Competitive production strategies are only considered successful if they are able to generate profits even in the long term. The chosen industry plays a major role in this. It has a direct impact on income.
Each industry has up to 5 competitive forces. By studying them, you can identify trigger points for precise analysis, which will later become the basis for the selected competitive strategy.
Selecting a competitive strategy
These forces are:
Threats from new competitors - due cash app database to the emergence of a fast-growing competitor, the company has to set a lower price on its products in order to retain customers.
Threats from substitute products - substitute products (replacements for the products you have on sale) prevent you from setting your desired price level.
Direct influence of consumers – buyers also have a direct impact on the establishment of minimum and maximum prices for goods. This will determine the size of the costs and investments for their attraction and service.
Direct influence of suppliers – due to conflicts with contractors, you can lose quality raw materials or purchase them at several times the price;
Rivalry between competing companies – participants in the industry.
Of course, each force has its own significance depending on the part of the market in question. Experts advise to engage in the formation of a competitive strategy by conducting a thorough analysis of all 5 forces in the industry in which development is planned. It is also necessary to make sure whether the chosen niche is attractive to potential clients at all.
Due to a lack of proper business education and inflated ambitions, some entrepreneurs are ready to do anything to survive in difficult markets. They use competitive strategies that negatively affect the entire industry, harming both themselves and other market participants. For example, these are those who try to "stay afloat" by dumping.
The development of a company's competitive strategy is based on both the analysis of the occupied place (to obtain information about the possibility of long-term profit) and on the competent formation of privileges over competing companies. Working on advantages is very important. This is a clear reflection of the company's positioning. Advantages should distinguish the company from its competitors.
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