Strategic competitiveness represents a metered and premeditated approach to creating a position in the market and industry advantage. Companies can create specific boundaries that represent how the organization or product intends to have an advantage among competitors.
Companies utilize analysis of their position in the market in order to assess and project future success and likely returns. In order to gain competitive industry advantage, an organization must find unique products, services, or marketing strategies to set them apart from competitors in a sustainable manner.
In this analysis, the term industry refers to a group of companies that offer similar products and services, and can act as substitutes for one another. It is important that comparisons are made between closely related organizations in order to correctly identify competitive industry advantage. An industry is the broadest category of comparison, putting together businesses that are generally related (CFI Team, 2022).
Further comparison can be made by examining market segments. Where industry represents a like group of companies, a market segment refers to a customer group that shares traits that contribute to specific demand, making them valuable to companies that can supply the product or service that satisfies that specific demand. Evaluation of the organization’s value in the market segment also contributes to competitive advantage and the position of the company in the industry.
Supply chains are an integral piece in the ability of a company to appeal to a market segment, and therefore a major element of analysis and strategy. The typical supply chain concept includes raw materials, a supplier, manufacturer, distributor, retailer and finally the consumer.
The raw materials are the ingredients or inputs that are needed to create the product, and they are sourced from suppliers. The suppliers send the raw materials to the manufacturer, who creates the product and gets it to the distributor, who then organizes and sends the correct amount of goods to the retailer. The retailer markets and ultimately sells the product to the consumer (CFI Team, 2022).
The efficiency and alignment of the supply chain can have a dramatic impact on the deliverable product. E-commerce has made this effort even more important, as a supply chain for this type of business includes warehouses of inventory or networks of distributors/retailers prepared for immediate shipment of products.
For companies whose value proposition is same or next day acquisition of product, any interruption in the supply chain can be detrimental to that company’s position in the market and industry advantage.
According to the Corporate Finance Institute, there are six major areas that are key in the competitive analysis of a company. First, they must assess the nature of the rivalry in the industry. The number of competing companies and the diversity of product offerings in the industry has an effect on the statistical ability of a company to compete with products in the same market segment.
It is also important to look at the brand loyalty of existing customers, and any costs that they might incur from switching from one brand to another similar product.
Next the company should measure the threat of entry to the industry. This refers to the ease with which new companies can be successfully introduced into the industry, whether it be consumer driven or related to regulations. If it is easy for new brands or products to enter, there is a significant threat of overpopulation, or flooding of the industry, which drives prices and quality down.
The next phase of analysis involves bargaining power, both of buyers and the suppliers that facilitate production. This refers to the ability of buyers to have an overall impact on the industry by negotiating lower pricing. Similarly, when substitutes are available for the suppliers of input materials, they have little bargaining power. When there are few ways or places to acquire an input, that input’s supplier can set prices higher without fear of losing business.
In the same vein, it is important to also consider the overall availability of substitutes for a company’s goods and services. The more available substitutes, the higher the threat. Competing products limit a company’s ability to charge maximum prices, and consistently offer the chance that another product or service will provide a lower price and higher quality.
Finally, companies should analyze complementary products. These are products that are directly related to another product’s sales and success- tortilla chips to salsa, for instance. While complementary products can positively affect sales, volatility in complements can hinder them greatly, making it an important factor in market positioning (CFI Team, 2022).
In any case, leadership must be aware not only of the organization’s current status, but also of any potential changes in the market or the environment of the industry. This awareness is considered “perceptual acuity”, and indicates that a company should take into account any events or potential events that could have any impact on their industry (Lamana, 2022).
Being proactive in response to industry changes can create and provide advantage over competitors who are forced to react instead. This awareness, coupled with extensive knowledge of the policies and actions of competitors, leads to a high level of “competitive intelligence” and an edge in the industry (Lamana, 2022) and the foundation for a marketing strategy.
After a close examination of the industry at large and the position of the company within that picture, it is important to then strategically examine the nature of the specific products being offered. Many organizations offer diverse products and services, which in itself represents a market strategy that protects the firm as a whole from threats in one area of production.
A 1987 study by Charles Hill and Robert Hoskisson looked closely at the multiproduct model and the consequential strategy it implied.
Firms can achieve the multiproduct model in a few different ways. Vertical integration, as it is described in the study, involves acquiring control over products that are part of the supply chain for an existing offering from the company. This action eliminates variables like supplier relationships and behavior, while also diversifying the firm’s offerings.
Another option is engaging in a synergistic economy by acquiring products that complement current offerings in an effort to gain better control over market presence. Financial economical diversification represents a company reaching into unrelated industries to spread their offerings across different markets and industries. The nature of this multi product offering provides a maximum risk return ratio, and also provides less conflict of interest for investors (Hill, Hoskisson, 1987).
In a multiproduct model it is important for an organization to analyze strengths and weaknesses in all of the products offered. An article from Supportbench offers several strategies to achieve this necessary goal. First, a company must “distinguish and prioritize between products”.
This includes brand identity, minimizing customer confusion, ensuring that appropriate customer bases are being reached for each product, and mitigating any internal competition between like products. The article suggests that prioritizing existing brands and integrating new ones without disruption or threat is paramount (Klimuk, 2017).
Also important in creating this strategy is understanding the value of an existing brand in the marketplace before integrating a new one. It can be either very successful or detrimental to link a product to something with an established reputation, so companies should take note of all the intricacies of doing so.
This strategy examines the importance of name recognition in branding products. Getting the naming correct for the target audience can have a huge impact on the success of a new product.
Managing multiple products and brands requires an appropriate hierarchy of upper level direction that is specific yet comprehensive and aligned with the mission of the organization at a holistic level. The unique needs of each product line must be met, but in a manner that serves the entire organization as well.
The article also suggests that a company “Create strong ad campaigns for each product” and “Conform to the product’s overarching identity. In creating and launching new products, an existing company must allow for the new product to have its own branding while still remaining linked to the success of the parent company. Advertising campaigns for this type of multi product organization should be well researched and clearly messaged, while still allowing the product to develop in its own right (Klimuk, 2017).
Regardless of the structure of a firm, strategy, competitiveness, and advantage are key in projecting and executing a successful product model. In order to maintain a favorable position in a market and an industry, an organization must have a clear sense of identity and of the industry itself. It can only benefit any organization to analyze and strategize a method that maintains value and responds proactively to potential threats with awareness and preparedness.
Resources
CFI Team. External Analysis: Analysis of a company’s industry environment, including its competitive structure, competitive position, dynamics and history. (December 4, 2022). Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/management/external-analysis/
Hitt, M, Ireland R., Hoskisson R. Strategic Management: Concepts and Cases: Competitiveness and Globalization. (2020) Cengage Learning. Available from Google Books.
HIll, C, Hoskisson, R. Strategy and Structure in the Multiproduct Firm. (May, 1987). Researchgate. https://www.researchgate.net/publication/230996318_Strategy_and_Structure_in_the_Multiproduct_Firm
Klimuk, E. 5 Strategies for Companies on Multiple Product Management. (December 8, 2017). Supportbench. https://www.supportbench.com/5-strategies-for-companies-on-managing-multiple-products/
Lamana, R. Overview of Chapter 2. (2022). Studocu. https://www.studocu.com/en-us/document/baruch-college-cuny/business-policy/chapter-2-analyzing-the-external-environment-of-the-firm/23632357
This study was done as part of a Supply Chain MPS focus at Lake Erie College in Painesville, OH. LEC is building a supply chain segment of their curriculum and the first class is “Special Topics in Supply Chain’ led by adjunct professor Ron Emery. .
The class is an exploratory class looking at all the various problems in Supply Chain today and why they pose such a problem to the economy. Students like Laura are doing research into those issues with the hope that as they become leaders within their various disciplines they develop the tools to address issues much more quickly than through traditional methods