Competitive Strategies

Approaches to Marketing Strategy

Basic Competitive Strategies

Overall cost leadership: Here the company works hard to achieve the lowest production and distribution costs. Low costs let it price lower than its competitors and win a large market share. Texas Instruments, Dell Computer, and Wal-Mart are leading practitioners of this strategy.

Differentiation: Here the company concentrates on creating a highly differentiated product line and marketing program so that it comes across as the class leader in the industry. Most customers would prefer to own this brand if its price is not too high. IBM and Caterpillar follow this strategy in information technology products and services and heavy construction equipment, respectively.

Focus: Here the company focuses its effort on serving a few market segments well rather than going after the whole market. For example, Ritz-Carlton focuses on the top 5 percent of corporate and leisure travelers. Glassmaker AFG Industries focuses on users of tempered and colored glass. It makes 70 percent of the glass for microwave oven doors and 75 percent of the glass for shower doors and patio tabletops. Similarly, Hohner owns a stunning 85 percent of the harmonica market.

Operational excellence: The company provides superior value by leading its industry in price and convenience. It works to reduce costs and to create a lean and efficient value delivery system. It serves customers who want reliable, good-quality products or services, but who want them cheaply and easily. Examples include Wal-Mart, Southwest Airlines, and Dell Computer.

Customer intimacy: The company provides superior value by precisely segmenting its markets and tailoring its products or services to match exactly the needs of targeted customers. It specializes in satisfying unique customer needs through a close relationship with and intimate knowledge of the customer. It builds detailed customer databases for segmenting and targeting, and empowers its marketing people to respond quickly to customer needs. Customer-intimate companies serve customers who are willing to pay a premium to get precisely what they want. They will do almost anything to build long-term customer loyalty and to capture customer lifetime value. Examples include Nordstrom, Sony, Lexus, American Express, and British Airways.

Product leadership: The company provides superior value by offering a continuous stream of leading-edge products or services. It aims to make its own and competing products obsolete. Product leaders are open to new ideas, relentlessly pursue new solutions, and work to get new products to market quickly. They serve customers who want state-of-the-art products and services, regardless of the costs in terms of price or inconvenience. Examples include Intel, Motorola, and Microsoft.

Competitive Positions

Market Leader Strategies

Expanding the Total Demand

Protecting Market Share

Market Challenger Strategies

Market Follower Strategies

Flashy it isn't. "We want to be the dullest story in America," declares Dial's CEO… . Dial doesn't spend zillions to make its offerings household names across the nation. Instead, Dial prefers to coast in the slipstream of giant rivals, such as Procter & Gamble… . Instead of spending big on research and development or marketing, Dial leaves it to others… . And Dial lets other companies educate consumers about new products. P&G, for instance, introduced concentrated powder detergents in 1990. Dial followed over a year later with its own concentrated version, Purex—priced as much as one-third lower than P&G's Tide. Despite this low profile, the company does well in its markets. For example, Dial soap is America's number one antibacterial soap, and Purex has staked out a leadership position in the value segment of the laundry detergent market. Renuzit is the nation's number two air freshener brand, and Amour Star is number two in canned meats.¹⁵

Market Nicher Strategies

Logitech has become a $944 million global success story by focusing on human interface devices—computer mice, game controllers, keyboards, PC video cameras, and others. It makes every variation of computer mouse imaginable. Logitech turns out mice for left- and right-handed people, wireless mice, mice shaped like real mice for children, and 3-D mice that let the user appear to move behind screen objects. Breeding computer mice has been so successful that Logitech dominates the world market, with Microsoft as its runner-up. This year, Logitech had its best year ever. Revenues were up 28 percent and profits soared 66 percent.¹⁶

The First Commerce Bank in Charlotte, North Carolina, opened its doors in 1996 with a laser focus on serving the banking needs of small- to mid-size businesses. It offered extended business hours, Internet banking for cash management, and a courier service for daily pick-up of noncash deposits from small-business clients, most of whom have few employees and prefer to remain in the office. Early ads focused on First Commerce's small size and more personalized service, building on the insecurities that small-business owners have in dealing with large banks. One ad showed a huge tower with a headline that read, "Your loan application is in there somewhere." In just five years, First Commerce Bank grew from $1 million to $131 million in assets with three branches, no small accomplishment in a city filled with large national banks. The U.S. Small Business Administration recently named First Commerce the top community bank in North Carolina. "The big banks in Charlotte were so focused on [bigger game] that we've picked up some of their business," says CEO Wes Sturges. "Their crumbs are tasty morsels for us."¹⁷