Competitive Strategy – Meaning, Types, and Development

One of the problems of the word competition is that it suddenly brings up a few negative thoughts. We seldom see competition as something useful and beneficial. However, if you are in a business, you will understand the benefits of competition and how it can be conducive for your making your business a success.

So, how will you devise a competitive strategy for your business? How will you be able to make the competition a growth factor in the long term? This is what we call competitive strategy in marketing parlance, and this is what we have chosen to discuss here today. You have come to this post should be a clear indication that you are seeking answers to your question – what is a competitive strategy and how to develop a competitive strategy.

Let us understand the concepts in a better way.

What is a Competitive Strategy?

A competitive strategy would a long-term plan for achieving a competitive advantage over your rival. This would ideally involve a SWOT analysis wherein you would analyze and compare the Strengths, Weaknesses, Opportunities, and Threats of both you and your competitor.

The plan involves devising methods to cater to market pressure and attract customers. This will go a long way in promoting the options to enhance the company’s marketing position in the long run.

What are the types of Competitive Strategies?

types of Competitive Strategy

The types of competitive strategies have been defined by several experts. The prime among them is Michael Porter and Michael Treacy.

Porter’s Competitive strategy involves the following parameters ad types of planning a competitive strategy.

1. Cost Leadership

This will involve lowering your production costs and providing access to low-cost products to the consumers. This will help you have a pricing based advantage over your competitors. The impetus here is to get quality products at a possibly lowest cost. This strategy can be beneficial in areas where the price plays a significant role.

2. Differentiation

This strategy will focus on providing a product with unique features that your competitors haven’t been able to offer. That would mean your price will increase. But, you will end up providing a product that is different from any of your competitors.

An effective differentiation strategy can be helpful in reducing the price sensitivity of the market and provide access to better brand loyalty.

3. Focus strategy

Focus strategy can either be cost specific or differentiation-specific. In either way, the strategy is to focus on a particular niche market or a specific audience. You will offer your services to a specific segment of the market and may skip other sections.

For instance, if you are a small scale airliner, you will provide a low-cost option for a few specific locations. This will involve the use of cost focus competitive strategy. In the same manner, you can offer luxury features to your customers at a higher cost, but only to a few select cities. This is what we call the focus differentiation method of competitive strategy.

According to Michael Treacy and Fred Wiersma, the competitive strategy can be classified in different categories such as

4. Operational excellence

This is somewhat akin to a cost leadership strategy. This will involve improving your production facilities and enhancing the workmanship. Automation can be one of the best options you can give a thought to.

The streamlined production thus helps you lower the cost of the product. The strategy can be one of the best prospects in areas where the products are almost homogeneous and the only differentiating factor is cost of the product.

5. Product Leadership

This strategy focusses on improving the quality of the product. The concept is to introduce the products that are superior to those already available in the market. The firms dealing in areas such as consumer electronics, automotive, fund management and pharmaceutical industries are an excellent example of this type of competitive strategy.

6. Customer Intimacy

This should be self-explanatory. In fact, the concept or strategy revolves around branding. The success of this strategy would largely be dependent upon how efficiently you can segment and target the markets.

The strategy involves blending customer knowledge with a high degree of flexible operation so as to provide quicker and faster solutions. In this competitive strategy, all your efforts such as product development, manufacturing, and all other factors focus on an individual customer.

How can you develop a rewarding competitive strategy?

How can you develop a rewarding competitive strategy

Well, there are several considerations you need to go through before you can come up with your options for the best competitive strategy for your business. A long term competitive strategy cannot be evolved in a single day, and the right opportunity to handle it would require a careful study.

Some of the factors you need to give a thorough thought will include

1. The purpose of your business

The principal purpose of a business entity should be clearly defined. This would go a long way in streamlining and designing your competitive strategy. Under most of the ideal conditions, the prime purpose of a business is to gain customers. That should be something quite distinct.

2. Analyze the competency in your firm

Core competency refers to the capabilities of your firm. These are either exclusive to your organization or the ones that you have been able to carry on in a better manner. Recognize these competencies and arrive at the best leveraging of these competencies to arrive at the best possible options.

3. Check out your primary option for growth

What are your growth expectations in the long run? Are you looking to grow through the means of acquisitions or want to expand internally? The choice of your expansion will have a more significant bearing on the competitive strategy that you would be opting for.

4. Analyze the goals for your future

What are your goals for your future? The goals should include a wide range of activities such as financial, operational, social or even other conditions. You can either check out the goals in a quantitative or a qualitative structure.

5. Try finding out the obstacles

Forecasting is one of the most critical elements in a competitive strategy plan. You should spot the barriers that you may come across in your attempt to reach your goals.

In fact, taking care of each of the barriers is exceptionally essential as a single issue can hinder a vast number of purposes. If you want to have a very efficient competitive structure, it should be crucial to overcoming these obstacles.

6. Plan the strategic approaches to overcome these obstacles

Now that you have enlisted and analyzed the barriers that you may come across in achieving your business goals, what strategies would you use to overcome them? There are several strategies one may apply, and the choice would be dependent on the type of obstacles and how they are likely to affect your functionality.

An offensive strategy is good enough if the obstacle is easy to overcome or neutralize. You would need to opt for a guerrilla strategy in cases where it is required in order to eliminate the barriers completely. If none of these strategies is justified, it can be an excellent option to go with the defensive strategy.


Well, those were a few techniques that should be helpful in getting access to the best possible advantages with respect to the perfect competitive strategy. Of course, the actual methodology would largely be dependent upon the individual cases, and it would perhaps need a more detailed case study. But having a piece of good knowledge about how a competitive strategy can work is a key to achieve a higher degree of success.

Make use of the knowledge for planning a long term strategy that would help your business get access to a better performance standard.