Raphael D.

Remolona
ABM-11A2

COMPETITIVE STRATEGY: Organizational

A firm's competitive strategy concerns how to compete in the business areas the firm
operates. In other words, competitive strategy means to define how the firm intends to
create and maintain a competitive advantage with respect to competitors. Holding a
competitive advantage over competitors means to be more profitable than competitors
over the long term. A firm's competitive strategy within a given business area is examined
looking at two factors: the creation of the competitive advantage and the protection of the
competitive advantage. The creation of the competitive advantage is described as the result
of either proactive or reactive competitive strategy. Proactive strategies can in turn be of
two different types: (a) improvement of performance (same game competitive strategy);
and (b) a change of the rules of the game (new game competitive strategy). Finally other
forms of competitive strategies are examined: (a) creation of a completely new
(nonexisting) business area; (b) enlarging the geographical scope of the business area
(cross-market competitive strategy); and (c) enlarging the business scope (cross-business
competitive strategy).

2 FACTORS TO CONSIDER IN COMPETITIVE STRATEGY

1. CREATION OF COMPETITIVE ADVANTAGE

The creation of the competitive advantage is described as the result of either

proactive or reactive competitive strategy.

Proactive and Reactive Business Strategies- Which is Better?

Every business model needs a plan of action that defines how a business should handle
particular situations, from system malfunctions to customer complaints. Choosing the
appropriate strategies determines how well an organization can detect and mitigate risks.

Companies should determine if a proactive or reactive approach best fits their operations,

customer needs, and workflow. While both methods have their advantages, there are some
significant downsides that management should consider.
What Does it Mean to be Reactive?

In terms of business strategy, being reactive means to respond to an incident through

audits and evaluations to discover the cause of the problem. This approach is completely
dependent on the event and can only begin once an issue occurs.

To successfully implement reactive strategies, a business needs to quickly-

Identify their customers

Define their brand and mission statement
Determine how to appropriately respond to the incident

By defining these elements, management can promptly address the issue, avoiding any
lasting repercussions from unaddressed concerns.

While reactive strategies save companies preparation time, it poses mitigation risks, as
businesses are only able to respond to threats after they've already experienced them.

For example, a new retailer is unaware of their busy seasons and experiences a complete
stockout of children's jeans during August. While they now know to increase stock levels
for next August, they still missed out on potential sales from being unable to anticipate the
surge in demand.

What Does it Mean to be Proactive?

On the other hand, the proactive approach uses research and preparation to mitigate risks
before they occur. This enables businesses to control a situation rather than relying on
reaction, which often proves to be inadequate as it allows incidents to happen and wait for
a response.

In order to successfully execute a proactive strategy, companies must-

Identify potential issues and concerns

Create multiple plans of action beforehand
Determine the best times to execute the plan

The main differences between a proactive and reactive approach are preparation and
accountability. Being proactive requires extensive preparation to anticipate and address
emerging events before they occur, taking full accountability to avoid any serious
repercussions. Meanwhile, the reactive method does not spend any time preparing for
potential issues but instead waits for issues to occur before creating a plan of action.

For example, a reactive marketing team would begin planning a campaign after noticing a
surge in traffic and sales. However, by the time the promotion is created and launched, the
peak of demand may have already passed.

A proactive marketing team would have monitored past and real-time data, enabling them
to detect this emerging trend and launch a targeted campaign ahead of time. This gives
companies a competitive edge and the ability to capitalize on customer data.

Another primary element of proactive strategies is quality control. While reactive tactics
rely on damage control, being proactive enables organizations to assess and contain a
situation before an incident occurs.
Therefore, businesses should consider how being proactive can improve their
responsiveness and overall performance.

Tips for Being Proactive

Although being proactive gives companies a significant advantage over reactive businesses,
it can require a lot of time and effort to develop an effective plan. Management should
consider-

Investing in Data Analytics

Access to insights, such as customer preferences, needs, and areas of concern, gives
businesses the ability to analyze and interpret data ahead of time. With data analytics,
management can detect patterns and emerging trends, enabling them to create a data-
based plan to prevent potential issues.

With management software, such as inventory, point-of-sale (POS), and forecasting

systems, organizations can store, analyze, and utilize large volumes of data. This enables
teams to improve customer service, operational efficiency, and response time.

Creating Open Communication

Success relies heavily on how well a company can communicate with their employees,
customers, and stakeholders. If the organization is experiencing a service failure,
management needs to be able to immediately alert staff and clients, rather than leaving
them to wonder why an operation or product is not functioning.

Businesses should be able to contact customers through various channels, such as email,
text, and social media. This enables management to inform loyal clients of the problem's
status and how they plan to resolve it. Otherwise, consumers may grow frustrated and
confused as to why a brand refuses to address the issue.
Resolving Issues Immediately
Simply reaching out to customers isn't enough if a business is unable to resolve the issue.
Companies should have a clear estimate of when the matter should be fully resolved, and
operation will return to normal.

This process should not take long, as the more time it takes to address an issue, the more
likely customers are to take their patronage elsewhere.

Training Employees
Without proper training, employees are unable to identify and mitigate issues before they
create a larger problem. Companies should hold training sessions during employee
onboarding and whenever new technology is implemented to teach workers how to handle
specific scenarios to avoid negative consequences.

For example, employees should know their company's return, refund, and customer
interaction procedures to streamline transactions and inform customers of their policies.
This avoids confusion regarding returning products and handling complaints.

Companies must determine whether they should take a proactive or reactive approach
when it comes to launching business strategies and handling incidents. While both have
their advantages, management should consider how the proactive method enables better
control over situations.
 2. PROTECTION OF COMPETITIVE ADVANTAGE

6 WAYS TO PROTECT YOUR COMPETITIVE ADVANTAGE

If you’ve spent time and money developing products, services, prices, channels or a way of
doing business that gives you an advantage over your competitors, it makes sense to keep
these unique and exclusive to your business for as long as possible.

Sometimes you can get a permanent advantage such as legal protection on intellectual
property, but for most small businesses staying relevant against competitors is something
you will need to continually work on.

1. Protect your intellectual property (IP)

Having the law on your side is handy when it comes to stopping any imitators. Your ‘IP’
includes the parts of your business that you can legally protect and take action if anyone
breaches your rights.

This includes:

 Copyright

 Patents

 Designs

 Trademarks

 Trade secrets

 Company and domain names.

To help decide what to do, make a list of the essential elements of your business you can’t
do without, identify if they can be protected and then weigh up the cost of legal protection
versus the possible loss.

2. Protect your intellectual assets (IA)

An intellectual asset is a competitive advantage that usually can’t be legally protected, such
as your business contacts, networks, your business know-how, and knowledge of what
customers want.

In these cases, you can still build a barrier by:

 Keep your information secret.

 Have staff sign confidentiality agreements.

 Document internal processes with key employees only.

 Share information (like prices) only to qualified leads.

 Limit what you place online and in the public arena.

List what intellectual assets are mission-critical to your business and outline how you’ll
keep these elements confidential.

3. Maintain your price advantage

If one of your key advantages is being able to source inventory or materials cheaper than
competitors (allowing you a higher than average margin or to price lower while still
making a decent profit), protect it by:

 Lock in exclusivity of supply with a legal contract.

 Build cash reserves to buy in bulk for volume discounts.

 Document your systems or processes that give you a cost advantage.

 Keep fixed costs low (own your location, contract out when busy etc.).
4 . Make it harder for other businesses to compete in your market

Look to deter new entrants by emphasizing the barriers to enter your market, or anything
that makes another business owner think it’s ‘too hard’ to compete directly. An established
brand in the minds of customers is one way. If you asked ten people to name an online
marketplace, an accounting software provider and fast food, nine of them will probably say
Amazon, QuickBooks and McDonalds. These businesses have invested in their brands to be
top of mind.

To prevent new businesses entering your market, try:

 Be first to market with unique products or services.

 Set up an exclusive service area you can defend legally.

 Have a supplier agree to only supply your business.

 Be the only approved vendor.

 Develop partnerships within your industry.

 Build an online following in social media.

 Establish top search rankings.

Anything which makes someone think twice before setting up outside your business is
useful.

5. Be better than your competitors.

Having an amazing business with happy customers that refer business is the ultimate way
to protect your competitive advantage, but even then, don’t take anything for granted. 

Audit the quality of your products or services to check you are better than the competition.
Do your products last longer than your competition. Do you have superior after-sales
service? Are you the most reliable? Find out what makes you unique and put steps in place
to make sure the customer experience is consistent every time.

6. Be the industry expert

If you can prove you know more than anyone about your industry, it’s a great advantage
and hard to copy. Post your thoughts in social media, speak at well-known events, run
webinars or podcasts with other industry experts, emphasize your qualifications and
publicize any testimonials from high profile people or businesses.

At the end of the day, if you’re successful and making a profit then you’re doing something
right. Find out what that ‘something’ is and plan to protect it for as long as you can.

Market Structure
The idea is simple: The enterprise's success significantly depends on the competitive
strategy which is mainly determined by the structure of the market in which the enterprise
is active. The market structure of an industry can be attractive or not. But which forces
impact this industry structure and thus the attractiveness of a market? (Figure 2.2).