Competition strategies: types and their characteristics. Protection against unfair competition

Competition strategy is a set of priorities of market participants (entrepreneurs), which determines the scenario of interaction with rivals. This concept captures the significant established goals and resources used to take a leading position in the market.

Modern problems of competition

Before considering the characteristics of competition strategies, it is worth paying attention to the conditions in which firms operate. So, the modern market is characterized by such competition problems:

• Instability of competitive advantage. The modern market is developing rapidly, the needs of consumers are constantly changing. Manufacturers have to constantly keep abreast of the pulse and timely respond to changes in order to constantly be in the lead.
• Excess of supply over demand. The number of manufacturers is constantly growing. Meanwhile, due to the constant crisis in the economy, demand is almost at a standstill.
• Decreased effectiveness of classic rivalry strategies. At the moment, enterprises that direct efforts to fight competitors are losing. Success goes to those who work to develop their own exceptional benefits.

Basic strategies

Specialists identify five basic (common) competition strategies. Namely:

• cost leadership strategy;
• wide differentiation strategy;
• optimal cost strategy;
• focused strategy based on low costs;
• focused strategy based on product differentiation.

Cost Leadership Strategy

Cost leadership is a competition strategy that involves attracting customers by minimizing costs in the manufacturing process. This mechanism can be implemented in two ways:

• perform work better and more efficiently than competitors, making changes to the internal management system in matters that determine the level of costs;

• to improve the work by combining some operations or by abandoning the most costly actions.

Significant additional profit can be obtained by attracting more buyers by lowering the price. It is also possible to increase revenue by reducing costs without changing the pricing policy.

For the successful implementation of this strategy, the following conditions must be observed:

• high degree of price competition among market participants;
• the produced product (service) has standardized parameters and meets the requirements of potential buyers;
• the vast majority of buyers use the product the same way;
• the transition of buyers to an alternative product involves an increase in costs;
• demand for products is characterized by high price elasticity (the issue of price affects the behavior of the buyer more than the physical characteristics of the goods);
• there are large wholesale buyers who can sell significant volumes of products at a time;
• the manufacturer has access to inexpensive factors of production (not only raw materials and materials, but also labor).

The advantages of this competition strategy include the following:

• high profitability even with significant competition;
• the cost leader has significant resources to maintain stable prices while increasing the cost of production factors;
• crowding out substitute products from the market;
• positive image in the eyes of the consumer.

Nevertheless, one should not forget about the risks associated with the implementation of the cost leadership strategy:

• cost reduction by other manufacturers, which can lead to a protracted price war;
• the emergence of a new generation of goods that will kill all the competitive advantages of existing products;
• focusing on cost reduction distracts attention from changing market trends;
• change in the level of customer sensitivity to prices and reorientation to the quality parameters of the goods;
• unforeseen internal changes that may lead to the need for higher prices.

Wide differentiation strategy

Wide differentiation is a competition strategy, which implies the maximum difference between products and similar products of competitors. That is, products are becoming popular among customers whose needs cannot be met by the standard uniform assortment on the market. For the successful implementation of this strategy, company management should pay close attention to the study of customer requests and behavior. This will allow the organization:

• set a high price for a unique product;
• increase sales due to the distinctive characteristics of the product;
• to win the love of buyers for their brand.

For the successful implementation of this competitive advantage strategy, the following conditions must be met:

• There are many ways to convert a product;
• the buyer is clearly aware of the difference between the goods and is willing to pay for distinctive advantages;
• buyers in the market have different needs;
• main competitors do not use a differentiation approach;
• the latest technologies are constantly being introduced in production;
• products are characterized by high quality;
• quality after-sales service.

Differentiation can be carried out in the following areas:

• reduction of consumer costs associated with the operation of the purchased goods;
• increasing the usefulness of the product to the consumer;
• providing intangible benefits through the possession of goods (prestige, status, and so on);
• creation of additional consumer value that cannot be obtained from competitors' products.

Nevertheless, it is worth considering some of the risks that accompany the implementation of this competitive advantage strategy:

• there is no guarantee that the differentiation will receive a response from potential buyers;
• successful distinguishing features can be quickly copied by competitors;
• the price may exceed the benefits that the buyer will receive from differentiation.

Optimal cost strategy

The strategy of optimal costs is a strategy of price competition, which involves the simultaneous optimization of costs and differentiation of goods. Thus, the main goal is to produce goods with high consumer value at a better price than competitors. For the successful implementation of this strategy, the following conditions must be met:

• the company has enough resources to ensure high quality products (at or higher than competitors) with minimal costs;
• buyers value the distinctive qualities of the goods, but are price sensitive.

Nevertheless, the implementation of the hybrid competition strategy under consideration is fraught with some risks, such as:

• the likelihood of being defeated by companies that focus solely on cost reduction or solely on differentiation;
• crowding out of the segment customers with high sensitivity to price or quality.

Focused strategies

Focusing is a generalized strategy of competitive actions, which implies the choice of a narrow sphere of competition. The company selects a specific segment of the region and directs all its efforts to its service. Thus, the organization may not have competitive advantages throughout the industry, but it gets serious advantages in a particular segment.

There are two varieties of focused competitive strategies - competition at the expense of costs (cost advantage due to low costs) and competition due to differentiation (advantage due to the distinctive qualities of the product). The choice of option depends on the specifics of the segment that the company is focused on. This is a great option for organizations that do not have the means to service the entire industry.

For the successful implementation of a focused strategy, two conditions must be met:

• the selected segment is significantly different from the industry as a whole;
• competitors poorly satisfy the needs of this segment;
• the segment has the potential for further expansion;
• the industry is heterogeneous and has many segments so that the organization can choose the most attractive.

Also, this competition policy has several significant drawbacks:

• there is no guarantee that competitors will also not be interested in the selected segment and will not force the organization out of it;
• the needs and preferences of the segment participants may change;
• members of the segment may react to the product or not be interested in the proposed product.

International competition

There are several generally accepted strategies for competition in international markets. Namely:

• Transfer of rights to use technology and production of the organization’s own products to foreign organizations.
• Strengthening national production in order to export goods for sale on foreign markets through its own sales channels.
• Multinational focus, implying the development of a separate strategy for each country.
• Global low cost strategy.
• Global differentiation strategy.
• Global focusing strategy.

Identification and analysis of key competitors

Identification of strategic competitors and analysis of their activities is the primary task of the organization, whose leadership is aimed at success. This will help to choose the right direction of competition. Research activities are carried out in the following areas:

• Identification of rivals from the point of view of the market. To understand who your competitor is, you need to determine who else satisfies the same consumer needs that you do. At the same time, it is important not to show "competitive myopia", paying attention only to obvious rivals. It is necessary to identify all competitors - both real and potential.
• Determining the goals of competitors. It is important not only to understand the size of profit that organizations are striving for, but also in what way they are going to achieve these goals.
• Analysis of rival strategies. As a rule, the main rivals are those organizations that are guided by the most similar competitive strategies.
• Assessment of the strengths and weaknesses of competitors. It is important to objectively evaluate your rivals. Strengths will tell you how to "defend", and weaknesses - in what areas you can conduct an "attack".
• Assessment of possible reactions. Marketing professionals must be able to anticipate how competitors can respond to organizational moves.

Unfair competition

Unfortunately, competition in market conditions does not always occur on a fair basis. Many organizations violate generally accepted standards. Moreover, we are talking not only about the unwritten rules of decency in the market, but also about specific provisions of the law.

In accordance with Law 135-ФЗ "On Protection of Competition", unfair competition is the actions of business entities aimed at gaining market advantages and material benefits that are contrary to law, business customs, decency, fairness and reasonableness, which may result in harm to other business entities (material damage or damage to business reputation).

Also at the legislative level, the most common forms of unfair competition have been identified. In the same law 135-ФЗ "On Protection of Competition" these activities include:

• dissemination of false, unverified, unconfirmed or distorted information that may harm the business reputation of the business entity or cause him material damage;
• providing the consumer with false information regarding the quality and consumer properties of the goods, as well as the method and place of its production;
• incorrect comparison of own goods with similar goods that is produced by another business entity;
• illegal use for commercial purposes of another's intellectual property (means of individualization of a legal entity, means of individualization of products, and so on);
• receipt, use and disclosure of commercial information without prior consent of the legal entity.

Also in world practice, the following activities are classified as unfair competition and are prosecuted by law:

• bribing existing and potential customers of competitors;
• luring competitors;
• Artificially reducing prices to below market levels (dumping);
• intentional copying of a competitor’s business activity (assortment of goods, advertising campaign, social responsibility and so on);
• blackmail and other forms of force impact on a competitor;
• collusion of two or more companies against other market participants.

The main ways to protect against unfair competition

Despite the relevance of the issue of protection against unfair competition, this issue has not been worked out well enough in the domestic space. Nevertheless, the availability of relevant legislation and the entry of large foreign companies into the market gave impetus to serious progress in this area. You can highlight the following most common measures to protect against the consequences of unfair competition in the market:

• Complaint to the Federal Antimonopoly Service or its regional representative office. It is necessary to submit an application in which information on the actions of an economic entity falling within the definition of unfair competition will be set out. It is important that each paragraph described in the statement is not unfounded, but documented.
• Advertising rebuttal or counter advertising. The need to refute unfair advertising is spelled out in the Federal Law "On Advertising". If the relevant authorities have confirmed the violation, the guilty business entity undertakes to organize counter-advertising at its own expense. It should be distributed through the same channels as the initial (unfair) information, have the same amount of information and duration. The content of counter-advertising is discussed and agreed with the supervisory authority.
• The withdrawal of products from sale. Goods that are produced and sold through unfair competition can harm not only companies participating in the market, but also end consumers. Thus, when a fact of unfair competition is revealed, a company may be obliged not only to temporarily stop production and deliveries, but also to withdraw its goods from retail chains. If the guilty company refuses to comply with this requirement, the regulatory authorities have the right to seize the goods from the shelves on their own. Moreover, the culprit is obliged to cover the financial losses that customers suffered due to the seizure of goods.
• Cancellation of transactions. If the agreements concluded by the organization contradict the law and generally accepted competition rules, then the transactions themselves and their results may be canceled.