Why Does Competitive Strategy Need More Than Just Market Research?
Competitive strategy is central to decision making challenges of an enterprise. Competition is perhaps the most continuous and troublesome problem enterprises need to deal with. Developing a competitive strategy is not simple.
It requires comprehensive collection of data and an intelligent method of its manipulation. The ability to calculate risks and develop plans. Moreover the ability to implement those plans is central to the competence of the enterprise.
Enterprises use strategies to position themselves better in the competitive environment. So that they may be able to deal with competition and avail opportunities. Enterprises need to be able deal with threats and risks in order to ensure their survival.
Moreover enterprises take into account their own weakness and abilities in order to develop strategies. So that they may be able to increase their return on investment ROI. Competitive strategy is developed by scanning the competitive environment.
The environment holds great wisdom for decision makers that often allows them to deal with complex problems. In fact scanning the environment often helps them deal with internal problems which strengthen the framework of business.
Competitive intelligence research strategy often involves market planning in order to deal with market obstacles. These are long term strategies that dictate the tactics to be used for short term objectives. These objectives involve dealing with competition, customer retention, increasing market shares, developing new products, venturing into new markets and much more.
Competitive strategies are beneficial not only for enterprises in face of competition. But also they help cover up gaps in the market. This provides more value to consumers. When competitors compete to propose greater value they become more consumer oriented which benefits the common people.
Customers get a better variety of products and services to choose from. And get better value that meets their needs and wants.
Micheal Porter's Competitive Strategy
Micheal Porter is Famous for his types of competitive strategies. These are traditionally seen as fundamental to marketing strategies. And so are taught in great detail to marketing students all around.
It involves selling your products at a lower price than the given market price of the same types of products. Hence businesses need to figure out ways to cut costs. So that they can have profit margins that can be used to generate capital.
Cost leadership is tilted towards making more sales than generating greater profit on one sales. Hence the strategy relies on making cheaper, easy to sell products that are sold in bulk for the masses. Hence businesses focus less on the quality of the product and more on its price.
Unlike cost leadership, cost focus is applied to a niche market. Or may be focused on a specific target of customers. Hence the business can dominate one segment using their pricing.
The idea is not to make products or services for the masses but to safeguard their position in a focused segment. So that a business can stabilize their position in the market.
This is a strategy from another dimension of Porter's strategies. Businesses focus on differentiating their products in terms of their uniqueness. Hence the product delivers value that is different to other products in the market.
These unique qualities are designed to dominate the market with their unique value propositions. Such as Quality, Pricing, premium services, Branding etc. So businesses charge premium pricing for providing such value. Which consumers are very much willing to pay since they won't get such value elsewhere
The word focus means that differentiation is done in a particular segment against competitors. This way businesses can provide specific value that meets specific demands. And so can safeguard their position in a niche market using a unique value proposition.
Market has become more competitive as markets have developed to be more buyer friendly. There are certain transformations in the market that have pushed decision makers to think beyond their traditional practices.
Decision makers and business executives started focusing on a tool that helped them guide through complicated problems. These aided them in coming up with useful strategies for their goals. Also stakeholders use this tool to create objectives and tasks for businesses to achieve. This tool is known as competitive intelligence. However to develop competitive strategies businesses often use intelligence to gather data, analyze it and convert it into useful intelligence. This intelligence is then used as a guide to competitive advantage.
Market intelligence is different from market research. Market intelligence focuses on not just what? and where? questions. But it's much deeper and more comprehensive and addresses How? as well. This means that it is more detailed and develops a better understanding of the situation.
Market research only provides an overview of the situation. However it does not provide insights into the market to calculate risks and opportunities involved. This is the reason large corporations have strong competitive intelligence practices to aid their decision making processes.
To develop new products and services, market research often proves insufficient. Producing something novel requires details that fit the market gap. Perhaps a detailed understanding of customers' minds would serve this purpose.
Such information can only be gathered using market intelligence practices. If an existing product is succeeding in the market is it because of the trend? Or maybe its design meets the needs of customers. Or perhaps it's the pricing that fits right. There may be an influence from the external environment that succeeds the product.
If Market research is just an observation. Then market intelligence is an investigation. Which means that market intelligence fuels competitive strategy far better than market research. Since the decision makers will have an understanding of not just what's happening but insights as to why it's happening.
This is the reason advanced business practice involves market intelligence rather than relying on research. Intelligence has grown to be much more accessible due to the advent of new practices like use of technology.
This means that even SMEs can use intelligence to develop effective strategies.