Journal number 1 ∘ Paata Koguashvili ∘ Ramaz Otinashvili ∘
Peculiarities of Competitiveness Strategies in Busines

https://doi.org/10.56079/20221/6

 

The competitive strategy of a business depends on the introduction of modern management practices. According to competitive strategy, businesses can be classified as market leaders, challengers, followers, and market niches, and the key aspects of their competition are analyzed. It is noted that the competition strategies are difficult to implement and require a considerable amount of resources.

To develop an effective competitive strategy, we need to get the most information about our competition. We need to continuously monitor our products/services, pricing dynamics, key incentive channels with competitors' similar products, identify competitive advantages or disadvantages.

Some market players react only to certain types of offensive action from the opponent and ignore all others. Some respond quickly and sharply to all competitors' actions. Some companies make such strategic actions that it is very difficult to calculate and guess their plans.

Competitors in some areas may act harmoniously, while they in other areas can be in constant competition. Knowledge of future reactions gives rivals the keys to deciding how to act - to attack or defend their positions.

Considering the examples of successful companies around the world, there is no universal model of competitive strategy for a particular business. Each firm must individually select the strategy that suits it, based on its goals, challenges, and opportunities.

Keywords:  Business, Competition, Strategy, Management.

JEL Codes: M10, M20, M21

Introduction

As a business cannot exist without a market, it is also impossible to imagine a market without competition. The main subject in each competition is resources- information, finances, technology, etc. However, the most important is the customer (“Client”) itself, without whom competition could not exist. 

Competitive strategy includes several factors that are essential for a business’s success such as competitive pricing and quality, customer value for products (services), the professionalism of the employees and a well-established image, business experience and reputation, credit history and a relevant level of management culture, etc.

 

Benchmarking

 

To be competitive, one would need relevant information and experience. Business development concept should be drafted - “comparative competitive strategy”, related to the search and study of modern methods of business management and their implementation. This practice is called Benchmarking. 

Any type of benchmarking means measuring competitor’s metrics and business processes to draft the perfect model for your own business. The benchmarking process allows a company to focus on best practices from competitors and apply it to their business needs.

The first stage when entering a competitive market is the study of competitors. Who is the immediate competitor? Who is the indirect competitor (producer of substitute goods)? The best way to do this is to become competitors' client - buy their goods, use their services, experience the pros and cons.

Recommendations for monitoring competitors are as follows:

1. Always keep an up-to-date list of competitor companies. Make an additional list of which ones interest you the most. For example, you have a furniture business. The main focus for you is its realization;

2. Periodically collect information about the names of competitor companies. Also, if you stumble upon names and surnames of employees in top management, gather information about them as well;

3. Gather information on competitors' mailings;

4. Enrol in business forums where competitors participate;

5. Regularly monitor mass media, web portals and Facebook pages;

6. Fill out various forms of queries on competitors' websites, so you can keep track of their operations, service levels and quality of service.

Suppose the firm has identified key competitors, selected distribution channels and marketing plans for target audience. This is a strategy group that you should attack vigorously.

In the nineties of the 20th century, the famous Japanese firm Honda, thea manufacturer of motorcycles and motorcycles, invested heavily in the construction of a new factory in the United States. Therefore, it temporarily reduced the output of the product to the local market. Its competitor, Yamaha, thought it was the perfect time to launch a new model series of motorcycles on the market, as well as an active advertising campaign.

Despite the difficult financial situation, Honda's top management responded immediately to this challenge. It reduced the amount of FDI, directed it to the local market and launched a new motorcycle model every month for a year. As a result, Yamaha was unable to withstand the competitive struggle and forced to leave this market segment.

 

Peculiarities of Competitive Strategy Development

 

To develop an effective competitive strategy, we need to get the most information about our competition. We need to continuously monitor our products/services, pricing dynamics, key incentive channels with competitors' similar products, identifying competitive advantages or disadvantages.

When identifying key competitors, marketers should find answers to the following questions: What is the competitor's goal? What is its behavior on the market? After that, the company must decide whether to attack or, on the contrary, protect the market segment. If a competitor adopts a new segment, this can be considered a good opportunity to launch an attack. And if you find that a competitor is trying to get into your segment, you should switch to a defensive strategy. "Whoever is informed - he is armed." Every market player responds in a unique way to the competitor's response. Some slowly and weakly, some immediately.

A classic example of a delayed assessment of trends in the automotive market is the well-known case of the "Big Three" of American automakers of the 70s of the last century - General Motors, Ford Motor Co., Chrysler. The sharp rise in fuel prices on the world market and a large number of middle-income and small families have dramatically changed demand in the auto market.

There was a sudden demand for cars with economical engines. Before the aforementioned American companies reacted to these changes, the Japanese, quickly learning about the trends in the US automotive market, responded quickly to the demands and occupied the niche of the US small car market. It marked the beginning of the first known US-Japanese trade wars. Later sanctions came were applied.

Timely response to market changes is essential. For example, an analyst at a South Korean company, Samsung, accidentally read in a local American newspaper about the closure of the latest American guitar factory. He communicated this information to the top management of the company headquarters. They analyzed the information and decided to export the guitars from their warehouse to the US immediately. Expectations were justified – the US government increased tariffs on imported products to encourage local producers. But Samsung at that point already had huge stock quantities on American territory, and consequently gained significant profits as soon as the new tariffs were introduced.

Some market players react only to certain types of offensive action from the opponent and ignore all others. Some respond quickly and sharply to all competitors' actions. Some companies make such strategic actions that it is very difficult to calculate and guess their plans.

It has to be noted that lately, the intensity of competition increased in many business segments of the Georgian market. For example, retailers and shopping centers, medical and transportation services markets, construction markets, etc.

According to competitive strategy, businesses can be classified as market leaders, challengers, followers, and market nichers.

Competitors in some areas may act harmoniously, while they in other areas can be in constant competition. Knowledge of future reactions gives rivals the keys to deciding how to act - to attack or defend their positions.

During competition, business agents often choose similar or different strategies, under the concept of Game Theory. For example, Georgian beer manufacturers Kazbegi and Natakhtari have chosen the same strategy of competition - they are waging a "price war". To do this, they must gradually reduce the price.

If the competition is healthy and in line with legal and ethical norms – the winner will be the leader. The strengths are expressed in high production and sales, advanced technology,  relatively low cost of raw materials, which ultimately results in reduced cost of production. As a result, the winner will be the one who will cost less of a produce and at the same time the quality of products won't be lost (which Georgian companies often ignore).

In the process of competition, one of the companies can change the strategy and after proper analysis choose different tactics of fighting. In the book by Robert Basel and Bradley Gale (1987) - "Entrepreneurship Information and Management System Program for Strategies and Corporate Success" - the authors brought in the preface O. Bismarck's famous expression "idiots say that they learn from their own experience but I prefer to learn from someone else's experience"

Samuel Walton, the Founder of Wal-Mart's Chain of Stores, belongs to the category of businessmen who study the successes or failures of others (competitors). He learned that the customer of a direct competitor, the major retailer Sears, was dissatisfied with stock replenishment, pointing to flaws in the distribution system. As a result, Walton himself created a modern distribution network system with its parking, which provided the clients with the time needed to service them. Later, with the launch of its food delivery service, its online sales rose by 40%. These strategic decisions have brought the company huge revenue and today it is considered to be the largest turnover corporation. 2021 ranking of the most competitive corporations: 

 

Ranking of Corporations with the Highest Turnover

 

Source: Fortune, Global 500: Full List http://fortune.com/global500/

 

Conclusion

There is no universal model of competitive strategy. Each company must individually select the strategy that suits it according to its goals, capabilities, and resources.

References:

• Invernizzi Diletta Colette, Locatelli Giorgio, Brookes Naomi J. (2018). "A Methodology Based on Benchmarking to Learn Across Megaprojects: The Case of Nuclear Decommissioning" (PDF). International Journal of Managing Projects in Business. https://www.emerald.com/insight/content/doi/10.1108/IJMPB-05-2017-0054/full/html

• https://netbasequid.com/blog/competitive-monitoring-analysis/

• Otinashvili R. (2021). Business Security,  Lecture Course, p.545. (in Georgian).

• Robert D. Buzzell, Bradley T. Gale (1987). Das PIMS-Programm. Strategien und Unternehmenserfolg..

• https://fortune.com/company/walmart/global500/

• Fortune, Global 500: Full List http://fortune.com/global500/

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