Increasing competition at market place and the impact of globalization has made the lives of firms difficult. To do something better has become the necessity for organizations to stay competitive. Star Textile is an organization, striving to win the competitive position at market place. Firm is having strong creativity and marketing skills, and has also been ranked in top 5 on the basis of R & D in Textile industry. The competitor of Star Textile working in the same industry, named as Acro Textile Mill, is also struggling to maintain its position in the market and wants to sustain competitive edge through core competency. Firm is having cost control & close supervision towards labors. Firm also takes advantage of economies of scale. Firm has maintained its position to make high volume of standardized products in the target market. Another competitor is Zia textile which makes a specific product. It makes uniforms for hockey and cricket team. Firm has a competitive edge in the local market. But due to a new entrance in the market, the firm may face threat. As the firm knows the target market and its needs, so the cost can be minimized in terms of advertisement, research & development and personal selling.
While looking at the traits of the companies, which competitive strategies do you suggest for firms to adopt? Give logical arguments and describe the possible positive outcomes of using those particular strategies? (20 marks)
Competitive strategies are the method by which you achieve a competitive advantage in the market. There are typically three types of competitive strategies that can be implemented. They are cost leadership, differentiation and a focus strategy. A mixture of two or more of these strategies is also possible depending on your business’ objectives and current market position.
The aim of this strategy is to be a low-cost producer relative to your competitors and is particularly useful in markets where price is a deciding factor. Cost leadership is often achieved by carefully selecting suppliers and production techniques to minimise production, distribution and marketing costs. However you need to be aware of any serious loss in quality that may render low cost ineffective.
A differentiation strategy seeks to develop a competitive advantage through supplying and marketing a product that is in some way different to what the competition is doing. If developed successfully this strategy can potentially reduce price sensitivity and improve brand loyalty from customers.
This strategy recognises that marketing to a homogenous customer group may not be that effective a strategy for the product the business is selling. Instead the business focuses its marketing efforts on a different selected market segments. That is, identify the needs, wants and interests of the particular market segments and customise marketing techniques to reflect those characteristics.
Star Textile should adopt Differentiation Strategy because firm is having strong creativity and marketing skills, and has also been ranked in top 5 on the basis of R & D in Textile industry.
Acro Textile Mill should adopt Cost Leadership Strategy because Firm is having cost control & close supervision towards labors. Firm also takes advantage of economies of scale. Firm has maintained its position to make high volume of standardized products in the target market.
Zia textile should adopt Focus Strategy or Niche Strategy because firm makes specific products. firm knows the target market and its needs, so the cost can be minimized in terms of advertisement, research & development and personal selling.
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