competition according to their market position. There are examples of numerous companies who have lost their presence in the market because of not being able to face competition and change according to the times. This further increases the need for companies to know how and when to react appropriately. What we can safely say is that the relevance of these strategies are increasing day by day.
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