A week ago I shared with you the first two competitive startegies – Market Leader Strategy and Follower Strategy. Today I will describe the remaining two – Challenger and Nicher strategy.
When choosing this strategy, the company should know the weaknesses of the leader and be able to use them to achieve leadership positions. The main risk of the challenger strategy is that an organization, devoting a lot of effort to competition, may overlook the real needs of the market.
A company applying for leadership needs to determine the goals of the strategy. Most companies consider expanding market share as their main long-term goal. Thus, the decision to go on the offensive is interconnected with the choice of the object of attack.
Leadership candidates can follow these attack strategies based on the direction of the attack
Offensive on the position of market leader
Rather risky, but potentially the most effective strategy. First of all, the applicant must conduct a study of the needs of the customers and their degree of satisfaction. A great object to attack is a large segment of the market, which either the leader does not serve, or the customers express dissatisfaction with the quality of their product or services.
Attack on competitor companies of similar size
Firms that do not cope with the needs of customers have a difficult financial situation, the products of which are not in demand due to low technical characteristics or high prices are most attractive as an object of attack.
Attack on small local and regional companies
Firms that do not cope with customer satisfaction have a difficult financial situation and are most attractive for an attack.
A concentrated blow by the main forces on the markets most significant for the competitor. The winner is the one who has more resources and greater managerial potential.
A frontal offensive means that an attack is conducted on a competitor’s product, on its advertising, and prices.
Less competitive resources are usually concentrated on competing for product and regional markets, which is why they are great targets for attack.
It implies conducting offensive actions in several directions at once: both on the front (priority markets), and the flank (secondary markets), and from the rear (third-order markets), when the attacking side offers the market all the same as its opponent, only a little more so that the consumer is not able to refuse.
Attack on more accessible markets, which allows expanding the company’s resource base. This strategy is to diversify the company’s production, its markets, and introduce new technologies.
The goal of the strategy is scientific research, the development of new technologies, and the implementation of attacks with the transfer of the front line in the territory where they have a definite advantage.
It consists of conducting small forces of many attacks throughout the territory occupied by the enemy, sudden demoralizing attacks of the enemy from pre-prepared bases using: selective price cuts, intensive blitz-campaigns to promote goods, and, as an exception, legal actions.
The opinion that guerrilla warfare is a strategic alternative for resource-limited companies is erroneous. Its management is very expensive.
Moreover, guerrilla fights are rather preparations for war.
The considered strategies allow you to determine the general direction of the company. A company that claims to be a leader should transform the overall strategy into a set of specific actions to expand market share by choosing a specific attacking strategy.
Leadership candidates can follow these attack strategies based on exposure tools
Reduce production costs
The applicant should strive to reduce production costs, increasing procurement efficiency, reducing labor costs, and/or using modern production equipment.
A company that claims to be a market leader sets low prices (in comparison with prices for similar leader products), offers products of medium or low quality at a much lower price.
The candidate for leadership offers higher quality products at a higher price than the market leader.
The challenger for leadership attacks the leader, providing customers with a wide selection of products.
The applicant must constantly disturb the leader, offering the market new types of products.
Service level strategy
Bidder offers customers new or better services.
Innovative distribution strategy
The applicant must create new distribution channels.
Intensive communications strategy
Some applicants attack the leader, increasing their advertising costs.
However, the increased advertising costs are justified only in cases where the applicant produces a truly competitive product, or its advertising exceeds the leader’s advertising messages.
The nicher strategy assumes that the company shows interest not in the market as a whole, but its specific segment. It is a logical continuation of the generic focus strategy and involves a significant differentiation of the goods of the company.
Nichers must solve three problems: creating a niche, expansion, and protection. The key idea of the nicher strategy is the focus.
Nichers can follow these strategies
- Focus on the end-users. Targeting the end user.
- Specialization in vertical. The company specializes in certain levels of production or distribution.
- Size of customers. The company specializes in serving only small, medium, or large customers.
- Special customers. The company serves one or more customers. Many small and medium-sized companies supply products to a single large consumer.
- Geographical specialization. The company sells products in a specific locality or region.
- Product specialization. The company produces only one product or a single product line.
- Production of a product with certain characteristics. Targeting a product with the same properties.
- Individual customer service. Orientation to service and quality of service.
- A certain ratio of quality/price. The company focuses on the production of either high-quality or cheap products.
- Service. The company offers one or more services that are not provided by other companies.
- Distribution channels. The company specializes in serving a single distribution channel.
As the situation in the niche may change, the company must take care of creating new niches. The company must adhere to the principle of niches, but by no means, a specific niche: multiple niches are preferable to a single niche. Operating on two or more niches, the company increases its chances of survival.
So basically these are the four competitive strategies for the organization to choose from.
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