The basic unit of analysis for understanding competition is the industry. All industries, whether, service or products compete either directly or indirectly with each other. Strategically, distinct industry encompasses products, where the sources of competitive advantage are similar. Competitive strategy refers to how a firm will compete with its competitors in the market share by looking into its weaknesses or strengths and comparing it with its competitors. Firms have the option to focus on tiny market niches, if they cannot withstand competition from established firms in the same industry.
According to Porter (1998), competitive strategy must be approached after a careful understanding and analysis of the industry structure and how it changes. Whether local or international, Porter (1998) argues that the nature of the competition encompasses five forces; the threat of substitute product or a service, threat of new entrants, suppliers bargaining power, the bargaining power of consumers and the rivalry among existing competitors. However, there are different approaches to superior performance in any given industry. Each of these represents a fundamentally different conception of how to compete. They include; cost leadership strategy, differentiation strategy, focus differentiation and integrated cost leadership. There are two well known companies that have thrived well because of their competitive strategies. This has provided these firms with capabilities that help them achieve maximum consumer satisfaction. These companies include Wal-Mart stores and its main rival Target Corporation.
Wal-Mart is a well known retail company that thrived well on effective business competitive strategy. It is world’s biggest corporation (it replaced Exxon Mobil atop the Fortune 500 in 2002), in March 2003, Fortune ranked it as the most admired company in the world. Wal-Mart stores ensures that manufacturers see themselves, wholesalers, retailers and consumers as part of a single customer focused process rather than as participants in a series of transactions. Its strategy clearly was that the company ought to be able to work together to lower the cost of both the manufacturer and distributor and get lower cost for the consumers. The major competitive strategies are: providing excellent service, the motivational power to allow the entire workforce to own part of the organization, the strategy of everyday low prices, which presents a better deal for the clients and saves on merchandising and advertising costs. Wal-Mart’s main rival in the retail market today is Target Corporation. Consumer wants and needs come first with Target Corporation. This history has provided Target the basis for its differentiation.
Cost leadership strategy
It is a business strategy that involves a firm conducting value chain activities efficiently to achieve maximum profit despite having low priced merchandise. . Wal-Mart's stores focuses on selling high quality and brand name products at the lowest price. To achieve this, the company reduces costs by the use of advanced electronic technology and warehousing. It also negotiates deals for merchandise directly from manufacturers, and thus eliminating middleman. Through this, the company saves extra costs by abolishing the expense of recurrent promotions. For Alison and Kretschmer (2007), constant prices of goods further make sales more predictable, thus, sinking stock outs and surplus inventory. On the other hand, targets unique upscale discount store approach broadens its competitor list. Another aspect of the retail environment is the online shop. The company sells its products to an unlimited number of clients in the Diaspora.
Focuses on companies offering products or a service that is distinctively and unique from its competitors and the target customers are willing to pay more or higher price. Wal-Mart aims at satisfying the customer’s needs by providing them with access to quality goods, make them available where and when the consumers need them, to develop cost mechanisms that provide for competitive pricing and to build and uphold a reputation for unconditional trustworthiness. On the other hand, targets unique upscale discount store approach broadens its competitor list. Another aspect of the retail environment is the online shop: Like Target, On the other hand targets unique upscale discount store approach broadens its competitor list.
Focused cost leadership
This is based on the firm’s leaders not ignoring the bases of differentiation that customers value and for which they are willing to pay an extra expense. The responsibility of senior management at organization at that time was not to tell store managers what needed to be done, but to create an atmosphere where they could learn and apply best practices. Wal-Mart's community outreach focuses on the goals of providing customer satisfaction, involving itself with local community services, and providing scholarships. Its emphasis is on children and environmental issues. Greenfield (2006) reckons that Target employees care about their work and will take the initiative to improve it. It does so by providing the resources, tools, and training necessary and management listen to their ideas. Since companies are systems of highly interdependent parts, decision processes must be integrated and include participation from all affected functional areas.
Integrated cost leadership.
Porter, (1998) states that in most cases company leadership concentrate more on delivering a product of competitive advantage at the lowest cost and pass on the savings the consumer rather should also shift focus onto the consumer’s proposition of the products. Therefore, Wal-Mart installed video cable linking all its stores to the corporate control centre and to each other. Store managers frequently hold video conferences to compare notes on what is happening on the ground, such as, which products were selling and which ones were not. Which marketing technique worked and which techniques failed and why. Target products available from companies following an integrated cost leadership or differentiation strategy are less differentiated than products offered by differentiators, and costs are not as low as those of the low-cost leader (that produces standardized products).