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KEY STRATEGY DEVELOPMENT TOOLS

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Key Strategy Development Tools

Introduction
Competitive strategy is an action plan meant to last that is devised by a company to
gain an important key advantage over its main competitors in a market. The most crucial
factor in competitive strategy is the development of value to the products and services. The
value proposition in business brings an added advantage to the market that cannot be easily
replicated by rivals. (Shaw 2016). This piece of writing aims to explore four competitive
models used in business to gain competitive advantage. These are AAA framework, Ansoff’s
Matrix, Generic Strategy, and Porter’s Five Forces. These strategies can be applied in
business singly or combining all or some of the strategies, so long as there is a realization of
added value.

(I)AAA FRAMEWORK
AAA framework is the acronym for Adaptation, Aggregation, and Arbitrage.
Adaptation strategies
Adaptation strategies are used to boost revenue and market share through the adaptation of
local requirements and preferences. Coca Cola Company has applied this strategy to be
successful in many countries. Marketing and branding strategies are different from country to
country. The company also use acquisition of local brands to establish network and compete
with local and popular brands (Ghemawat, 2007).
Aggregation strategies
Aggregation strategies in making use of economies of scale through creation of cross border
efficiencies. Coca Cola has used the strategy to open its business across the world and attain
global economies of scale (Ghemawat, 2007).
Arbitrage strategies
These strategies are the development of universal value where cost, currency variations, and
price are exploited. Companies using the strategy are able to remain competitive by
accessing markets outside their jurisdiction where they can realise more profits due to price
difference. McDonald’s is using this strategy offered by globalisation, using its good
reputation. The company also signs contract with farmers to supply them with raw materials,
to ensure constant supply and enjoy agricultural economies of scale (Ghemawat, 2007).
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(II)ANSOFF’S MODEL
Ansoff’s Model was developed by Igor Ansoff to assist businesses in making decisions related
to product and market growth. Ansoff observed that for a firm to grow, it will have to rely on
the strength that the new or existing service is promoted in the existing market or new market.
Ansoff model has four quadrants that help in understanding the various strategies that a
company can pursue namely; Market development, Diversification, Product development and
market penetration as illustrated below;

Market Development
Market development is promoting a product that already exists in a new market. Coke
repackaged Diet Coke in (a product that got a niche with women with the perception that it
was meant for women) and branded it Coke zero-with no added sugar and low calories- the
target market being men. The product is otherwise Diet Coke, but the drink is packaged
differently to suit male customers through the appeal of shiny black colours. Thus the
marketing of a product in existence to new ‘men market.’
Product development
Product development means marketing novel products to a market already secured by the
business. Tennis players emulate professional players in the kind of rackets they use. But
those rackets are custom made to fit the specification of the pro players. Therefore, the
Wilson Custom Racket Shop, the maker of these wearables have developed wears to fit the
specification of these players provided it is similar to what the professional players use
(Elmes& Barry 2017).
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Market penetration
Market penetration is promoting a product that currently exists in a market that is also
available. Telecommunication companies are known to apply this strategy, as they can
manipulate their prices to attract existing customers or acquire the shares of a competitor in
the same market (Elmes& Barry 2017).
Diversification
Diversification approach is segmented into two wide groups; related and unrelated
diversification. In the case of related diversification, a firm brings a new category of goods into
the market to complement the main product that the company is offering. A company
producing leather shoes can also start producing other products of leather like wallets. On the
other hand, unrelated diversification is the introduction of products that are not related to the
existing products offers. A company producing leather products can start venturing into the
manufacture of phones (Elmes& Barry 2017).

(III)GENERIC STRATEGY
Generic Strategy was developed by Michael Porter and entailed three strategies,
Differentiation, Cost Leadership, and Focus strategies. Campell-Hunt (2010) further explains
that focus strategy has two subsets; cost focus and differentiation focus. Although companies
such as Jiffy Lube leads in providing competitive oil prices, car dealers or small mechanic
shops might provide cheap oil expecting to get more customers in their outlets, in the hope
that the customer will one day come for other services offered in the shops like new
transmission. Virgins’ airline is applying differentiation strategy under the label Virgins to offer
array of services. It offers competitive prices with high quality services, which include full
service meal, WIFI. By making use acquisitions and subsidiaries, Virgins airline is able to
establish markets across different countries. Focus strategy, on the other hand, is offering for
a specific market through unique requirements for the customers as well as the dynamics of
the market. This target market creates loyal clients impossible for rivals to imitate. Focus cost
leadership entails the offer of relatively cheap products in a niche market. Checkers is a US
fast food restaurant that offers its customers a unique experience. Customers can drive and
pick their orders without alighting from the car. They are served very quickly as they leave the
premises. Their products are cheap (Alamdari and Fagan, 2005).
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IV) PORTER’S FIVE FORCES

Porter developed the Five Forces as a tool to analyse the competitiveness of a specific
industry. These forces are namely: Buyers’ influence, Supplier’s bargaining clout, threats from
new players or entrants, and the scale of rivalry in the industry and risk from substitute
products or services in the market. All these forces combined determine the attractiveness
and how profitable the industry has (Porter, 2008).
Trefix is a stock analysis company that has analysed Under Armour, a firm that is involved in
the apparel industry and athletic footwear.
Competitive rivalry:

Competitive rivalry: Under Armour faces intense competition from Nike, Adidas and newer players.
Nike and Adidas, which have considerably larger resources at their disposal, are making a play within
the performance apparel market to gain market share in this up-and-coming product category. Under
Armour does not hold any fabric or process patents, hence its product portfolio could be copied in the
future.

Bargaining power of suppliers: A diverse supplier base limits the company's bargaining power. Under
Armour's products are produced by dozens of manufacturers based in multiple countries.

Bargaining power of customers: Under Armour's customers include both wholesale customers as well
as end customers. Wholesale customers, like Dick's Sporting Goods and the Sports Authority, hold a
certain degree of bargaining leverage, as they could substitute Under Armour's products with those of
UA's competitors to gain higher margins. The bargaining power of end customers is lower as UA
enjoys strong brand recognition.

Threat of new entrants: Large capital costs are required for branding, advertising and creating product
demand, and hence limits the entry of newer players in the sports apparel market. However, existing
companies in the sports apparel industry could enter the performance apparel market in the future.

Threat of substitute products: The demand for performance apparel, sports footwear and accessories
is expected to continue, and hence this force does not threaten Under Armour in the foreseeable future.

Conclusion
In pursuit of growth and success in business, companies face a challenging business
environment, which makes them look for ways to remain relevant. Due to this, companies are
forced to apply various forms of competitive strategies to succeed. Each of the strategies
discussed can work alone to turn the fortunes of a company or a company can apply more
than one strategy to bring expected results. For instance, Ansoff’s model can work well with
other strategic tools to enhance the performance of a company. In summary, it is advisable for
a business to come up its own strategy that works for them to succeed.
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References

Alamdari, F. and Fagan, S., 2005. Impact of the adherence to the original low‐cost model on
the profitability of low‐cost airlines. Transport Reviews, 25(3), pp.377-392.
Campbell‐Hunt, C., 2010. What have we learned about generic competitive strategy? A meta‐
analysis. Strategic Management Journal, 21(2), pp.127-154.
Elmes, M. and Barry, D., 2017. Strategy retold: Toward a narrative view of strategic discourse.
In The Aesthetic Turn in Management (pp. 39-62). Routledge.
Ghemawat, P., 2007. Redefining global strategy: Crossing borders in a world where
differences still matter. Harvard Business Press.
Miloch, K.S., Lee, J., Kraft, P.M. and Ratten, V., 2012. Click clack: examining the strategic
and entrepreneurial brand vision of Under Armour. International Journal of
Entrepreneurial Venturing, 4(1), pp.42-57.