Determination of basic long-term goals, course of action and allocation of resources for achieving objectives. A strategy is a ploy or a future course of action.
What is a competitive Strategy?
A competitive strategy is one, which is followed or built by a firm to survive or beat, as the case may be, its competitors. This strategy may be implicit or explicit. However, explicit strategies are better than implicit ones. Basically, developing a competitive strategy is processing a wide method meant for how a business is going to compete, what should be the goals and what policies will be required to carry out these goals.
In short, competitive strategy and its relative success decides the future of any firm. Though each firm’s strategy is a presentation of its unique circumstances, but at the ground level all competitive strategies have some similar features.
Formulation of Competitive strategy
As already mentioned, each firm’s strategy is different from the others and so are the various considerations. But at the broadest level, formulating competitive strategy involves the considerations of 4 key factors that decide the limits of what a firm can successfully achieve. The four key factors are:
1. Company-Strengths and Weakness,
2. Personal Values of the key implementers,
3. Industry opportunities and threats,
4. Broader society expectations.
The first two are factors internal to the company and the other two are the external factors.
Wheel of Competitive Strategy
It is a tool for connecting the key features of an enterprise’s competitive strategy on a single sheet. In the center of the wheel are the firm’s objectives and the spokes are the key working policies with which the firm is seeking to accomplish these goals. Similar to a wheel the spokes (policies) should radiate from and reflect the center (goals) and these spokes should be linked with each other or the wheel will not rotate.
Five forces of Competition or the 5 competitive forces that shape strategy
The essence of formulating competitive strategy is relating a firm to its environment. Environment here refers to the industry in which the firm is located. On the other hand, each industry has a different state of competition, which depends on five basic competitive forces, and so the competitive strategy depends on these five forces of competition. These competitive forces are as follows:
• Threat of potential entrants,
• The threat of substitute services or products,
• Bargaining power of Suppliers,
• Bargaining power of Buyers,
• Industry competitors/Rivalry among existing competitors.