Department of Management

Strategic management

Course work

Modern competitive strategies of the enterprise

Vladimir, 2010

Introduction

1.3 Modern competitive strategies: definitions, types of strategies and their requirements

2.3 Methods of strategic analysis

3. Selection of a competitive strategy for Kazanskaya confectionery factory"Dawn"

3.1 General characteristics of the company

3.2 Market Analysis

3.3 Choosing a competitive strategy for OAO Zarya.

Conclusion

Bibliography

competition market strategic

Introduction

Any company that starts its activity or is already operating, at the beginning of a new project, must clearly imagine the need for the future in financial, material, labor and intellectual resources, the sources of their receipt, and also be able to accurately calculate the efficiency of using resources available in the course of the company. In a market economy, entrepreneurs should not count on a stable income and success without clear and effective planning of their activities, constant collection and accumulation of information about both the state of target markets, the position of competitors in them, and their own capabilities and prospects. One of the main areas of strategic planning is business planning, which provides for a development perspective, if it is correctly drawn up and answers the most important question for a businessman - is it worth investing in a particular project, will it bring income that can pay for everything expenditure of manpower and resources. Competitive strategies are an important and integral part of modern market relations. A firm or an enterprise builds its competitive strategy based on its position in the market, i.e. whether it is a market leader, a contender for leadership, a follower or a niche inhabitant. Conducts an analysis of its competitors and evaluates its capabilities, and only then chooses a suitable competitive strategy for itself.

Each segment is characterized by original consumer behavior, and, therefore, its own competitive strategy, which can be best implemented by an enterprise in this segment. In competitive struggle, you can follow offensive and defensive strategies. Any competitive advantage is continuously attacked by competitors, especially those rich in resources. There are two main reasons to go hand-to-hand with competitors, pitting competitive advantages against each other. The first is an attempt to win market space by outperforming the strengths of a weaker competitor. An attack by a weaker opponent at the time of his greatest strength brings a decisive victory and leading position in competition. Another reason is the need to negate the competitive advantages of one or more competitors. The criterion for the success of such tactics is the comparison of the costs of the attack with the benefits obtained. When attacking a competitor's weaknesses, the attacker redirects their strengths and resources directly to the opponent's weaknesses. Attacks on competitors' weaknesses are more likely to succeed than attacks on their strengths. In the market, all firms can be attacked by competitors (including new market entrants and firms seeking to improve their position).

The object of study of this work is such a phenomenon as competition.

The subject of the course work is modern competitive strategies.

Purpose of the study:

To reveal and analyze the concept of "modern competitive strategies", identify their main types and requirements for them and determine their effectiveness.

Research objectives:

1. find and analyze the concept of "modern competitive strategies";

2. identify the main types of competitive strategies and the requirements for their implementation, give examples of the application of strategies;

3. to determine the effectiveness of competitive strategies in market relations on the example of an enterprise.

1. The concept of competition and its role in the activities of the enterprise

1.1 Competition. Essence, types

Competition is rivalry in any segment of the market between separate legal entities or individuals (competitors) interested in achieving the same goal. This goal is to maximize profits by winning consumer preferences.

There are 4 main types of competition:

pure (perfect) competition;

monopolistic competition;

· oligopoly;

a pure monopoly.

But looking deeper, you can expand the list to 6 items:

functional competition - based on the fact that the same consumer need can be satisfied in different ways;

Specific competition is competition between similar goods, but different in design;

subject competition is competition between similar products, but different in product quality and brand attractiveness;

price competition - price reduction increases sales, leads to market expansion;

Hidden price competition: selling personal goods at the price of a competitor, reducing the price of consumption of goods;

Consider the main types of competition.

The market of pure (perfect) competition

It is characterized by the fact that in the struggle for the attention and money of buyers, many manufacturers of the same type, standardized goods face each other. At the same time, none of them has control over such a market share that allows him to impose favorable terms of sale on the others.

There are no barriers to entry into the industry and non-price competition under pure competition. This is exactly how artisans once competed in the bazaars of ancient cities, and this is how small producers of agricultural products compete with each other to this day.

Economists call such competition perfect because here it develops without any restrictions, and market equilibrium is achieved as a result of mass transactions of sellers and buyers who cannot impose their will on each other and are forced to seek a compromise in the form of a market price (market equilibrium price). In such a situation, the advantages of market mechanisms (however, as well as their shortcomings) are most fully manifested.

It is the market of perfect competition that most accurately describes the interaction of supply and demand.

Monopolistic competition market

Economists talk about the emergence of monopolistic competition in the case when, in order to satisfy the same need, sellers begin to offer buyers analogous goods - various goods that differ from each other in some features, but satisfy the same need of buyers.

For example, televisions satisfy the same need of buyers - the desire to watch TV shows. But each company that manufactures TVs offers the buyer products that are slightly different from each other: the number of channels received, the design of the case, the sound quality, etc. At the same time, a certain brand of TVs is offered to the market by only one company that has patents for the technical solutions implemented in this brand.

If there are many such firms, then we are dealing with monopolistic competition. This is a type of market situation in which the monopoly power of each firm extends only to the production of a particular variety of goods, but not to control over the market of all goods of the same type. Firms, in such competition, enter the industry relatively easily, with significant emphasis on advertising, trademarks, brands, etc. This type of competition was born after the creation of a system for protecting copyright and trademark rights through patents.

It is precisely because of this legal protection of the manufacturer's rights to exclusive ownership of trade names and trade secrets that other firms cannot produce their products under the same name and with exactly the same properties as the products protected by the patent. Therefore, each company has to enter the world of competition under its own name and with its own developments.

Market of oligopolistic competition (oligopoly)

If some firms manage to come up with the most attractive variety of goods for buyers or attract the largest number of buyers at the expense of low prices, they can eventually force out other, less successful sellers from the market. And then these few largest firms will become the masters of the market, competing only among themselves.

This situation was typical, for example, for Russian market cars. The planning authorities of the USSR shaped this industry in such a way that there were only three main manufacturers in it: VAZ (manufacturer of the Zhiguli), AZLK (manufacturer of Muscovites) and GAZ (manufacturer of the Volga). These are machines of various classes, and each class of machines is produced by only one plant.

The oligopoly situation in the domestic car market was destroyed only by the mass appearance of foreign-made cars in the domestic market. It is easy to guess that in the market of oligopolistic competition, the ability of buyers to negotiate the best purchase conditions for themselves is even less than in the market of monopolistic competition. After all, almost all goods of a certain type are produced and offered for sale by only a few firms, and there is no one else to buy it from.

Pure monopoly market

In such a market for the buyer, the worst conditions are formed. Under a pure monopoly, the buyer's ability to bargain becomes extremely limited, since there is simply no alternative manufacturer (seller). This is how the economic life in our country was arranged.

A huge share of products (especially complex technical ones) was produced here by just one enterprise - an absolute monopolist. It is clear that in this case the only method of the buyer's struggle against the omnipotence of the monopolist-manufacturer is simply not to buy the goods. But not always this method can be used. If the buyer cannot do without a commodity, he will be forced to buy it even at the cost of giving up other goods.

After we have considered the types of competition, it is necessary to learn how to behave in the market with a certain competition. That is to develop a competitive strategy.

1.2 The main competitive strategies of the enterprise

Competitive strategy is the company's desire to take a competitive market position in the industry - that is, in the main arena where rivals fight. Competitive strategy aims to achieve a stable and profitable position that allows the company to withstand the onslaught of the forces that determine the competitive struggle in the industry by strengthening competitive advantages over rivals in the market.

How to choose a strategy? The profitability of the industry is one of the important factors determining the choice of a competitive strategy. The second central problem in choosing a competitive strategy is the positioning of the company within a particular industry. Depending on its positioning relative to other market participants, its earnings will be above or below the industry average. A company in a favorable position will earn high profits even if the industry structure turns out to be unfavorable, and the average profitability due to this circumstance will be low. The basis of the company's effective operation in the long term is a sustainable competitive advantage. And although each company has a large number of strengths and weaknesses compared to competitors, they can usually have only two types of competitive advantages: low costs and product differentiation.

The two main types of competitive advantage, combined with the area in which a company seeks to achieve these advantages, allow it to develop three of the most common competitive strategies with which to achieve a level of efficiency above the industry average: cost leadership, differentiation and focusing. The focus strategy has two varieties: cost focus and differentiation focus. These three strategies are shown in Fig. one.

Picture 1.

The main thing to understand about the most common strategies is that each of these strategies is inherently focused on obtaining certain competitive advantages and in order to achieve these advantages, the company must make a choice, that is, decide what type of competitive advantages it needs. and to what extent the company will achieve these benefits. It is impossible to be "everything for everyone" - this is a strategic recipe for mediocre and ineffective activity; often this means that the company lacks any competitive advantage.

Cost minimization

Of the three most common strategies, cost minimization is perhaps the most obvious and understandable. As part of this strategy, the company aims to establish low-cost production of goods in the industry. Typically, such a company has a wide scope of activity: the company serves several segments of the industry, while capturing related industries whenever possible. Often, it is this broad scope of activities that allows the company to achieve leadership in minimizing costs. The sources of cost advantages can be very diverse and vary by industry type. This can be efficiency gains due to economies of scale, own proprietary technologies, special access rights to raw material sources, and many other factors. For example, in the television industry, cost leadership includes optimally sized picture tubes, low-cost design, automated assembly, and global production scale that fund research and development. If a company provides security services, the cost advantage comes from low overheads, an abundance of low-cost labor, and effective training programs required by the high employee turnover in the industry. Being a low-cost producer is not just about taking advantage of the learning curve. Such manufacturers must constantly look for new sources of cost advantage and make the most of them.

If a company manages to achieve an undisputed lead in cost reduction and maintain this advantage over time, the efficiency of such a company will far exceed the average market level - but provided that the company can keep the prices of its products at the average level for this industry or at the level slightly higher than it. A company that is a leader in cost reduction will, thanks to this advantage, earn high profits even at prices comparable to competitors, or at lower prices than competitors. However, such a company should not forget about the basics of differentiation. The company's product must be evaluated by buyers as comparable to competitors' products, or at least quite acceptable, otherwise the company, even being a leader in minimizing costs, will be forced to significantly reduce product prices in order for sales to reach the required indicators. And this can negate any benefits accruing from a cost-cutting position. For example, Texas Instruments (watch manufacturing) and Northwest Airlines (air travel) fell into this trap: both companies managed to significantly minimize their costs. But then Texas Instruments couldn't solve the problem of product differentiation and had to leave the market. Northwest Airlines discovered the problem in time, and management made efforts to improve marketing, passenger service, and ticketing services so that the company's products were in no way inferior to competitors' products.

Thus, no matter how much a company relies on competitive advantages in the form of cost reduction, it must still achieve equality, or at least approximate equality, in the basis of differentiation of its products in relation to competitors' products - only in this case the company will be able to reach efficiency indicators that exceed average level. Equality in the bases of differentiation allows a company that is a leader in minimizing costs to directly translate its low cost advantage into high profits—higher than those of its competitors. But even if the bases of differentiation are approximately equal, the low prices necessary to gain control over the desired market share in no way affect the leader's cost-minimizing advantage, as a result of which the leader receives higher incomes than the market average.

The logic of a cost-minimizing leadership strategy usually requires the company to become the sole leader, and not just be part of a group of those who aspire to this position. Many companies that refused to acknowledge this fact made a serious strategic mistake. When there are several candidates for the position of leader in minimizing costs, the rivalry between them becomes especially fierce - after all, each, even the smallest, market segment begins to be of decisive importance. And until one of the companies takes the lead, "convincing" the rest of the competitors to change strategy, the consequences of this struggle for profitability (and also for the structure of the industry in the long term) can be very detrimental, and this has been the case with several petrochemical enterprises. industry. Thus, the strategy of cost leadership is basically based on the priority right to have a certain advantage - and the company is forced to give up this right, unless at some point it has the opportunity to radically change its position in relation to costs thanks to major technological advances.

Differentiation

The second of the most common competitive strategies is the strategy of differentiation, which consists in the fact that the company tries to establish a unique position in an industry, giving the product characteristics that will be appreciated by a large number of buyers. There can be one or more such characteristics or attributes - the main thing is that they are really important for buyers.

In this case, a company whose products satisfy certain customer needs through these attributes positions itself in some unique way, and the reward for this uniqueness is the willingness of customers to pay high prices for the company's products.

Ways to differentiate differ from industry to industry. Differentiation may be based on unique properties the product itself, implementation features, special marketing approaches, as well as a wide variety of other factors. For example, in the construction equipment industry, Caterpillar's product differentiation is based on long machine life, maintenance, parts availability, and an excellent dealer network. In the perfumery and cosmetics industry, the basis of differentiation is most often the image of the product and its placement on the shelves of department stores.

A company that can differentiate products in some way and maintain a chosen direction for a long period will perform more efficiently than the average company in the industry - but only if the markups on the company's goods exceed the additional costs of differentiation, that is, to to make the product unique. A company that chooses a differentiation strategy must therefore constantly look for new ways to differentiate—ones that can generate profits that outweigh the costs of differentiation itself. But a company following the path of differentiation should not forget about costs: any, even the highest mark-ups, will not lead to anything if the company takes a disadvantageous position in terms of costs. Thus, if a company chooses differentiation as a strategy, it should strive for cost parity or near parity with its competitors by cutting costs in all areas not directly related to the chosen direction of differentiation.

The logic of the differentiation strategy requires that the company bases differentiation on such attributes of the product that would distinguish it from the product of competing companies. If a company wants to pay a high price for its products, it must be truly unique or perceived as unique by customers. But unlike the cost leadership strategy, the implementation of a differentiation strategy does not require the presence of only one leader in the industry - in this case, there may be several companies that successfully implement the differentiation strategy, but provided that the products in this industry have several parameters that are especially valued buyers.

Focusing

The third general competitive strategy is the focus strategy. This strategy differs from the others: it is based on the choice of a narrow area of ​​competition within a particular industry. A company that has chosen a focus strategy selects a specific segment or group of industry segments and directs its activities to serve exclusively this segment or segments. By optimizing its strategy in accordance with target segments, the company tries to gain certain competitive advantages in these segments, although it may not have overall competitive advantages within the entire industry.

The focusing strategy comes in two varieties. Focusing on costs is a strategy in which a company, operating in its target segment, tries to gain an advantage at the expense of low costs. By focusing on differentiation, a company differentiates in its target segment. Both strategy options are based on the features that distinguish the selected target segment from other segments of the industry. The target segment is likely to include both customers with special needs and production and distribution systems that best suit them and differ on this basis from industry standards. When focusing on costs, the company takes advantage of differences in their structure in various sectors of the industry, while when focusing on differentiation, the company benefits from the fact that in certain market segments there are special groups of buyers with special needs. The existence of such differences in cost structure and consumer demand suggests that these segments are poorly served by broad-based competitors - such companies serve these special segments on an equal footing with everyone else. In this case, the company that has chosen the focus strategy gains competitive advantages by fully focusing its work on this segment. It doesn't matter if it's a narrow segment or a broad segment: the essence of the focus strategy is that the company receives income from those features of this segment that distinguish it from other sectors of the industry. A narrow specialization in itself is not enough for a company to achieve performance indicators that will be above the market average.

Consider the example of Hammermill Paper. The work of this company is an excellent example of the implementation of a focus strategy: the company chose a strategy based on differences in the production process, and then optimized its production in accordance with the chosen target segment. Hammermill is moving more and more towards the production of relatively small batches of high quality paper for specific applications, whereas large companies whose equipment is set up to produce large batches would suffer significant losses by producing such a product. Hammermill equipment is more suitable for the production of small batches of goods and frequent reconfiguration for certain product parameters.

A company that has chosen focusing as a competitive strategy has a significant advantage over competitors with a broad specialization, namely: such a company can choose the direction of optimization - differentiation or cost reduction. For example, it is possible that competitors are not serving a particular market segment well enough to satisfy the needs of buyers in this sector, and then the company has excellent opportunities to focus on differentiation. On the other hand, broad-based competitors are likely to spend too much money and effort on serving this segment, which means that their costs of satisfying the needs of buyers in this segment are too high. In this case, the company has an option to focus on costs - after all, you can reduce costs by spending money solely on meeting the needs of customers in this segment, and nothing more.

If the target segment chosen by the company is no different from other segments, the focus strategy will not bring the desired results. For example, in the soft drink industry, Coca-Cola and Pepsi produce a wide range of products with different compositions and tastes, while Royal Crown decided to specialize in the production of only cola. The segment chosen by the company is already well served by Coke and Pepsi, even though these companies also serve other segments. Therefore, Coke and Pepsi have a distinct advantage over Royal Crown in the cola segment of the market, thanks to the fact that they produce a wider range of products.

The performance of a company that has chosen a focus strategy will be above the industry average if

a) the company will be able to achieve sustainable leadership in its segment in minimizing costs (focusing on costs) or to differentiate its product in this segment as much as possible (focusing on differentiation);

b) in this case, the segment will be attractive in terms of its structure. The structural attractiveness of a segment is a prerequisite, as some segments in an industry will be inherently less profitable than others.

Often the industry provides opportunities for the successful implementation of several long term strategies focusing, but only if the companies choosing this strategy pursue it in different segments. In most industries, several different segments can be identified, with specific customer needs or specific production and delivery systems, making these segments excellent testing grounds for a focus strategy.

So. Cost leadership and differentiation strategies typically focus on gaining competitive advantage across a broad range of industry segments, while focus strategies focus on gaining cost advantage or differentiation in narrow industry segments. The specific actions required to implement each strategy will vary depending on the type of industry, and the possibilities of implementing a particular general strategy in a particular industry will also be different. It is not easy to choose a general strategy, and even more difficult to implement it in practice, but there are logically "built" ways to gain competitive advantage, and these ways can be tried in any industry.

Can more than one strategy be implemented at the same time?

Any of the most common competitive strategies is a fundamentally different approach to gaining competitive advantage and how to maintain it over a long period of time. Each such strategy combines a certain type of competitive advantage that the firm is trying to achieve, as well as the scope of the strategic goal.

Usually a company must choose for itself a specific type of both, otherwise it will find itself stuck between leaders and laggards. For example, if a company tries to simultaneously serve a large number of diverse market segments by choosing to focus on cost or differentiation, it loses the benefits that it could gain by optimizing its strategy for a specific target segment (focusing).

1.3 Modern competitive strategies: definitions, types of strategies and their requirements

Philip Kotler identified four types of competitive strategies based on the market share occupied by the firm:

1. strategies of the market leader;

2. leadership aspirant strategies;

3. follower strategies;

4. Niche dweller strategies.

Leader strategies

A leading firm is a firm that occupies a large part of the market share of a particular product, dominates it, in comparison with other market participants, and its competitors recognize this as well. In order to retain a dominant position, the leader must strive to expand the market as a whole and its segment, find new consumers, reduce prices by reducing costs, etc. For such an organization, any strategy is justified if it leads to an increase in profitability, and the risk associated with it is small. Such companies usually set an example for their competitors by setting and changing pricing policies, expanding market share, and so on. (Lukoil, Gazprom, Coca-cola, IBM, Xerox and others.)

Market expansion

When the market expands, as a rule, the leader wins. This strategy can be implemented in the following ways:

1. Attract new customers.

2. New ways to use the product.

3. Increasing the intensity of product use. This is an attempt to convince consumers to increase the intensity of use of the company's products.

This strategy is usually chosen in the early stages. life cycle goods, while demand is still expanding, and the pressure of competitors, in the presence of a large growth potential, is not yet great.

Defensive strategy

The goal of a defensive strategy is to protect your market share by countering the most dangerous competitors. It is often adopted by an innovator firm that, after it has opened up a new market, is attacked by imitation competitors. Currently, it is generally accepted that the dominant company has the ability to use six defensive strategies:

1. Positional defense. Aimed at creating insurmountable barriers around its current position; in its pure form rarely leads to success, as it must be accompanied by a change in marketing policy and adaptation to change external environment. best method defense is a continuous product upgrade.

2. Flank defense. It is aimed at protecting the most vulnerable places in the organization's position in the market, where competitors can first of all direct their attacks.

3. Preemptive defense. It is based on anticipatory actions that make a potential attack by competitors impossible or significantly weaken it, for example, by anticipating the appearance of a new competitor on the market, you can reduce the price of your products. Preemptive defense is often purely psychological character when the market leader warns competitors against reckless attacks.

4. Counterattack. Used by the leader when pre-emptive and flanking defensive strategies fail. The leader can pause to see the weaknesses of the attacking competitor, and then hit for sure (for example, by contrasting the reliability of their products with the flaws in the competitor's new products in advertising). The most effective strategy has proved to be defense, reconnaissance of the gaps formed in the ranks of the advancing, concentration of forces and a decisive offensive. Another method of counterattack is the invasion of the enemy's main territory, forcing him to return troops to protect his ancestral lands. Another common form of counterattack is an economic or political blockade of a competitor. The leader has the ability to subsidize price cuts for some products (usually the most profitable for competitors) at the expense of other products or announce the preparation of a new product so that consumers stop buying from a competitor. Another step is lobbying for the holding by the executive or legislative power of shares unfavorable to a competitor.

5. Mobile defense. Aimed at expanding its activities to new markets in order to create a springboard for future defensive and offensive actions. By expanding the market, an organization shifts its focus from its current product to a better understanding of the underlying needs of its customers across the full spectrum of the organization's technological and other capabilities. Due to the significant potential of the leader, this makes attacks from competitors unpromising. Market expansion implies that the company shifts attention from a specific product to the needs that satisfy this class of goods as a whole, conducts research and development work along the entire technological chain. Shrinking Defense. It is based on the “surrender” of weakened market territories to competitors while concentrating resources on more significant and stronger ones; allows you to save resources, rationally use the funds allocated for marketing activities.

Market share expansion

Market leaders have the opportunity to increase profits by expanding their market share. One percent of many markets are worth tens of millions of dollars. The expansion of the market share served does not mean an automatic increase in profits. Much depends on the company's market expansion strategy. Because the costs of market expansion can far outweigh the revenue generated, a company should carefully consider the impact of the following factors:

1. Potential conflict with antitrust laws. The expansion of the dominant company's market share is usually accompanied by competitors' claims to "monopolize" the market. An increase in risk reduces the attractiveness of expanding market share.

2. Economic costs. It is known that the profitability of a company when it reaches a certain market share may decrease. A company that owns 60% of the market must be aware that some consumers are in principle negative about any monopoly, others are loyal to competing suppliers, others have specific needs, and others prefer to deal with small companies. The company will face significant costs for legal fees, maintaining relations with the press and lobbying for market expansion. In general, expanding market share is not feasible when a company cannot realize economies of scale or experience, if there are unattractive market segments, if consumers want to use different sources of supply, and if barriers to exit are high. An industry leader should focus on expanding the market as a whole rather than fighting for market share.

3. The possibility of a wrong strategy aimed at expanding market share and reducing profits. High market share leads to increased profits when the company's unit costs are reduced, when it offers a product of exceptionally high quality, setting a corresponding premium on the price. Companies with high market share have been found to outperform their competitors in three areas: new product development, relative product quality, and marketing spend.

1. Companies with significant market share develop and introduce more new products.

2. Companies that have managed to improve the quality of their products relative to competitors' products are more likely to expand their market share compared to companies whose product quality is stable or declining.

3. Companies whose marketing spending growth rate exceeds the market growth rate tend to increase their market share. The increase in marketing costs has a positive effect on the expansion of the market for both consumer goods and industrial products. The increase in advertising spending has a positive effect on expanding the market share of predominantly consumer goods. Increasing the cost of promoting goods is effective for all types of goods.

4. A significant (compared to competitors) price reduction for products does not allow the company to significantly increase market share, since some competitors respond with less significant price reductions, while others will offer consumers additional benefits for the same price.

Leadership Strategies

Applicants for leadership are aggressively attacking the leader and other competitors along the front, using all possible and impossible strategies and attacks. A bidder can wage a price war, lower production costs and therefore prices, produce prestige or unusual goods, expand product lines, develop new products, improve distribution channels, improve service levels, or launch a brilliant advertising campaign. There are many examples when a company claiming leadership knocked the ground out from under the feet of the favorite and bypassed it. The advantage of the challenger is that he is guided by a high goal and concentrates his limited resources on achieving it.

To begin with, the challenger must define the goals of the strategy (many firms have a long-term goal of expanding market share) and the object of attack:

1. Attack on the position of the leader. This is a rather risky strategy, but also potentially the most effective. The best target for attack is a large segment of the market, to which the leader directs little effort, or consumers are dissatisfied with the quality of his product or services. First of all, it is necessary to conduct a study of the needs of consumers and the degree of their satisfaction. There is another way - to capture the leader segment by releasing a fundamentally new product. (For example: Canon won a significant share of the Xerox market by introducing portable copiers).

2. An attack on similarly sized competing firms that are unable to cope with meeting the needs of customers, have a difficult financial situation, their products are not in demand due to low quality or / high prices.

3. An attack on small local and regional firms that are in a difficult financial situation and unable to meet the needs of consumers.

offensive strategies

The company decided on the goals and the object of the attack. Then you need to choose one of five offensive strategies.

1. Frontal offensive. This is a concentrated blow to the main strengths of a competitor: its product, prices and its advertising. It is reasonable to use this strategy when the firm has at least three times more human and financial resources than the target of the attack. One of the types of such an offensive is a price war, but lowering the price of a product is effective in the following cases: if the market leader does not take retaliatory steps; if you manage to convince the market that your product is not inferior in quality to the leader's products, but is sold at a lower price. The second form of aggressive pricing is based on large investments by the attacker in technology upgrades aimed at reducing production costs and subsequent price reductions, in which Japanese companies have been particularly successful.

2. Flank offensive. Represents a real marketing flair, usually used by companies with limited resources. Represents an attack on a competitor's most vulnerable spots. It can manifest itself either in a geographical sense: the company occupies places not covered by the leading competitor; or segmentation: determines the needs of consumers that are not thought out by the competitor and satisfies them. Flanking strategy is the ability to identify and fill gaps between supply and demand. In contrast to the fierce competition of companies competing in the same market, an effective flank attack allows you to better meet the needs of consumers. Flanking is an offensive in the best traditions of modern marketing philosophy, which proclaims that the purpose of marketing is to identify and satisfy the needs of consumers. Obviously, a flank attack is more effective than a frontal attack.

3. Attempt to encircle. It implies offensive actions against the enemy in several directions at once: both along the front, and from the flank, and from the rear, when the attacking side offers the market everything the same as its competitor, only in some ways its product is a little better, so that the consumer does not was able to refuse the offer. An encirclement attempt makes sense only when the attacker's leadership has significant resources and believes that a surprise attack will crush the defender's will to resist.

4. Detour maneuver. It involves an attack on the most accessible markets, which expands the company's resource potential. Upon reaching a certain level of development, the company attacks and moves the front line to its territory, where it has an undoubted advantage.

5. Guerrilla warfare. It consists in small but multiple attacks of competitors from all sides: selective price cuts, intense blitz campaigns to promote goods, or, as an exception, legal actions. It is a misconception that guerrilla warfare is a strategic alternative for resource-constrained companies. Its maintenance is very expensive. Moreover, guerrilla fighting is more of a preparation for war. The only effective response to an aggressor partisan is a swift counterattack.

Attacking strategies

The strategies discussed earlier allow you to determine the general direction of the company. A company that claims to be a leader must transform the overall strategy into a set of specific actions to expand market share.

1. Discount strategy. A company that claims to be a market leader can set prices low compared to prices for similar products of the leader. This technique is the basis of the strategy of such retail chains. An effective discount strategy involves three conditions: the company convinces customers that its products and services are not inferior in quality to the products and services of the leader; buyers are sensitive to price differences and do not experience discomfort when changing suppliers; the market leader keeps prices at the same level without reacting to a competitor's attack.

2. Strategy of cheaper goods. The candidate for leadership has the opportunity to offer products of average or low quality at a much lower price. The use of this strategy is advisable in the case when a significant segment of buyers is only interested in price. Companies using this strategy are likely to be attacked by firms whose products are even cheaper. In this case, the defenders should concentrate their efforts on improving the quality of products.

3. Prestige goods strategy. The challenger for leadership offers higher quality products at a higher price than the market leader. After some time, the company, taking advantage of the high reputation of its brand, expands production at the expense of cheaper products.

4. Strategy for expanding the product range. The leadership challenger attacks the leader, giving buyers wide choose products.

5. Innovation strategy. The challenger must constantly disturb the leader by offering the market new types of products.

6. Strategy to improve the level of service. The applicant offers new or better services to customers

7. Strategy for innovation in distribution. The applicant must create new distribution channels for products. (Avon was able to strengthen its position in the market by developing sales through network marketing, without being distracted by battles with competitors for leadership on the shelves of department stores).

8. Strategy to reduce production costs. The applicant must strive to reduce production costs by increasing procurement efficiency, reducing labor costs and/or using modern production equipment which allows for a more aggressive pricing policy.

9. Intensive advertising. Some challengers attack the leader by increasing their advertising spending. However, increased advertising costs are justified only in cases where the applicant produces a truly competitive product or its advertising exceeds the advertising messages of the market leader.

Usually, to expand the market share, the applicant has to use a combination of the strategies described above, and his success is determined by the most effective combination of them.

Follower strategies

These include companies that seek to maintain their market share and circumvent all the "pitfalls", while imitating a specific "foreign" strategy. However, followers can also pursue strategies aimed at maintaining and increasing the market segment. True, following the leader does not at all imply ordinary copying - the follower must lead his own growth strategy, and one that does not provoke aggressive retaliatory actions from competitors. There are 4 strategies of followers: imitator, double, imitator or opportunist.

1. Imitator. Duplicates the leader's product and packaging, selling the product on the black market or dubious intermediaries. (Companies such as Apple Computer and Rolex constantly face the problem of fakes, especially in the Far East.)

2. Double. Copies products, up to a slightly modified brand name.

3. Simulator. Something copies from the leader, but retains differences in packaging, advertising, prices, etc. Its policy does not bother the leader as long as the imitator does not launch aggressive attacks, moreover, the imitator helps the leader avoid a complete monopoly in the industry.

4. Adaptor. Usually modifies or improves the leader's product. He starts in some other markets to avoid a direct confrontation with the leader, very often the opportunist becomes a challenger. Many Japanese companies have gone this way.

Although the follower does not incur research costs, he usually earns less than the leader.

Niche Strategies

The firm serves small segments of the market, and does not compete with large firms. Its feature is specialization in a particular product/service. Recently, large firms have also begun to pay attention to this strategy.

A company that has chosen a certain niche achieves a significant increase in added value and profit; it focuses on high margin profits, while mass-market companies focus on large profit margins.

The key idea of ​​a niche is specialization. Companies that operate in niches choose one of the following roles:

1. Specialization by end users Specialization by vertical.

2. Specialization according to the size and importance of clients. The company focuses on serving small, medium or large customers.

3. Geographic specialization. The company sells goods/services in a particular locality or region.

4. Product specialization. The company produces only a certain product or its own single product line. Specialization in individual customer service.

5. Specialization in a certain ratio of quality and price. The company is engaged in the production of either high-quality or cheap products.

6. Specialization in service. The firm offers one or more unique services that are not provided by its competitors.

7. Specialization in distribution channels. The firm specializes in the development of a single distribution channel. Since the position in the niche may change, the company must take care to create new niches. It is worth noting that by operating in two or more niches, the company increases its chances of survival in an atmosphere of fierce competition.

To be successful in today's economy, a firm must focus on its competitors, ie. avoid their strengths and look for their weaknesses, then launch a marketing attack on these weaknesses. A firm does not have to be the best in every area of ​​its activity. You can focus your efforts in several areas, achieve excellent results in them, and even lead, and be “on the sidelines” in the rest

2. Strategic analysis of the enterprise in a competitive environment

2.1 Strategic management of an enterprise in conditions of hypercompetition

Strategic management is a set of measures developed by an enterprise to implement long-term plans for the development of production, staff, expected sales and profits. Strategic management in modern conditions is the prerogative of only a few enterprises that are able to change the factors of not only the internal, but also the external environment, based on the "philosophy" of the existence of the company, its mission. Among the potentially manageable factors of the external environment, one should name competitors, the influence on which is feasible indirectly: through consumers.

Strategic management should be aimed at maintaining the competitiveness of the enterprise, which is determined by many factors: the quality, price of products, the dynamics of its output, the motivation of the enterprise's consumer activity, the quality of the workforce, etc. The assessment of these factors, the definition of priorities, their relationship, as well as competitor analysis, market segmentation, the decision to release goods based on the market environment of the enterprise is the starting point of strategic management within the framework of the company's competitive strategy.

Supercompetition is manifested in various aspects of the company's activities both in the internal environment and in the external environment: the emergence of new technologies, know-how, the rapid change in product markets and consumer concepts, manifested in domestic and foreign industry competition, changing systems in the field of knowledge. Strategic management in this regard should be based on continuous market assessment, taking into account the time parameter of competition, which will be the key to flexible and adequate successful adaptation of the enterprise in today's super-competitive environment.

Most classical approaches to strategic management do not pay enough attention to the relationship between the formulation of the company's goals and measures for their implementation, as well as the mechanisms for monitoring the achievement of these goals. The situation is also aggravated by the fact that many company executives still use only direct financial performance indicators for decision-making. But they cannot predict the future with their help, since they are mostly focused on the past and contain little control information necessary for making strategic decisions. Only by looking at the causes of financial failures (lower demand, imperfect processes, etc.) can alarming deviations that affect the achievement of strategic goals be identified at an early stage.

2.2 Threats to the enterprise. Competitive forces

There are five competitive forces that determine the attractiveness of an industry and the position of a given organization in the competitive struggle, namely:

1. Entry of competitors. How easy or difficult is it for new entrants to start competing, what barriers exist.

2. Threat of substitutes. How easy it is to replace a product or service, in particular, to reduce the cost.

3. Bargaining power of buyers. How strong is the position of buyers. Can they jointly order large volumes of products.

4. Bargaining power of suppliers. How strong is the position of the sellers. Are there many potential suppliers or only a few, a monopoly?

5. Rivalry among the existing players. Is there strong competition between existing players? Is there a dominant player or is everyone equal in strength and size.

How exactly these forces act on enterprises can be seen in Figure 2.

Figure 2

The profitability of the industry as a whole is determined by the action of the above five forces, since it is they that affect the prices, costs and level of required investments of companies operating in the industry - all these elements are also components of the return on investment. The bargaining power of buyers directly influences what prices a company can charge for its products. Similarly, the threat from substitute products (substitutes) affects prices. The bargaining power of buyers also determines the size of costs and investments - "powerful" buyers require expensive maintenance. The cost of raw materials and other materials depends on the bargaining power of suppliers. The intensity of competition also affects prices, as well as the costs of competition, in areas such as manufacturing, product development, advertising, and sales. The constant threat of the emergence of new competitors limits price growth and determines the required starting level of investment, which is a tool to curb the influx of new competitors.

The Porter Competitive Forces Model is probably one of the most commonly used business strategy tools. It has proven its usefulness in many cases. Porter's model is especially strong in the outside-in aspect.

2.3 Methods of strategic analysis

We have already considered the types of competition and 5 competitive forces that affect the enterprise. In a competitive environment, it is important for an enterprise to have a strategic plan. In order to choose the strategy that the company will adhere to, it is necessary to conduct a strategic analysis. There are several types of strategic analysis. Let's consider them.

GAP analysis (gap analysis)

Gap Analysis is a comprehensive analytical study that studies discrepancies, gaps between the current state of the company and the desired one. This analysis also allows you to identify problem areas ("bottleneck") that impede development, and assess the degree of readiness of the company to make the transition from the current state to the desired one.

Consider how this method of analysis is applied to solving the problem of increasing sales. If a company has chosen this parameter as a strategic goal, then its achievement can be approached in different ways.

· On the one hand, within the current market volume, we can increase our sales by intercepting sales from competitors. We must not forget that competitors in the same way claim the market share of your company and you need to protect yourself from them.

· On the other hand, perhaps there is still a large group of consumers not covered by our goods/services. If we assume that all possible consumers have used the goods / services produced by our company and competitors, then the total sales volume is called the absolute potential of the market and can be taken as a “super goal”.

We list the main reasons that prevent us from covering the entire potential market.

· Firstly, there are groups of consumers who are not satisfied with existing products, as they do not have certain functions. So maybe people don't drink coffee because they have high blood pressure due to the caffeine it contains. In this case, you can expand the range of products by releasing, for example, decaffeinated coffee.

· Secondly, many goods do not reach consumers, because they simply cannot purchase them at the right time due to shortcomings in the distribution network (the delivery schedule is not kept, products are not ordered on time). In this case, it is necessary to think about how to properly organize the sale of goods.

· Third, many consumers do not know how best to use the product. Then our task is to indicate such a path (see Orbit advertisement: "Take two chewing gum pads").

Steps for Conducting a Gap Analysis

Gap analysis includes the following steps.

1. Determining the current value. Gap analysis begins with a forecast of the state of the company for the planned period using the method of expert assessments or using mathematical predictive methods. This stage allows you to assess what position your company could occupy, to calculate all the possible benefits that it received as a result of making certain decisions.

2. Determination of the maximum available value. In the process of assessing the existing gap, it is necessary to find out whether it can be bridged at all? If the gap is too large to bridge with your own resources, it is wise to either reconsider the desired future, break it down into several transitional steps, or stretch the process over a longer period of time.

3. The choice of the criterion by which the review will take place. Within the framework of this stage, it is necessary to break down the overall gap into components corresponding to each significant functional, sectoral, territorial and other areas of activity, for which planning will subsequently be carried out. In this breakdown, sets of needs are identified and grouped into major categories. Thus, each section of planning is a group of needs that has an impact on bridging the gap between the present and the future. Among the groups of possible needs may be such as information, communication, financial marketing, administrative, technical, etc.

4. A set of plans (initiatives) to achieve. Sources can be employees of various services, distribution channels, competitors, government agencies. Market-driven sources identify opportunities based on consumer wants and needs. Research-oriented sources identify opportunities for creating new products based on basic research. At the same time, ideas generation methods may include brainstorming, surveys, questionnaires, etc.

Analysis of cost dynamics and construction of an experience curve

One of the classic strategy models was developed in 1926. It links the definition of strategy to the achievement of cost advantages. Assumes that every time the volume of production doubles, the cost of creating a unit of output decreases by 20%. The experience curve is shown in fig. 3. The reduction in costs with an increase in production is due to a combination of the following factors: 1 advantages in technology that arise with the expansion of production; 2 learning by experience in the most efficient way to organize production; 3 economies of scale effect. According to the experience curve, the main direction of the firm's strategy should be to gain the largest market share, since it is the largest of the competitors who has the opportunity to achieve the lowest unit costs and, therefore, the highest profits. In modern conditions, the achievement of cost leadership is not necessarily associated with an increase in the scale of production. The current high-tech equipment is designed not only for large-scale production, but also for small ones. Today, even a small firm can use computers, modular equipment that provides high performance and the ability to reconfigure to solve various specific problems. Figure 3

The purpose of the analysis is to find ways to reduce costs while increasing production. The main goal is to gain the largest market share.

The main disadvantage of the model is that it takes into account only one of the internal problems of the organization and inattention to the external environment (primarily to the needs of customers).

The classic portfolio model is the BCG matrix (Boston advisory group).

When conducting a strategic analysis, one of the important issues is the company's future product portfolio. It is necessary to understand which areas of activity are priorities, how they will be financed and positioned in the market. Therefore, when developing a strategy, it is recommended to use one of two standard methods: the Boston Consulting Group (BCG) matrix or the McKinsey matrix. In accordance with these methods, all the company's businesses are positioned in terms of "market attractiveness" and "competitive status of the company in this market." The fundamental difference between these two methods lies in assessing the attractiveness of the market and the competitive status of the company on it. The BCG matrix is ​​based on the hypothesis that both of these indicators can be estimated using one parameter. The attractiveness of the market is determined by the rate of its growth, and the competitive status of the company in this market - in accordance with its share. Even this simplified approach can be used to start with, but a more accurate estimate can be obtained only if several parameters that affect attractiveness and competitive status are taken into account.

These matrices offer the following set of strategic decisions (see Fig. 4

Figure 4

Market attractiveness
small
competitive status of the company		"Cash Cows". Strategy - tight control of investments and redistribution of excess profits between new promising projects is necessary (projects can also be associated with "cash cows")	"Stars". The strategy is to protect and strengthen
		"Dogs". The strategy is to get rid of "dogs" whenever possible, unless there are good reasons to keep them.	"Wild cats". The strategy - "wild cats" are subject to special study, the purpose of which is to answer the question: can they, under certain conditions (investments), turn into "stars"

So Zvezda has high sales growth and high market share. Market share must be maintained and increased. "Stars" bring a very large profit. But, despite the attractiveness of this product, its pure cash income is quite low, as it requires significant investment to ensure a high growth rate. Cash Cows (Money Bags) have a high market share but low sales growth. "Cash cows" must be protected and controlled as much as possible. Their attractiveness is explained by the fact that they do not require additional investments and at the same time provide a good cash income. Sales proceeds can be used to develop the Wild Cats and support the Stars. "Dogs" are characterized by low growth, low market share, the product is usually a low level of profitability and requires a lot of attention from the manager. Get rid of the "dogs".

"Wild Cats" ("Dark Horses", "Question Marks", "Dead Weight"). They have low market share but high growth rates. These items need to be studied. In the future, they can become both stars and dogs. If there is a possibility of transfer to the stars, then you need to invest, otherwise, get rid of it.

Disadvantages of this analysis:

Strong simplification of the situation;

Lack of consideration of the financial aspect, the removal of dogs can lead to an increase in the cost of cows and stars, as well as negatively affect the loyalty of customers using this product;

The assumption that market share corresponds to profit, this rule may be violated when a new product is introduced to the market with large investment costs;

The assumption that the decline in the market is caused by the end of the product's life cycle. There are other situations in the market, for example, the end of the rush demand or the economic crisis.

Benefits of the BCG Matrix include:

Theoretical study of the relationship between financial receipts and the analyzed parameters;

Objectivity of the analyzed parameters (relative market share and market growth rate);

The clarity of the results obtained and the simplicity of construction.

It allows you to combine portfolio analysis with a product life cycle model.

Simple and easy to understand

Easily develop business unit strategy and investment policy

Construction rules:

the horizontal axis corresponds to the relative market share, the coordinate space from 0 to 1 in the middle with a step of 0.1 and then from 1 to 10 with a step of 1. The assessment of the market share is the result of an analysis of the sales of all industry participants. Relative market share is calculated as the ratio of own sales to sales of the strongest competitor or the top three competitors, depending on the degree of concentration in a particular market. 1 means that own sales are equal to sales of the strongest competitor.

The vertical axis corresponds to the growth rate of the market. The coordinate space is determined by the growth rates of all company products from maximum to minimum, the minimum value can be negative if the growth rate is negative.

For each product, the intersection of the vertical and horizontal axes is set and a circle is drawn, the area of ​​​​which corresponds to the share of the product in the company's sales (Fig. 5)

Figure 5

Multi-factor portfolio model - McKinsley matrix.

In the early 1970s, an analytical model was proposed jointly by the General Electric Corporation and the consulting company McKinsey & Co, and called the "GE/McKinsey model".

The name of the model comes from the name of the company and seven factors, seven words that begin in English with the letter “S” (strategy - strategy, skill - skills, shared values ​​- generally recognized values, structure - structure, systems - systems, staff - personnel, style - style)

Market attractiveness criteria

Instead of a single market growth, a number of market attractiveness criteria were used, such as:

The size of the market.

· Growth rates of the market.

The number of competitors.

· Profit potential.

· Social, political and legal factors.

Criteria of competitive strength.

Also, instead of using one market share as an indicator of competitive strength, a number of factors were used, such as:

· Market share.

· Opportunity to develop a distinctive advantage.

· Opportunities to develop cost advantages.

· Reputation.

· Possibility of distribution.

Weighing criteria.

Managers were able to decide which criteria applied to their products. This gave the model market attractiveness - competitive position flexibility. Having decided on the criteria, the managers then agreed on a weighting system for each set of criteria, those of the factors that were more important, had more weight. For example:

market attractiveness. competitive strength.

Market size 0.15 Market share 0.20

Market growth rate 0.20 Differential advantage 0.40

Number of competitors 0.30 Cost advantages 0.05

Profit potential 0.30 Reputation 0.10

Social, political, Distribution opportunities 0.25

legal factors 0.05

Each market attractiveness factor is rated on a 10-point scale (from 1 meaning “not attractive” to 10 meaning “very attractive”). Also, each factor of competitive strength is evaluated on a 10-point scale. Each score is multiplied by the weight of the factor and summed to arrive at an overall market attractiveness and competitive strength score for each product. Then, this can be plotted on the Market Attractiveness - Competitive Position matrix (Figure 6)

Figure 6

Zone 1: finance growth.

Zone 2: make a selection.

Additional analysis is required for the middle zone.

The McKinsey model is also important in that it perceives planning not only as a process of creating formal schemes and a set of quantitative indicators. The planning process is understood here as establishing communication and agreement between employees, linking their interests, taking into account all aspects of human activity in the enterprise. Planning here is primarily productive communication.

PIMS business analysis model

The PIMS approach is to look for instructions developed on the basis of the generalized experience of successful and unsuccessful companies. Since 1972, a database of 450 corporations has been compiled containing analyzes of more than 2,800 business units. Statistical analysis and database computer modeling provide participating companies with the necessary information and strategic guidance based on a variety of strategic situations in various industries. There are two fundamental concepts for a database:

1. Business unit (business unit) - division, product line or profit center.

2. Served market - part of the overall market in which the firm competes.

PIMS-analysis evaluates: changes in the competitive position of the firm; the strategies used to achieve it; ultimate profitability.

The analysis shows that the profitability of the enterprise is constantly influenced by three groups of factors. The first group describes the firm's competitive position, including market share and relative product quality. The second reflects the structure of production, including the intensity of investment and labor productivity. The third group reflects the relative attractiveness of the level of market growth and consumer characteristics. Taken together, these variables account for 65 to 70 percent of the profitability options of the enterprises examined. The purpose of the PIMS project is to apply this experience to specific strategic issues. These questions include:

What level of cash flows and profits is "normal" for this type of enterprise, given their market environment, competitive position and strategy used?

If the business continues, what market share and profitability outcome should be expected in the future?

How will this result be affected by changes in strategy?

How did enterprises in the same or other industries, operating in similar conditions and with a similar competitive position, achieve results using different types strategies?

The answers to these questions will help evaluate possible alternatives when developing a strategy.

The PIMS database is represented by a large number of industries, a variety of products, markets and geographical regions. Most are located in North America, although 600 of the 2,800 locations are in the UK, Europe and elsewhere.

Results of the PIMS project. This analysis found links between strategy and company performance. These relationships will help managers understand and anticipate the impact of strategic decisions and market conditions on company performance. The most common links between strategy and performance are listed below:

In the long term, the most important factor influencing the efficiency of the company's divisions will be the quality of the company's goods and services in relation to its competitors.

Market share and profitability are closely related.

High investment intensity actively affects profitability.

Many businesses - the so-called "dogs" and "question marks" - make a profit, while many "cash cows" do not.

Vertical integration is only profitable for some businesses, not for others. For enterprises with a small market share, the return on investment is higher when the degree of vertical integration is low. For enterprises with market shares above average, the return on investment is the highest either with a low, or vice versa, a high level of vertical integration.

Most of the strategic factors that increase return on investment also have a positive impact on the long-term value of the enterprise in the future.

Limitations of the PIMS model. Some elements of the PIMS model are criticized - from the definition of information collection methods and data accuracy to gratuitous links between them. This criticism is justified and warns of the need for careful use of the results obtained. PIMS analysis can give the user a false sense of accuracy and predictive power. It should be seen as an additional source of ideas for strategic planning, along with one's own experience, views and analysis.

Practical use. The argument that the structure of an industry, a firm's competitive position, its cost/profit/investment structure, and the competitive strategies it employs significantly affect profitability has a strong intuitive appeal.

Practitioners know that being the dominant market leader in a growing market with attractive revenue opportunities and moderate investment needs will bring high returns. On the other hand, an enterprise that is in the third or fourth competitive position in a mature market with a low rate of return will make a low profit or loss. PIMS shows that these structural indicators significantly affect the profitability of the enterprise, and that companies should look for competitive structures and positions that would provide them with profit advantages.

SWOT analysis

SWOT is a method of analysis in strategic planning, which consists in dividing factors and phenomena into four categories: Strengths (Strengths), Weaknesses (Weaknesses), Opportunities (Opportunities) and Threats (Threats).

This analysis is necessary element research, an obligatory preliminary step in the preparation of any level of strategic and marketing plans. The data obtained as a result of the situational analysis serve as the basic elements in the development of the company's strategic goals and objectives.

1. Enumeration of strengths and weaknesses.

2. Enumeration of opportunities and threats.

1. Detailed description of strengths and weaknesses.

2. Detailed description of opportunities and threats.

At the next stage, the opportunities and threats identified during the analysis are divided into three groups according to priority, the need to concentrate efforts and means, and the thoroughness of monitoring.

The final stage is the formulation of the main strategic directions, taking into account their importance.

The results obtained are formulated into the company's strategy, its goals and objectives. We will discuss this type of analysis later.

PEST analysis

(sometimes referred to as STEP) is a marketing tool designed to identify political (Political), economic (Economic), social (Social) and technological (Technological) aspects of the external environment that affect the company's business (Fig. 7)

Politics is studied because it regulates power, which in turn determines the company's environment and the acquisition of key resources for its operations. The main reason for studying the economy is to create a picture of the distribution of resources at the state level, which is the most important condition for the activity of an enterprise. No less important consumer preferences are determined using the social component of PEST analysis. The last factor is the technological component. The purpose of his research is considered to be the identification of trends in technological development, which are often the causes of changes and market losses, as well as the emergence of new products.

The analysis is carried out according to the "factor - enterprise" scheme. The results of the analysis are drawn up in the form of a matrix, the subject of which are the factors of the macro environment, the predicate is the strength of their influence, estimated in points, ranks and other units of measurement. The results of the PEST analysis make it possible to assess the external economic situation in the sphere of production and commercial activities.

Table 1.

POLITICAL FACTORS	IMPACT OF THE ECONOMY
· Current legislation in the market Future changes in legislation · European/international legislation Regulatory bodies and regulations · Government policy, change · State regulation competition · Trade policy Tightening state control over the activities of business entities and penalties Elections at all levels of government Funding, grants and initiatives · Lobbying/market pressure groups · International pressure groups · Environmental problems Other influence of the state in the industry	· Economic situation and trends · Dynamics of the refinancing rate ・Inflation rate Investment climate in the industry Overseas economic systems and trends General problems of taxation · Taxation specific to the product / services Seasonal/weather effects Market and trading cycles effective demand Production specifics Supply chains and distribution end user needs · Currency exchange rates Key external costs o Energy carriers o Transport o Raw materials and components o Communications
SOCIO-CULTURAL TRENDS	TECHNOLOGICAL INNOVATIONS
Demographics Changes in legislation affecting social factors Structure of income and expenses Core values ・Lifestyle trends Brand, reputation of the company, image of the technology used · Models of behavior of buyers Fashion and role models Major events and influencers Opinions and attitudes of consumers consumer preferences · Media representations Buyer contact points · Ethnic/religious factors	Development of competitive technologies research funding Replacement technologies/solutions technology maturity Change and adaptation of new technologies production capacity, level · Information and communication Consumers buying technology technology legislation Potential for innovation Access to technology, licensing, patents · Intellectual property issues

Ansoff matrix

The Ansoff matrix was developed back in the 1950s. American economist I. Ansoff. The matrix determines the company's growth strategies, taking into account the novelty of the market and the novelty of the product. Depending on the combination of different product and market combinations, the following strategies are possible:

1) market penetration: an old product in an existing market. This strategy can be estimated by the volume of sales and the probability of risk. These indicators are calculated taking into account the value of possible costs for the implementation of the chosen strategy. Aggregate costs are necessary in order to attract potential customers; creating competitive advantages; stimulating sales and increasing service potential; 2) market development: old goods in the new market. This strategy involves marketing efforts to promote the existing product to new markets through brand promotion, branding, creating a new reliable system distribution;

3) product development: new product in the old market. The promotion of a new product to an old existing market is associated with a high degree of risk and requires significant expenses for penetration into the traditional market, organization of the presentation, demonstration of a new product, thorough consultation and persuasive advertising;

4) diversification: a new product in a new market. This strategy initially involves the development of planning and management decisions in the field of innovation of goods, services, determining the degree of unsatisfied demand for a new product, the possible market share and the level of risk of marketing efforts for advertising, promotion, brand promotion and the formation of public opinion among the target audiences of buyers.

3. Selection of a competitive strategy for OAO Kazan Confectionery Zarya

3.1 General characteristics of the company

Founded in June 1924, in 1993 the enterprise was transformed into a joint-stock company.

JSC "Zarya" was determined by the following mission: the production of high-quality confectionery products in order to meet the needs of customers and maximize profits for investors and shareholders. Based on the long-term goals of the company, the current strategy of OAO "Zarya" in general can be defined as a strategy of concentrated growth, namely the strategy of strengthening the position in the market (Market Penetration).

Long-term goals have been set for Zarya OJSC (at the beginning of 2010):

· Sales volume - 28000 tons. Profit - 37,000 million rubles.

· Assortment and its proportions: caramel - 50%; cookies - 30%; bars "Class!" - 10%; cakes - 5%; waffles - 3%; marmalade, nuts, candy sets - 2%.

· Rate of return - 25%.

· Work with large wholesalers and the presence of a wide distribution network for the sale of products in the Republic of Tatarstan and beyond.

· Installation of less energy-intensive and more technologically advanced equipment, dosing and packing stations, a new caramel line of rotary type, a station for preparing fillings.

Maximum use of modern information technologies in work with suppliers and clients (Multisite Information Management System, Business-To-Business and Extra-net-solutions).

All in all. OJSC "Kazan Confectionery Factory "Zarya" has been operating on the market for quite a long time, and during this time the products manufactured by the enterprise have proven themselves from the best side. During the management of the enterprise, a wealth of experience has been accumulated, personnel of appropriate qualifications have been selected.

3.2 Market Analysis

The market for the company's products is segmented by territory and by type of trade:

· Regions of Russia (mainly large wholesale).

· The Republic of Tatarstan (districts), except for the city of Kazan - (retail, small and medium wholesale).

· City of Kazan - (retail and large wholesalers).

· Retail chains (such as "Edelweiss") - 5.3%.

· Corporate trade - 3%. It, in turn, is subdivided into trade in stores owned by Zarya OJSC and in stores that work with the factory on a franchise basis.

The company estimates that confectionery consumption in Tatarstan, where Zarya holds 75% of the market, is approximately 3 kg per capita; in Kazan, where the company's market share is 75-80%, consumption is about 8.5 kg. For comparison, Hershey's experts have calculated that per capita consumption of confectionery products in the United States is 10 kg. In the Nordic countries, it averages 20 kg per capita.

Comparing the Zarya factory with its competitors, one can single out its strengths and weaknesses, opportunities and threats.

Strengths:

More educated and dynamic young middle management;

Active role of marketing ( great attention given to marketing in the region, better knowledge of customers, better service);

The best packaging (for some types of products);

More flexible pricing policy;

Raw material supply issues are handled more professionally;

Less expensive raw materials and materials;

Good reputation with buyers.

Weak sides:

Old equipment, large volumes of waste, the need for frequent repairs and checks of the technical condition of the equipment;

City center location: tight industrial premises, the lack of a single warehouse for finished products;

Additional transportation costs (presence of a remote warehouse of raw materials);

Lower profitability due to high costs.

Opportunities:

Entering new markets or market segments;

Expansion of the production line;

Vertical integration.

The possibility of new competitors;

Increasing pressure on prices from buyers and suppliers;

Growing competitive pressure.

The strengths of the firm's products are design and delivery. The weak side is the unstable quality. The company is not a price leader. At the factory "Zarya" there is an adapted to today marketing concept. It is primarily based on a combination of commercial efforts (the sphere of promotion and sales is affected) and a marketing approach to the development of promising types of products. In the future, it is planned to reduce the range of products, as well as replace worn-out fixed assets.

In recent years, the marketing service has created its own network of branded stores and wholesale warehouses. The main advantages of this scheme of work are the daily income received on the account, the widest assortment, lower selling prices, and a fresh product.

In 2010, the company was given a number of tasks, the progress of which is presented in Table. 3.

The demand for caramel is not considered seasonal. For other types of products, especially for chocolates, the demand increases sharply on the eve of various holidays, especially the New Year. In December, the company sells the most expensive products in large volumes, as New Year it is customary to give gifts. The main output of the Zarya factory is caramel and biscuits. At the same time, sales volumes for the main types of products in 2010 not only did not reach the planned ones, but also fell compared to the previous period (except for caramel). not only did not reach the planned ones, but also fell relative to the previous period (except for caramel). This led to an overall drop in sales. The reasons for the deviation of the results are both in external changes and in the internal environment.

Table 2. The progress of the company's implementation of the tasks set in 2010

External causes include:

· Expansion of Ukrainian products to the Russian confectionery market: 75% - the share of Ukrainian products from all imports of confectionery products in Russia. Selling prices are 16-20% lower than the prices of Russian companies.

· Dynamics of the confectionery market. Consumption of chocolate products in 2010 increased by almost 1.5 times. Due to the growth in purchasing power, preference is given to more expensive and high-quality products.

· High concentration of confectionery manufacturers in the surrounding areas.

Internal reasons for deviations from the plan include:

· Insufficient working capital leading to the delay of all planned programs.

· Inflexible response to changes in consumer preferences: the program for combination rotors has not been launched, which provides for the optimization of the production of packaged and bulk biscuits.

· The relatively high cost of caramel produced does not allow competing in the lower price segments, and the technological limitations of the existing equipment are less and less meeting the expectations of customers and do not allow the product to be repositioned in the middle price segment.

· Low level of distribution.

3.3 Choosing a competitive strategy for OAO Zarya

Having previously considered the strengths and weaknesses of the organization, we will compile a SWOT matrix for OAO Zarya (Table 4).

It is believed that when developing a strategy, the main attention should be paid to the "SIV" field, since it provides an opportunity for development. Comparison of the ability to enter new markets with the strengths of the factory on the SIV field creates favorable conditions, first of all, for promising products with a developed brand (caramel line, "Class!", "Happy Day" cookies). These products need to apply an active attacking strategy, expand production and position themselves in new price segments.

On the SIS field, the threats of increasing competitive pressure concern, first of all, the main products of the factory (caramels, biscuits, cakes, sweets). Taking into account the strengths of Zarya OJSC (flexible pricing policy, reputation, packaging), the marketing strategy for these products can be defined as defensive, since it is also necessary to take into account the factors that fall into the "weakness and threat" field.

The defensive strategy is formulated on the basis of the results of marketing research in the form of positioning strategies for the main products of the Zarya factory (caramel, cookies, cakes, sweets).

In the field of "SLV" (weakness and opportunity), this combination of factors makes it possible to eliminate the weaknesses of the organization (old equipment, large volumes of waste) due to the emerging opportunity (expanding production capacities due to entering new markets).

Table 4. SWOT matrix for OAO "Zarya"

Opportunities: 1. Entering new markets or market segments. 2. Expansion of the production line.	Threats: 1. Possibility of emergence of new competitors. 2. Increasing influence on the prices of buyers and suppliers.
Strengths: 1. More educated, dynamic, flexible and young middle management.	FIELD "SIV" Entering new markets - reputation, flexible pricing policy, active role of marketing, packaging. Expansion of production - an active role of marketing, educated leadership.	FIELD "SIS" Emergence of new competitors - flexible pricing policy, active role of marketing, reputation, packaging. Influence on prices by buyers and suppliers - flexible management, pricing policy.
Weaknesses: 1. Old equipment, large volumes of waste. 2. Cramped production rooms	FIELD "SLV" Old equipment - expansion of the production line. Close production premises - vertical integration. Low profitability, additional costs - entering new markets	SLU FIELD Competitive pressure - old equipment, lower profits due to high costs. Impact on prices by buyers and suppliers - lower profitability.

Also, due to vertical integration (entry into a confectionery holding), the influence of the organization's weaknesses (crowded production facilities, lack of a single warehouse for finished products, additional costs for intra-factory transport, lower profitability due to high costs) can be weakened.

In a SWOT analysis, it is necessary not only to reveal threats and opportunities, but also to try to evaluate them in terms of how important it is for the company to take into account its behavior for each of the identified threats and opportunities. For such an assessment, the method of positioning each specific opportunity on the opportunity matrix is ​​used. The matrix of opportunities for OAO "Zarya" is presented in Table. five.

Table 5. Matrix of opportunities for OAO "Zarya"

As can be seen, all three possibilities of the firm have for it great importance and they must be used.

A similar matrix is ​​compiled for hazard assessment. From above are deposited possible consequences for the firm, which may lead to the implementation of the threat. The probability that the threat will be realized is put aside (Table 6).

Table 6. Threat Probability

The most dangerous threat - the growing competitive pressure - must be eliminated without fail and immediately. The threat of the emergence of new competitors should be constantly in the field of view of the company's management and eliminated as a matter of priority. With regard to the increasing influence of buyers and suppliers on prices, less attention can be paid to this threat.

Strategic opportunities and threats that require the concentration of all the necessary resources for their implementation and the corresponding threats that require increased attention and careful ongoing monitoring are among the highest priority. They must be under the constant supervision of the top management of the company.

Strategies to use in this situation:

1) a leader strategy (expanding market share by providing customers with a wide choice of products; but for this it is necessary to strive to expand the market as a whole, attract new consumers, find new ways to consume and use products; in order to dominate confidently, a company must find ways to expand general demand, defend your market segment with well-planned offensive and defensive actions, and try to expand your market share)

2) a defensive strategy (preemptive defense - based on anticipatory actions that make a potential attack by competitors impossible or significantly weaken it, for example, anticipating the emergence of a new competitor on the market, you can reduce the price of your products; often it is purely psychological in nature, when the market leader warns competitors from reckless attacks).

To obtain the desired performance results, an enterprise development strategy should be developed for at least the next five years. JSC "Kazan confectionery factory "Zarya" during this period plans to develop new sales markets by expanding the range of products.

This year it is planned to stabilize production, based on real capacity, as a result of which funds will be allocated for the expansion of production.

The analysis carried out at JSC "Kazan Confectionery Factory "Zarya" allows us to conclude that in order to carry out these activities, it is necessary to choose the following solutions:

To arrange the supply of the enterprise with raw materials both for the main production program and for auxiliary production;

To improve the material and technical base of the enterprise through the overhaul and modernization of equipment, the commissioning of new equipment, capital buildings and structures;

To ensure the rational use of labor resources through the introduction of progressive systems of personnel management, remuneration and the use of computer technology in the planning and control of production activities.

Also, for the successful work of Kazan Confectionery Factory Zarya, it is necessary to create a marketing department that would deal with market research, advertising, pricing, and expanding the scope of activities.

Now let's talk about organizational structure. According to the organizational levels of formation, a corporate strategy (the strategy of the company as a whole), a business strategy (for a separate type of activity), a functional strategy (for each direction of a certain field of activity - a production strategy, a commodity strategy) and an operational strategy (for structural units, within functional areas) are distinguished. ).

For an enterprise operating in a single-industry segment, a corporate strategy is not developed.

JSC "Kazan confectionery factory "Zarya" needs to set the following goals and objectives of the business strategy:

Development of measures aimed at strengthening competitiveness and maintaining competitive advantages;

Consolidation of strategic actions of the main functional units;

Efforts to solve special issues and problems of the company.

At the same time, the business strategy is formed as the following aspects are considered:

Where the firm has the greatest chance of winning in the competition;

What characteristics can distinguish a firm in the market;

How can you neutralize the actions of competitors.

In a competitive market, there are 3 approaches:

a) low cost strategy;

b) differentiation strategy: a full range of advantages (quality, service, style, technology, high value of the goods);

c) the strategy of conquering one's own market segment - a small niche that is protected from other industries.

For OJSC "Kazan Confectionery Factory" Zarya "the strategic goal is to improve the commodity strategy, production strategy (resource). That is, the profit received should also be used to create special funds for the enterprise, settlements with the budget, and for other purposes. The following funds are formed :

Reserve - not less than 10% of the authorized capital;

Production Development Fund - 5%.

At the enterprise, as a functional strategy, you can use the strategy of improving the product range in the direction of its expansion and the decision on the technical modernization of production. The main responsibility for the formation of a functional strategy rests with the heads of departments.

At the next stage, the goals of the functional strategy are denounced as measures of the operational strategy: evaluation of goods, their profitability, manufacturability, proposals for equipment modernization.

JSC "Kazan confectionery factory "Zarya" should concentrate its efforts on the development and retention of market share, powerful equipment, measures to reduce the cost of products, organization of a marketing service at the enterprise for advertising campaigns and participation in industry exhibitions.

For the successful sale of its products, OJSC "Kazan Confectionery Factory" Zarya "is already using a sales system, which consists of:

Sales at the place of production;

Working with intermediaries.

In the future, after an increase in production volumes, it is necessary to plan the opening of our own sales offices, as well as the conclusion of long-term contracts.

OAO "Kazan confectionery factory "Zarya" is a manufacturing enterprise with sufficient potential to expand production.

Conclusion

Competitive strategies are an important and integral part of modern market relations. A firm or an enterprise builds its competitive strategy based on its position in the market, i.e. whether it is a market leader, a contender for leadership, a follower or a niche inhabitant. Conducts an analysis of its competitors and evaluates its capabilities, and only then chooses a suitable competitive strategy for itself.

Research tasks completed:

4. found and analyzed the concept of "modern competitive strategies";

5. the main types of competitive strategies and the requirements for their implementation are identified, examples of the application of strategies are given;

6. The effectiveness of competitive strategies in market relations is determined on the example of an enterprise.

In conclusion, I would like to note the following. Today, the external environment is important for all organizations without exception. In order to survive and develop in an extremely dynamic and uncertain external environment (and these are common characteristics of the modern environment of domestic industrial enterprises), organizations need to adapt to changes, as well as actively shape their own future. Therefore, strategic management plays a decisive role in market conditions.

Today, almost all the main functional divisions of industrial enterprises have a certain idea of ​​the external environment. However, the procedures for collecting, analyzing and transmitting information about it are carried out in most cases non-purposefully, spontaneously and accidentally, so it does not give a holistic view of the external environment and its impact on the results of the enterprise.

In view of the foregoing, we can conclude that the only correct option for the behavior of a modern enterprise to achieve effective long-term functioning and successful development is to pay increased attention to the analysis of the external environment. And this requires the development and implementation of a comprehensive analysis, taking into account the individual characteristics of the enterprise with appropriate personnel, financial and technical support. Only under this condition can one count on the effectiveness of strategic and operational tactical management decisions.

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A company's competitive strategy describes the business approach and initiatives it uses to attract new customers, compete, and strengthen its market position. The goal is very simple and is to conduct business ethically and fairly in relation to competitors, achieve a competitive advantage in the market and create your clientele, the so-called circle of loyal customers. A company's competitive strategy usually involves both offensive and defensive actions taken depending on changes in the market situation. In addition, the competitive strategy provides for short-term tactical moves for an immediate response to the situation and long-term actions on which the future competitive opportunities of the company and its position in the market depend.

Companies around the world use a variety of methods to attract customers, gaining their trust on repeat sales, overtaking competitors and maintaining their place in this market. Since company management began to combine short-term and long-term tricks to match the specific situation of the company and the market environment, there is a huge number of options and nuances of strategy. This means that there are as many competitive strategies as there are competitors themselves. Among them, there are five options for a competitive strategy (According to Thompson):

• 1. Cost leadership strategy provides for a reduction in the total cost of producing a product or service, which attracts a large number of buyers.
• 2. Broad differentiation strategy is aimed at giving the company's products specific features that distinguish them from the products of competing firms, which helps to attract more buyers.
• 3. Cost Optimal Strategy enables customers to get more value for their money through a combination of low costs and wide product differentiation. The challenge is to provide optimal (lowest) costs and prices relative to manufacturers of products with similar features and quality.

4. Focused strategy, or market niche strategy based on low costs, is focused on a narrow circle of buyers, where the company is ahead of its competitors due to lower production costs.

5. A formulated strategy, or a market niche strategy based on product differentiation, aims to provide representatives of the selected segment with goods or services that best meet their tastes and requirements.

Picture. 1.4.. Five basic competitive strategies

According to Thompson in figure 1.4. five main strategies of competition are shown; each of them occupies different positions in the market and provides for completely different approaches to business management.

Table 1 presents the research of A. Thompson in which he indicated character traits five competitive strategies (for simplicity, the two varieties of focused strategy are combined under one heading, since their only distinguishing feature is the basis of competitive advantage):

Table 1. Distinctive features of the main competitive strategies

Characteristic	Cost Leadership	Broad differentiation	Optimal costs	Focused low cost and differentiation
Strategic goal	Targeting the whole market	Targeting the whole market	Value-conscious buyer	Narrow market niche where customer needs and preferences differ significantly from the rest of the market
The basis of competitive advantage	lower production costs than competitors	The ability to offer customers something different from competitors	Giving buyers great value for their money	Lower costs in a niche served or the ability to offer customers something special that suits their requirements and tastes
assortment set	Quality basic product with no frills (acceptable quality and limited selection)	Many varieties of products, wide selection, strong emphasis on the ability to choose among various characteristics	Product characteristics - from good to excellent, from inherent qualities to special	Meeting the special needs of the target segment
Production	Constant search for ways to reduce costs without loss of quality and deterioration of the main characteristics of the product	Finding ways to create value for customers; striving to create a superior product	Implementation of special qualities and characteristics at low cost	Production of goods corresponding to this niche
Marketing	Identification of those characteristics of the product that lead to cost reduction	Creating such qualities of goods for which the buyer will pay	Offering products similar to those of competitors at lower prices	Linking focused unique capabilities to meeting specific customer requirements
Strategy support	Reasonable prices / good value	Creating feature differences that will pay for	Individual management of cost reduction and product/service quality improvement at the same time	Maintaining a niche service level higher than that of competitors; the goal is not to undermine the company's image and not to scatter efforts by expanding into other segments or adding new products to expand the market presence

Based on the above, we can distinguish (according to M. Porter) three BASIC competitive strategies, which we will consider in detail below. They are:

ü Absolute leadership in costs.

b Focusing.

b Differentiation.

STRATEGY: ABSOLUTE COST LEADERSHIP

This strategy has become widespread due to the concept of the experience curve. It consists in achieving absolute industry leadership in costs based on a set of economic measures aimed specifically at this goal. Porter identified that in order to achieve cost leadership, businesses need to:

• · actively create production capacities of economically efficient scale,
• vigorously pursue cost reductions based on the accumulation of experience,
• tight control over production and overhead costs,
• avoid small transactions with clients,
• · minimize costs in areas such as research and development, service, distribution system, advertising, etc.

All of the above requires great attention to cost control on the part of management. Lower costs compared to competitors become the leitmotif of the entire strategy, although the quality of the product and service, as well as other areas, cannot be ignored.

Porter concluded that with the advantage of lower costs, the firm will generate revenue that exceeds the industry average, and he will receive it even in the face of strong competition. A low-cost position protects the firm from competitors, since this level means that it is able to earn a profit in conditions where its rivals have already lost such ability. A low-cost position protects the firm from powerful buyers, since the latter can only use their power to drive prices down to the level of less efficient competitors. Low costs protect against powerful suppliers, giving the firm a greater degree of flexibility as input costs rise. Factors that ensure a low cost position also tend to raise barriers to entry associated with economies of scale or cost advantages. Finally, a low-cost position tends to favor the firm relative to competitors in relation to substitutes.

Thus, the low-cost position protects the company from all five competitive forces, because market forces continue to operate in the direction of lower profits only until they wipe out the profits of competitors following the leader in efficiency, and since less efficient competitors are the first to suffer. from competitive pressure. Achieving an overall low cost position often requires a relatively high market share or other equally important benefits. It may also require changing the product itself to make it easier to manufacture, releasing a wide range of similar products to share costs, serving all major customer groups in order to expand sales. The implementation of a low cost strategy, in turn, may require large upfront investments in the latest equipment, aggressive pricing, start-up losses to gain the necessary market share. A high market share can, in turn, contribute to economies of scale in the supply chain and thus further reduce costs. If the low cost position is achieved, it provides a high bottom line and the opportunity to reinvest in new, modern equipment to maintain cost leadership.

Low cost manufacturing is attractive and needs to be protected from the five competitive forces.

* Faced with the challenge of competitors, a low-cost company is in a better position to compete aggressively on price, to defend against a price war, and to use lower prices to increase sales or win market share from a competitor. This advantage also generates industry average profits (through higher margins or higher sales volume). Low cost -- good protection in markets where price competition is strong.

* Confronting the strength of the buyers, the company with low costs partially maintains the level of profit, since strong buyers are rarely able to reduce the price to the survival line of the most cost-effective seller.

* Considering the leverage of suppliers, it should be noted that a company with low costs is better protected from the dictates of suppliers if the basis of its competitive advantage in terms of costs is a better internal organization. (Low-cost companies whose advantage comes from being able to purchase components at preferential prices from external suppliers may be vulnerable to strong suppliers.)

• * From the point of view of potential market participants, the cost leader may lower the price to make it more difficult for newcomers to win customers. The price power of the cost leader is a major barrier to entry into the industry.
• * In competition against substitute products, the cost leader has a good position, since the use of low prices is a good defense against companies trying to introduce similar products and services to the market.

Low costs allow the company not only to set low prices and create barriers to protect its position, but also to make a profit. Sooner or later, price competition will become the main force in the market, less successful companies will be crushed by stronger ones. Firms with low costs are in a stronger position relative to competitors to meet the desire of customers to get a low price.

Competitive cost leadership strategy-- especially strong in the following cases (according to Thompson's research):

• 1. Price competition among sellers is especially strong.
• 2. The product produced in the industry is standard, the characteristics of the product meet the requirements of the entire range of consumers (such conditions allow buyers to make a purchase decision based only on the best prices).
• 3. There are several ways to differentiate a product in order to attract a buyer (provided that the differences between brands do not matter to the buyer), but the differences in price for the buyer are significant.
• 4. Most buyers use the product in the same way -- satisfying general requirements in use, the standardized product fully satisfies the needs of customers. In this case, it is the price, and not the features or quality of the product, that is the dominant factor determining consumer preferences.
• 5. Buyers' switching costs for switching from one product to another are low enough to give them some freedom of choice to look for products with a lower price.
• 6. There are a large number of buyers who have serious power to reduce the price.

As a rule, most price-sensitive buyers opt for the lowest price. In this case, the low cost strategy will inevitably lead to success. In markets where the main competition is around price, low costs relative to competitors are a serious competitive advantage.

As a conclusion on the absolute cost leadership strategy, we can say that in order to avoid the problems and dangers of the cost leadership strategy, managers must understand that the strategic goal of "low costs" compared to competitors does not mean that this idea is absolutized. While gaining cost leadership, managers should not ignore other issues that buyers attach importance to. Moreover, a competitive strategy is promising if the value of competitive cost advantage is stable enough at key points where the company has achieved cost advantage, and it is difficult for competitors to copy it or get close to it.

STRATEGY: DIFFERENTIATION

The second basic strategy is the strategy of differentiating the product or service offered by the firm, that is, creating such a product or service that would be perceived within the framework of across the industry as unique.

Differentiation can take a variety of forms. Such forms were defined by Porter:

• prestige of design or brand (Fieldcrest in the production of towels and linen, Mercedes in the automotive industry),
• by technology (Hyster in the production of forklifts, Macintosh in the field of stereo components, Coleman in camping equipment),
• by functionality (Jenn-Air in the production of electric stoves),
• consumer service (Crown Cork and Seal in the production of metal containers),
• · by dealer network (Caterpillar Tractor in construction equipment) or by other parameters.

Ideally, a firm differentiates itself in several ways. For example, Caterpillar Tractor owes its reputation not only to its dealer network and excellent spare parts organization, but also to the high quality and reliability of its products, which is very important for heavy construction equipment, where downtime is costly.

It should also be noted that the differentiation strategy does not mean a weakening of attention to costs, in this case they are only a non-primary strategic goal. A differentiation strategy, if successfully implemented, is an effective means of achieving above industry average profits, as it creates a strong position against the five competitive forces, albeit in a different way than a cost leadership strategy.

Differentiation protects against competitive rivalry because it creates consumer brand loyalty and reduces product price sensitivity. It leads to an increase in net profit, which reduces the severity of the cost problem. Consumer loyalty and the need for competitors to overcome the product uniqueness factor creates a barrier to entry into the industry.

Differentiation provides a higher level of profit to resist the power of suppliers, and also allows the power of buyers to be moderated, since the latter are deprived of comparable alternatives and therefore less price sensitive.

As a result, a firm that has differentiated and earned consumer loyalty has a more favorable position than its competitors in relation to substitutes. The implementation of differentiation can sometimes prevent the achievement of a high market share, since often the concept of product differentiation implies its exclusivity, which immediately excludes a high market share.

However, differentiation presents an alternative to a low-cost position, since the measures required to achieve it are costly. Such measures include:

• extensive research and design developments,
• Purchase of high quality materials
• Intensive work with clients.

Even if all consumers in an industry recognize the superiority of a particular firm, not all of them will be willing or able to buy the product at a higher price. In other businesses, differentiation may be compatible with relatively low costs and not preclude pricing that is comparable to that of competitors.

Successful differentiation allows the firm to:

• * set an increased price for a product / service;
• * increase sales (because a large number of buyers are attracted due to the distinctive characteristics of the product);
• * win customer loyalty to your brand (because some customers become very attached to additional product features).

Areas where there is room for differentiation.

The opportunity for successful differentiation exists in the actions being implemented along the entire industry value chain.

The most common moments when there is a possibility of differentiation are associated with the following links in the value chain (according to Thompson):

• 1. The logistics of those links that have the strongest impact on the quality of the company's final product (McDonald's has very strict requirements for the preparation of french fries, so there are clear specifications for potatoes purchased from suppliers).
• 2. Product development activities based on new research and development can potentially improve product design and performance, expand product end-uses and applications, make products more diverse, reduce new product development time, be first to market more often, ensure product safety, recycle used products and improve environmental protection.
• 3. The R&D-oriented production process allows manufacturers to use more advanced technologies that protect the environment, improve product quality, capabilities or attractiveness.
• 4. Improving the production process allows you to reduce scrap, prevent premature damage to products, increase the life of the product, ensure greater safety, improve the economy of use, do everything so that the end consumer is interested in the appearance of such a product. (The quality of the final products of the Japanese automakers is the result of an excellent manufacturing process and assembly line operations.)
• 5. Ensuring shipments and distribution activities allow faster delivery, more accurate order fulfillment, reduced storage space and reduced inventory of finished products.

6. Customer service, market research, and sales activities can result in distinctive features such as customer assistance, faster service and repair, better and more complete product information, more end-user training materials, better selling conditions, faster fulfillment of the order, more frequent contact with the client and, finally, ensuring that it is convenient for the buyer. (IBM has added value to its products by offering its mainframe customers proactive technical support and 24/7 preventive maintenance.)

Managers need to fully understand the sources of differentiation and the actions that will lead to product uniqueness in order to sound a differentiation strategy and develop different approaches to differentiation.

Achieve competitive advantage based on differentiation. The key to a successful differentiation strategy is to create customer value in a way that is different from the competition. There are several approaches to creating customer value. Consider a few of them in more detail:

DIFFERENTIATED PRODUCT FEATURES THAT REDUCE CUSTOMER COSTS

Thompson developed a series of solutions that showed how to use the product produced more economically. A company should not lower the price to make it cheaper for the customer to use their product. The alternative is to give the product/service features that would allow the customer to:

• · Reduce unnecessary waste and materials thrown away by the buyer. An example of a differentiating feature is returnable components (dishes, waste paper, etc.).
• · Reduce buyer labor costs (less training time, lower skill and craftsmanship requirements). Examples of features are special assembly tools, modulators for replacing interchangeable components.
• · Reduce buyer time. Examples are products with higher performance, availability of off-the-shelf parts, or less frequent maintenance.
• · Reduce customer storage costs. An example of a differentiating characteristic is just-in-time delivery.
• · Reduce buyer's waste disposal and pollution control costs. An example is the collection of waste and their subsequent processing.
• · Reduce the buyer's logistics costs. An example is a computerized system for taking orders and issuing invoices.
• · Reduce maintenance and repair costs. An example is the exceptional reliability of equipment.
• · Reduce buyer's installation, bidding or financing costs. An example is payment within 90 days at the same price as for cash.
• · Reduce the buyer's need for other goods/services (electricity, protective equipment, security, quality inspection, other tools and mechanisms). An example is high performance liquid fueled power equipment.
• · Increase the benefit of using the model.
• · Reduce the buyer's repair costs in the event of a sudden breakdown. An example is a long warranty period.
• · Reduce customer costs for technical personnel. An example is free technical support and assistance.
• · Increase the efficiency of the buyer's production process. Examples - acceleration of processing of products, better interfacing with auxiliary equipment.

DIFFERENTIATIVE FEATURES OF THE PRODUCT THAT INCREASE THE EFFICIENCY OF ITS USE

This approach, according to Thompson, allows you to create a more perfect product and its consumer price. It is possible to increase the effectiveness of the goods/services offered to the buyer due to the following specific features and characteristics:

• · Offer customers products that are more powerful, durable, comfortable, or easier to use.
• · Make the company's product / service cleaner, sleeker, calmer or requiring less maintenance compared to competitors' products.
• · Raise manufacturing standards over existing ones.
• · Meet the requirements of customers to a greater extent than competitors offer.
• · Give buyers the opportunity to complement the product or later receive a more advanced model offered for sale.
• · Give the buyer more flexibility in adapting their products to the needs of their customers.
• · Do your job even better to meet the buyer's returning requirements.

As a conclusion on the differentiation strategy, we can say: differentiation creates a certain protection for the company from the strategies of rivals, as buyers develop loyalty to the company's brand or model and they are ready to pay (a little, and possibly a lot) for the product they like. . Successful differentiation:

1) creates entry barriers (due to customer loyalty and product uniqueness) for newcomers to the industry, which are difficult for them to overcome;

• 2) smooths out the influence of the power of buyers, since the products of alternative sellers are less attractive to them.
• 3) helps the company avoid the threat from substitute products, since their characteristics and qualities are not comparable with differentiated products.

In addition, if differentiation allows a company to charge a higher price and have a higher profit margin, then it is free to resist the force of suppliers trying to raise the price of the products they supply. Thus, like cost leadership, successful differentiation creates defensive lines against the five competitive forces.

FOCUS STRATEGY

The third basic strategy is focusing on a particular customer group, product line, or geographic market segment. Like differentiation, focusing can take many forms. However, if the goals of a low cost or differentiation strategy apply to the industry as a whole, then a focus strategy means focusing on a narrower goal, which affects the activities of all functional areas of the business.

The basis of this strategy is the assumption that the company with its help is able to pursue a narrow strategic goal with greater efficiency or productivity than competitors operating in a wider area. As a result of its implementation, the company achieves either differentiation due to better satisfaction of the needs of the target market, or lower costs in servicing this market, or both.

Even if the focus strategy does not lead to low costs or differentiation in terms of the market as a whole, it allows one of two or both of these positions in the space of a narrower target market. A firm pursuing a focus strategy also has the potential to earn higher profits than the industry average. Its focus assumes either a position of low costs within the strategic goal, or a high degree of differentiation, or both positions.

As we can see, when considering cost leadership and differentiation strategies, these positions provide protection against all competitive forces. In addition, focusing can serve as a means of selecting targets least threatened by substitutes, or those areas in which competitors are weakest.

Focused strategies become attractive when a number of conditions are met:

• * the segment is too big to be profitable;
• * the segment has a good potential for growth;
• * the segment is not critical for the success of most competitors;
• * a company using a focus strategy has enough skills and resources to successfully work in the segment;
• * A company can protect itself from challenging firms by virtue of customer benevolence towards its superior ability to serve segment buyers.

The special skills and abilities of the company using this strategy in serving the target market niche provide a basis for protection against the five competitive forces. Firms operating in different segments may not have enough competitive opportunities to serve their target customers. The competence of a firm that focuses its efforts on a market niche erects entry barriers that make it difficult for competitors to enter the target segment. The company's exceptional ability to serve a niche market also makes it difficult to penetrate the target segment of substitute products. The impact of strong buyers is greatly reduced, in part by their own reluctance to do business with less capable competitors.

As a conclusion on the focusing strategy, we can say that focusing works well when:

• 1) it is quite expensive and difficult for firms operating in various segments to meet the requirements of buyers of a specialized niche;
• 2) none of the competing firms makes an attempt to specialize in this segment;
• 3) the firm does not have enough resources to serve a wider market share;

4) There are many different segments in the industry, which allows the company to choose its niche according to its strengths and abilities.

CONDITIONS FOR THE IMPLEMENTATION OF BASIC STRATEGIES

The three basic strategy options differ not only in the functional characteristics discussed earlier, but also in other parameters. To successfully implement them, various resources and skills are required. In addition, different organizational conditions, control procedures and incentive systems are needed for basic policy options. Therefore, to achieve success, as a rule, a long-term commitment to a certain strategy as a task of paramount importance is required. Below are some of the conditions of general importance associated with the implementation of the basic options for the strategy developed by M. Porter.

Table 2. Basic strategy options

Basic strategy	General Resource and Qualification Requirements	General requirements for organizational conditions
Absolute cost leadership	*Real investment and access to capital *Technological process development skills *Careful supervision and control of labor processes *Low cost system *Product design that facilitates production	Strict cost control Frequent and detailed monitoring reports Clear organizational structure and responsibilities Incentives based on clear quantitative indicators
Differentiation	*High marketing potential *Product design * Creative skills*High potential for basic research *High reputation for product quality or firm technology leadership *Significant industry experience or a unique combination of skills from other industries *Close cooperation with distribution channels	Close functional coordination of R&D, product design, and marketing Subjective assessments and incentives instead of quantitative indicators Opportunities to attract a highly skilled workforce, researchers and creative staff
Focusing		A combination of the above conditions and measures aimed at achieving a specific strategic goal

Basic strategy options may also require different leadership styles, significantly change the corporate culture and atmosphere, and attract different types of people.

Competition is the rivalry between commodity producers for more favorable conditions for the production and sale of goods in order to obtain the maximum possible profit on this basis. Competition is the most effective method of economic control, as it costs society the least cost.

The competitiveness of an organization is the ability to carry out efficient business activities and its profitable implementation in a competitive market. Competitiveness as a phenomenon is a combination of quality and cost characteristics that ensure the satisfaction of a specific need.

As an example, in fig. 1. A graphical model for comparing the competitiveness indicators of two organizations in eight parameters is given.

Rice. 1. Orientation of competitiveness

The combination of different products on the market and different consumer orientations allows us to talk about some types of competitors, the main of which are given in Table. one.

To conduct competitor analysis, it is necessary to identify all real and potential competitors and consider them in terms of possible strategies; current position; financial opportunities; entrepreneurial philosophy and culture, and goals.

The study is carried out in three stages, which involve:

• identification of current and potential competitors;
• analysis of indicators, goals and strategies of competitors;
• identifying the strengths and weaknesses of competitors.

According to P. Doyle's classification, groups of direct competitors using a cost leadership strategy seek to conquer the market with the help of low prices by minimizing all types of production and sales costs. The efforts of the differentiation group are aimed at satisfying to the greatest extent the needs of consumers in terms of the main parameters of the product.

Table 1. Types of competitors

The focus group concentrates its efforts not on the market as a whole, but on its segments, where competitors seek to win over the buyers of the first two groups. However, indirect competitors with their substitute products or similar services often pose no less danger to the organization. In addition, over time, competitors acquire the knowledge and experience that allows them to move into the strategic group occupied by the organization and become direct competitors.

Rice. 2. Strategic groups of direct competitors: A, B, C, D, E, E - competitors

Identification of competitors is carried out on the basis of one of the approaches.

The first approach is associated with an assessment of the needs satisfied in the market by the main competing firms, the second one focuses on the classification of competitors in accordance with the types of market strategy used by them.

In the first approach, competing firms are grouped according to the type of needs that their product satisfies. In the second case, competitors are classified according to key aspects of their orientation in production and marketing activities.

Strategic directions of competition

Competitive advantage is formed as a result of the implementation of one of the competitive strategies: cost leadership, differentiation strategy, optimal costs and focusing. There are two ways to establish cost advantage: 1) do a job better than the competition; 2) correct the structural and functional indicators of costs - value chains (hereinafter - ts).

In a compact form, the necessary information is presented in Table. 2.

Table 2. Factors that determine cost leadership

Cost management	Influence of management	Improving value chains	Cost Leadership Protection
Structural components Economies or losses of scale can be identified or created anywhere along the value chain The effect of the learning curve and experience (by increasing labor efficiency; creating product modifications that increase production efficiency; retooling the machine park; obtaining private information from suppliers, consultants and former employees competing firms) Relationship with other activities in the value chain. For example, to identify those moments where both suppliers and companies have high costs, since there is no coordination and joint optimization Sharing capabilities across different production units within an organization (economy of scale, reduced time to create new technology etc.)	Increase / reduce the number of products offered Add / cut services provided to customers Contribute more/less distinguishing features in product quality characteristics Pay more/less employees relative to competitors in similar industries Increase / reduce the number of different distribution channels for marketing the company's products	Simplify product development, remove redundancies Reengineering of the main production processes Use of smarter technology Use of sales to the end consumer and marketing approaches that cut unnecessarily, high costs and profits for wholesalers and retailers (often 50% of the final price paid by the buyer) Transfer of production facilities closer to the consumer/supplier	Cost leadership puts you in the best position to attack, defend, increase sales or gain market share Countering the power of buyers, a low-cost company often maintains profit margins A low-cost company is best protected from supplier dictate if the basis for its competitive cost advantage is better internal organization.
Benefits of vertical integration compared to moving certain activities outside the company (giving significant trading power, reducing costs at the junctions) Dependence geographical location(employee salaries, taxes paid, energy costs, costs of receiving and shipping products, chartering) Functional components Advantages and disadvantages of early adopters (trademark and incremental costs) Capacity utilization percentage Strategic choices and production decisions	Increase / decrease the level of R&D relative to competitors Spend more/less effort to increase productivity and efficiency relative to competitors Increase/reduce specifications for purchased materials	Achieving a greater economic level of vertical integration compared to competitors Implementing a “something for everyone” approach and focusing on a limited set of products/services in order to meet the special but important requirements of the buyer and eliminate unnecessary actions and costs associated with a large number of product modifications	From the point of view of potential market participants, the cost leader can lower the price to make it more difficult for newcomers to win customers. In competition against substitute products, the cost leader is well positioned, because the use of low prices is a good defense against companies trying to introduce similar products to the market.

Characteristics of typical competitive strategies

Low strategy costs are especially important in the following cases:

• price competition among sellers is particularly strong;
• the product produced in the industry is standard;
• differences in price for the buyer are significant;
• most buyers use the product in the same way;
• the cost of buyers to switch from one product to another is low;
• there are a large number of buyers who have serious power to lower the price.

Risks of the strategy to achieve low costs: technological breakthrough of competitors; simple ways to copy the skills of a cost leader; excessive focus on cost reduction and blindness to other areas; change in customer preferences and the desire for better quality goods; short circuit vulnerability in a given technology.

Differentiation strategy becomes attractive as customer preferences diversify. The company must study the requests and behavior of customers. Competitive advantage arises when a large number of buyers will be interested in the proposed attributes and characteristics of the product.

Successful differentiation allows the firm to charge a higher price for the product; increase sales; gain customer loyalty to your brand.

Varieties of differentiation schemes: distinctive taste, specific properties, small mail delivery, 24-hour product delivery, more value for money, prestige and distinctiveness, workmanship, technological leadership, full-scale service, the highest image and reputation. Differentiation is attractive because:

• creates entry barriers;
• smooths out the influence of the power of buyers;
• helps to avoid the threat from substitute products.

Differentiation works best in markets where there are many ways to change the product and the buyer recognizes these differences as having value; the needs of the buyer and the ways of using the goods are different; a small number of competitors take a similar approach to differentiation.

Risks of differentiation strategy. If the buyer sees little value in uniqueness, then the cost strategy will win. In addition, competitors can copy all the innovations.

Optimal cost strategy. The strategy is focused on giving customers "more value" for their money. This implies a strategic focus on low costs while providing the customer with more than the minimum acceptable quality, service, features and attractiveness of the product.

The strategic goal is to become a low-cost, good-to-excellent product manufacturer, and then use the cost advantage to drive down the price of similar products produced by competitors.

The strategy is attractive in terms of competitive maneuvering. An optimal cost company may offer a mid-range product at a sub-average price or a good quality product at an average price.

Focused Strategy low costs and differentiation focused on a narrow part of the market. The goal is to do a better job of serving customers in the target segment.

A focused low-cost strategy is associated with a market segment in which buyers' demand for cost (and hence price) is significant in contrast to the rest of the market space. Costs are reduced through the use of the brand (no advertising, marketing costs), targeting customers who do not research the market (do not pay for consultations).

Focusing works well when a company finds ways to cut costs by limiting the number of buyers in order to well define its niche. Focusing is useful when:

• the segment is too big to be attractive;
• the segment has good potential for growth;
• the segment is not critical to the success of most competitors;
• a company using a focus strategy has enough skills and resources to successfully work in the segment;
• a company can protect itself from challenging competitors through customer benevolence and its superior ability to serve segment buyers. Risks of a focused strategy: there is a possibility that competitors will find an opportunity to approach the company's actions in a narrow target segment; the requirements and preferences of consumers of the target market segment are gradually spreading to the entire market;
• a segment can become so attractive that it attracts the attention of many competitors.

Strategic advantages of vertical integration. If vertical integration does not lead to significant cost savings or additional benefits, then it is not strategically justified.

Backward integration leads to cost savings when the required production volume is large enough to provide the same economies of scale as those for suppliers (and vice versa). It also reduces the company's dependence on suppliers.

Forward integration creates a network of committed dealers representing the company's products to the end user (this can result in cost savings).

For producers of raw materials, integration into production can promote greater product differentiation and help avoid price competition with other producers of raw materials.

However, the closer the supplier is to the activities of the manufacturer, the more opportunities the company has to break out of this competitive environment and differentiate the final product due to design, service, quality, packaging, etc.

Strategic disadvantages of vertical integration:

• increases investment in the industry, technologies are conserved;
• limits the firm in the freedom to choose suppliers;
• requires balancing capacities at each stage in the value chain (when the production capacity of one of the links exceeds the needs of another, the surplus must be sold);
• requires different skills, business abilities and the ability to analyze the situation;
• integration with parts manufacturers can reduce a company's manufacturing flexibility (frequent changeovers are costly).

So, the integration strategy has both strengths and weaknesses. The choice depends on the following:

1) whether integration can improve the strategically important areas of the company's work in the direction of costs or increase differentiation;

2) how it affects capital costs, flexibility and responsiveness, administrative costs;

3) whether it is capable of creating a competitive advantage.

Structural analysis of the activities of competitors is part of the overall evaluation system and is carried out in such a way that the forms and methods of the competitors' product policy are clarified; dynamics of price changes of competitors; analysis of means of stimulating sales of competitors.

The most important parameter of competitiveness is the quality of goods. Quality is the totality of properties and characteristics of a product that gives it the ability to satisfy stated or implied needs.

This and other parameters of competitiveness allow us to evaluate the organization under study in comparison with competitors. An example of such a comparison is given in Table. 3. Strategic assessment of the company's external environment requires an answer to seven questions. These questions are listed below.

Table 3. Identification of the strengths and weaknesses of the organization in comparison with competitors

Characteristics of competitiveness	Competitiveness Characteristics Parameters	Parameter estimates
		organizations	competitors
Marketing Benefits	Market share Product quality Service level Efficiency of customer contacts Ways of distribution of goods Geographical features of the market
Financial stability	Business profitability analysis Cash flow analysis Analysis of current debt
Efficiency	Cost level Production capacity data Staff technical skills Supply options
Organizational Capabilities	Leadership Potential Employee motivation Ability to adapt Entrepreneurial ability

Factors affecting the situation in the industry

1. What are the main economic indicators of the industry?

Industries vary widely in characteristics such as market size, extent of competition, market growth rates, number of buyer (seller) firms and their relative size, difficulty entering and exiting the industry, degree of vertical integration of sellers, rate of technological changes. These indicators also include the size of economies of scale and the effect of the experience curve, the degree of standardization or differentiation of competitors' products, profitability (profitability).

Factors that need to be studied to determine the main characteristics of the industry:

• market size;
• the extent of competition;
• the growth rate of the market and the stage at which the market is located;
• the number of competitors and their relative sizes;
• the number of buyers and their financial capabilities;
• integration is directed "forward" or "backward";
• directions and pace of technological change;
• ease of entry into and exit from the industry;
• products of competing firms are highly differentiated or almost identical;
• whether companies have the opportunity to realize economies of scale in production, transportation, marketing when conducting promotional activities;
• whether a high degree of capacity utilization is the most important condition to achieve a low level of production costs;
• whether the learning-experience curve in the industry is such that average price products declined as cumulative output grew;
• whether the necessary investments are being made in the industry;
• whether the industry is above or below the average profit margin as a whole.

Example: a set of key economic indicators and the strategic importance of key economic characteristics industries.

2. What competitive forces are at work in the industry and what is their impact?

The level of competition is determined by five forces: rivalry between sellers within the industry, the presence of the attractiveness of substitute products, the possibility of new competitors entering the industry, the influence of suppliers, and the ability of consumers to dictate their terms. The task of analyzing competition in an industry is to assess each force, determine the degree of its pressure, and then analyze the competitive strategy that a company should focus on, taking into account the existing “rules” of competition in the industry, which aims to:

a) Isolate the firm as far as possible from the five forces of competition.

b) use the "rules" of competition in the industry for the benefit of the firm;

c) gain a competitive advantage.

Five forces model:

1. Rivalry between sellers:

• low prices;
• improved product characteristics;
• service level;
• terms of the warranty period;
• ways to promote the product to the market;
• new goods (all resources and the strength of competition).

Competition Intensity Factors:

• number of firms;
• growth in demand for products;
• lower prices, increased sales, reduced inventory;
• costs of buyers for change of firms;
• dissatisfaction of some companies with market shares;
• industry profitability;
• the cost of exiting the industry;
• swinging the market due to the difference of companies;
• buying by a large company of another industry of an outsider who could become an industry leader.

2. Entry into the industry of new competitors (barriers):

• economies of scale in production (it is difficult to produce large volumes at once, risk, overproduction);
• impossibility of access to know-how and technologies (special knowledge and experience are needed);
• learning curve effect (production experience);
• consumer commitment to brands (discounts, quality, service);
• the size of capital investments (% on loans, winning a client);
• cost inequality (cheap raw materials, know-how, experience curve, geography, % credit);
• access to sales channels (wholesale, retail, advertising, dealers);
• actions of regulatory authorities (licensing, environmental protection);
• tariffs and non-tariff restrictions (government restrictions).

3. The influence of substitute products - competition with firms in another industry:

• affordable prices;
• product quality and characteristics;
• complexity of switching for consumers;
• the complexity of retraining employees, technical assistance;
• time spent on reliability and quality checks;
• psychological costs.

4. Competitive strength of suppliers:

• significance for the consumer;
• standardization of supplier products;
• number;
• the severity of the need;
• volume of a consignment of a substitute product;
• close relationships with suppliers;
• the share of the supplier's products in the production price;
• the impact of the supplier's products on quality;
• the cost of switching to another supplier;
• suppliers' propensity to make concessions;
• possibility of vertical integration.

5. Competitive strength of buyers:

• size of buyers;
• sentence;
• impact on prices, quality and service levels.

The strategic meaning of the five forces is the structure of forces and the nature of the struggle.

The structure of competition in an industry is unattractive if the rivalry between sellers is high; market entry barriers are low; competition from substitutes is high; sellers and buyers can benefit significantly from participating in transactions.

Ideal competitive environment: suppliers and buyers are in a weak position; there are no good substitutes; entry barriers are high; competition between sellers is moderate.

The strategy must do the following:

1) isolate the company from the five forces;

2) influence competition in a direction favorable to the firm;

3) secure a strong position in the competitive game.

3. What causes changes in the structure of competitive forces in the industry and the environment?

The driving forces are changes in the industry's long-term economic growth trends; changes in the composition of consumers; introduction of new products; market entry or exit of large firms; globalization; changing cost structure and productivity; the transition of consumer preferences to standard products from differentiated ones; the impact of changes in legislation and government policy; changing social values ​​and lifestyles, reducing uncertainty and risk.

There are usually 3-4 main driving forces. The driving force analysis aims to:

1) determine which driving forces have the greatest impact;

2) establish the extent and consequences of influence;

3) adapt the strategy to the action of driving forces.

4. Which companies have the strongest (weakest) competitive positions?

To answer this question, a map of strategic groups is being developed. Rivals belonging to the same or closely spaced strategic groups are close competitors.

Algorithm for mapping the structure of groups (Fig. 3):

• establish the full range of characteristics (price/quality level, geographic scale of activities, degree of vertical integration, product range, distribution channels used, range of services);
• put companies on the map;
• to unite the firms which have got approximately in one space;
• draw a circle (the diameter is proportional to the share of the group in total sales).

• map field variables should not be strongly correlated;
• variables should show large differences in the positions taken by firms in the competitive struggle;
• variables must be neither quantitative nor continuous;
• the use of circles of different diameters makes it possible to reflect the relative sizes of each strategic group;
• several maps give different representations of competitive positions.

You can draw arrows indicating the movement of groups to other positions.

Attempts by competing firms to enter a new strategic group almost always lead to an increase in the intensity of competition.

The closer the groups on the map are to each other, the stronger the competition.

From the map, you can determine whether differences in the potential profitability of individual categories of groups are associated with a strong or weak position each of them.

Rice. 3. Map of competitive positions in the furniture sales market: the levels of quality-price ratio (Q/C) are marked vertically; horizontally - assortment set on the furniture sales market in Vladimir; the diameter of the circle is proportional to the share in the sales volume; the numbers indicate the furniture sellers

5. What is the competitor's next most likely strategic move?

This analytical step includes determining competitors' strategies, identifying strong (weak) rivals, assessing their competitive capabilities, predicting their next steps. Well-organized reconnaissance activity to collect information about the enemy makes it possible to predict his actions.

The firm cannot outplay rivals if it does not monitor their actions. It is important to determine the structure of competitors: their position in the industry; goals; basic approaches to the conduct of competition.

a forecast of the next steps of competitors is necessary: ​​an understanding of their strategic intentions; assessment of their position in the market; awareness of how much they need to strengthen their financial situation; analysis of public statements; competitor flexibility; understanding the mindset of leadership; reconnaissance activities.

6. What are the key factors for competitive success?

Key success factors (KSF) are the actions to implement the strategy, competitive opportunities, performance that the company must provide in order to be competitive and achieve financial success.

Key success factors are actions and competitive opportunities that need to be given special attention: capacity utilization, distribution network, advertising, production costs, customer location. IN different industries KFU are different, but there are rarely more than 3-4 of them.

7. Is the industry attractive and what are its prospects for achieving a high level of profitability (above the average in other industries)?

If it is concluded that the industry is attractive, then an aggressive strategy is usually adopted to create a strong competitive position, increase sales and invest in the development of the production base and equipment renewal.

If the industry is relatively unattractive, then:

a) companies outside the industry and considering joining it may decide negatively and start looking for other opportunities;

b) weak companies can merge with competitors or be taken over by the latter;

c) strong companies can limit further investment and focus on cost reduction and/or innovation strategies (new product launches) to increase long-term competitiveness and ensure profitability.

Competition strategies are a set of initiatives aimed at attracting and satisfying customers and strengthening market position. M. Porter identified three types of competitive strategies:

Price leadership - attracting consumers due to the lowest price in the market;

Differentiation - attracting consumers by maximizing the differences between the company's product and competitors' products;

Focusing - the company's orientation to a narrow segment of consumers on any basis.

The choice of a competition strategy is based on the definition of three components: product (degree of product differentiation), market (degree of market segmentation), distinctive competencies of the company (Table 9.1). In practice, competitive strategies require additions.

1. In addition to price leadership, there is a strategy of optimal costs - increasing customer value due to higher quality at prices at or below competitors.

2. Implementation of the focusing strategy is possible in two ways:

Focusing on the basis of low costs. Orientation of the company to a narrow segment and crowding out competitors due to lower prices;

Focus on product differentiation. Orientation of the company to a narrow segment of customers and crowding out competitors due to the unique offer of goods or services.

3. Options for combining the strategy of price leadership and differentiation are possible. Cost reduction methods for differentiation are wide application standard assemblies and parts, reducing marketing costs. Companies charge a premium price compared to the pure price leader, but which will be lower than the pure differentiator.

Table 9.1

Characteristics of competitive strategies

	Product differentiation	Market segmentation	Distinctive competence
Price leadership	(mainly for the price)	(mass market)	Production and materials management
Differentiation	(mainly by properties)	(many market segments)	R&D, sales and marketing
Focusing	Low to High (prices or properties)	(one or more segments)	All kinds of distinctive competence

Consider the content of basic competitive strategies.

Price leadership- it is the ability to offer a lower price at the same level of profit, and in a price war, the ability to withstand competition due to better starting conditions. The price leadership strategy is good in the following cases:

Strong competition on price,

Production of a standard product or a product intended for a wide range of consumers,

standard use of goods.

At the heart of the formation of a price leader is the reorganization of the value chain by improving technology, direct marketing, simplifying product design, eliminating additional consumer properties and focusing on basic needs.

Analyzing the price leader according to the Porter competitive forces model, the following features can be distinguished:

The price leader is relatively safe from potential competitors while retaining a price advantage;

The price leader is less sensitive than competitors to increased pressure from suppliers at the entrance and buyers at the exit: the mass market strengthens its position in the "trade";

When replacement products enter the market, the price leader can lower the price and maintain market share.

There are the following disadvantages of the strategy:

Protracted price wars are possible;

Competitors can use price reduction methods;

There is a risk of over-indulgence in cost reduction;

The strategy is not suitable for all types of businesses.

Differentiation involves achieving a competitive advantage by creating products or services that are perceived by consumers as unique. In this case, companies can set a premium price. The strategy is implemented when consumer needs and preferences cannot be satisfied with standard goods or the previous composition of sellers. Differentiation can be achieved in many ways: unique product qualities, large selection , unique service, design, etc. There are the following types of differentiation:

Product differentiation is the offering of products with characteristics that are better than those of competitors;

Image differentiation is the creation of an image of an organization and / or products that distinguishes them from competitors from the best side .;

Service differentiation is the offer of a higher and more diverse level of related services.

Analyzing the differentiator according to the Porter competitive forces model, the following features can be distinguished:

The company has an advantage as long as consumers maintain a stable loyalty to its products;

Powerful suppliers are rarely a problem, as the company is more focused on price than cost;

Substitute products pose a threat only if they are able to satisfy consumers to the same extent;

The main problem is the maintenance of uniqueness in the eyes of consumers, especially in terms of imitation.

Differentiation is usually associated with an increase in costs, so it is successful if it provides an increase in sales revenue. The strategy may fail under the following circumstances:

Creation of a differentiating feature that, from the point of view of the buyer, does not reduce his costs or does not give him new advantages;

Excessive differentiation, when the price is much higher than the price of competitors, and the properties of the product exceed the needs of the consumer;

Too high price for additional properties;

Lack of notification of consumers about new product properties;

Misunderstanding or ignorance of properties valuable to the buyer.

Focusing involves working with a limited group of segments within which differentiation or a low-price approach is implemented. The application of the strategy is acceptable when:

There is a market segment that provides profit;

There is no interest in the segment from the leaders;

There are a sufficient number of segments in the industry, which allows you to choose the most interesting one.

Analyzing a company focusing its activities according to the Porter model, the following features can be distinguished:

A focused company buys in relatively small volumes. But as long as it can increase prices for loyal customers, this disadvantage is not so significant;

There is a closer connection with consumers;

The niche a company operates in may suddenly disappear due to changes in technology or consumer tastes.

Focused strategies provide an advantage if the company's costs are lower than those of competitors, and its products meet customer needs better than competitors' products.

The implementation of the strategy is associated with the following disadvantages:

There is a risk of the company being squeezed out by competitors;

The needs and demands of this segment may change;

A segment can be so attractive that it attracts the attention of many competitors.

Best Cost Strategy requires the company's experience and ability to simultaneously reduce costs and product differentiation. The goal is to offer the consumer a product of high value that meets expectations in terms of essential properties and exceeds expectations in terms of price. The optimal cost strategy ensures success under certain market conditions. In markets where buyers are accustomed to high product differentiation but are price sensitive, a cost-benefit strategy is more effective than a cost leadership or pure differentiation strategy.

Competitive strategy is the company's desire to take a competitive market position in the industry - that is, in the main arena where rivals fight. Competitive strategy aims to achieve a stable and profitable position that allows the company to withstand the onslaught of the forces that determine the competitive struggle in the industry by strengthening competitive advantages over rivals in the market.

How to choose a strategy? The profitability of the industry is one of the important factors determining the choice of a competitive strategy. The second central problem in choosing a competitive strategy is the positioning of the company within a particular industry. Depending on its positioning relative to other market participants, its earnings will be above or below the industry average. A company in a favorable position will earn high profits even if the industry structure turns out to be unfavorable, and the average profitability due to this circumstance will be low. The basis of the company's effective operation in the long term is a sustainable competitive advantage. And although each company has a large number of strengths and weaknesses compared to competitors, they can usually have only two types of competitive advantages: low costs and product differentiation.

The two main types of competitive advantage, combined with the area in which a company seeks to achieve these advantages, allow it to develop three of the most common competitive strategies with which to achieve a level of efficiency above the industry average: cost leadership, differentiation and focusing. The focus strategy has two varieties: cost focus and differentiation focus. These three strategies are shown in Fig. one.

Picture 1.

The main thing to understand about the most common strategies is that each of these strategies is inherently focused on obtaining certain competitive advantages and in order to achieve these advantages, the company must make a choice, that is, decide what type of competitive advantages it needs. and to what extent the company will achieve these benefits. It is impossible to be "everything for everyone" - this is a strategic recipe for mediocre and ineffective activity; often this means that the company lacks any competitive advantage.

Cost minimization

Of the three most common strategies, cost minimization is perhaps the most obvious and understandable. As part of this strategy, the company aims to establish low-cost production of goods in the industry. Typically, such a company has a wide scope of activity: the company serves several segments of the industry, while capturing related industries whenever possible. Often, it is this broad scope of activities that allows the company to achieve leadership in minimizing costs. The sources of cost advantages can be very diverse and vary by industry type. This can be efficiency gains due to economies of scale, own proprietary technologies, special access rights to raw material sources, and many other factors. For example, in the television industry, cost leadership includes optimally sized picture tubes, low-cost design, automated assembly, and global production scale that fund research and development. If a company provides security services, the cost advantage comes from low overheads, an abundance of low-cost labor, and effective training programs required by the high employee turnover in the industry. Being a low-cost producer is not just about taking advantage of the learning curve. Such manufacturers must constantly look for new sources of cost advantage and make the most of them.

If a company manages to achieve an undisputed lead in cost reduction and maintain this advantage over time, the efficiency of such a company will far exceed the average market level - but provided that the company can keep the prices of its products at the average level for this industry or at the level slightly higher than it. A company that is a leader in cost reduction will, through this advantage, earn high profits even at prices comparable to those of competitors, or at lower prices than competitors. However, such a company should not forget about the basics of differentiation. The company's product must be evaluated by buyers as comparable to competitors' products, or at least quite acceptable, otherwise the company, even being a leader in minimizing costs, will be forced to significantly reduce product prices in order for sales to reach the required indicators. And this can negate any benefits accruing from a cost-cutting position. For example, Texas Instruments (watch manufacturing) and Northwest Airlines (air travel) fell into this trap: both companies managed to significantly minimize their costs. But then Texas Instruments couldn't solve the problem of product differentiation and had to leave the market. Northwest Airlines discovered the problem in time, and management made efforts to improve marketing, passenger service, and ticketing services so that the company's products were in no way inferior to competitors' products.

Thus, no matter how much a company relies on competitive advantages in the form of cost reduction, it must still achieve equality, or at least approximate equality, in the basis of differentiation of its products in relation to competitors' products - only in this case the company will be able to reach efficiency indicators that exceed average level. Equality in the bases of differentiation allows a company that is a leader in minimizing costs to directly translate its low cost advantage into high profits—higher than those of its competitors. But even if the bases of differentiation are approximately equal, the low prices necessary to gain control over the desired market share in no way affect the leader's cost-minimizing advantage, as a result of which the leader receives higher incomes than the market average.

The logic of a cost-minimizing leadership strategy usually requires the company to become the sole leader, and not just be part of a group of those who aspire to this position. Many companies that refused to acknowledge this fact made a serious strategic mistake. When there are several candidates for the position of leader in minimizing costs, the rivalry between them becomes especially fierce - after all, each, even the smallest, market segment begins to be of decisive importance. And until one of the companies takes the lead, "convincing" the rest of the competitors to change strategy, the consequences of this struggle for profitability (and also for the structure of the industry in the long term) can be very detrimental, and this has been the case with several petrochemical enterprises. industry. Thus, the strategy of cost leadership is basically based on the priority right to have a certain advantage - and the company is forced to give up this right, unless at some point it has the opportunity to radically change its position in relation to costs thanks to major technological advances.

Differentiation

The second of the most common competitive strategies is the strategy of differentiation, which consists in the fact that the company tries to establish a unique position in an industry, giving the product characteristics that will be appreciated by a large number of buyers. There can be one or more such characteristics or attributes - the main thing is that they are really important for buyers.

In this case, a company whose products satisfy certain customer needs through these attributes positions itself in some unique way, and the reward for this uniqueness is the willingness of customers to pay high prices for the company's products.

Ways to differentiate differ from industry to industry. Differentiation can be based on the unique properties of the product itself, implementation features, special marketing approaches, as well as a wide variety of other factors. For example, in the construction equipment industry, Caterpillar's product differentiation is based on long machine life, maintenance, parts availability, and an excellent dealer network. In the perfumery and cosmetics industry, the basis of differentiation is most often the image of the product and its placement on the shelves of department stores.

A company that can differentiate products in some way and maintain a chosen direction for a long period will perform more efficiently than the average company in the industry - but only if the markups on the company's goods exceed the additional costs of differentiation, that is, to to make the product unique. A company that chooses a differentiation strategy must therefore continually look for new ways to differentiate—ones that can generate profits that outweigh the costs of differentiation itself. But a company following the path of differentiation should not forget about costs: any, even the highest mark-ups, will not lead to anything if the company takes a disadvantageous position in terms of costs. Thus, if a company chooses differentiation as a strategy, it should strive for cost parity or near parity with its competitors by cutting costs in all areas not directly related to the chosen direction of differentiation.

The logic of the differentiation strategy requires that the company bases differentiation on such attributes of the product that would distinguish it from the product of competing companies. If a company wants to pay a high price for its products, it must be truly unique or perceived as unique by customers. But unlike the cost leadership strategy, the implementation of a differentiation strategy does not require the presence of only one leader in the industry - in this case, there may be several companies that successfully implement the differentiation strategy, but provided that the products in this industry have several parameters that are especially valued buyers.

Focusing

The third general competitive strategy is the focus strategy. This strategy differs from the others: it is based on the choice of a narrow area of ​​competition within a particular industry. A company that has chosen a focus strategy selects a specific segment or group of industry segments and directs its activities to serve exclusively this segment or segments. By optimizing its strategy in accordance with target segments, the company tries to gain certain competitive advantages in these segments, although it may not have overall competitive advantages within the entire industry.

The focusing strategy comes in two varieties. Focusing on costs is a strategy in which a company, operating in its target segment, tries to gain an advantage at the expense of low costs. By focusing on differentiation, a company differentiates in its target segment. Both strategy options are based on the features that distinguish the selected target segment from other segments of the industry. The target segment is likely to include both customers with special needs and production and distribution systems that best suit them and differ on this basis from industry standards. When focusing on costs, the company takes advantage of differences in their structure in various sectors of the industry, while when focusing on differentiation, the company benefits from the fact that in certain market segments there are special groups of buyers with special needs. The existence of such differences in cost structure and consumer demand suggests that these segments are poorly served by broad-based competitors—such companies serve these special segments on an equal footing with everyone else. In this case, the company that has chosen the focus strategy gains competitive advantages by fully focusing its work on this segment. It doesn't matter if it's a narrow segment or a broad segment: the essence of the focus strategy is that the company receives income from those features of this segment that distinguish it from other sectors of the industry. A narrow specialization in itself is not enough for a company to achieve performance indicators that will be above the market average.

Consider the example of Hammermill Paper. The work of this company is an excellent example of the implementation of a focus strategy: the company chose a strategy based on differences in the production process, and then optimized its production in accordance with the chosen target segment. Hammermill is moving more and more towards the production of relatively small batches of high quality paper for specific applications, whereas large companies whose equipment is set up to produce large batches would suffer significant losses by producing such a product. Hammermill equipment is more suitable for the production of small batches of goods and frequent reconfiguration for certain product parameters.

A company that has chosen focus as a competitive strategy has a significant advantage over competitors with a broad specialization, namely: such a company can choose the direction of optimization - differentiation or cost reduction. For example, it is possible that competitors are not serving a particular market segment well enough to satisfy the needs of buyers in this sector, and then the company has excellent opportunities to focus on differentiation. On the other hand, broad-based competitors are likely to spend too much money and effort on serving this segment, which means that their costs of satisfying the needs of buyers in this segment are too high. In this case, the company has the option of choosing to focus on costs - after all, you can reduce costs by spending money solely on meeting the needs of customers in this segment, and nothing more.

If the target segment chosen by the company is no different from other segments, the focus strategy will not bring the desired results. For example, in the soft drink industry, Coca-Cola and Pepsi produce a wide range of products with different compositions and tastes, while Royal Crown decided to specialize in the production of only cola. The segment chosen by the company is already well served by Coke and Pepsi -- even though these companies also serve other segments. So Coke and Pepsi have a clear advantage over Royal Crown in the cola market, thanks to their wider range of products.

The performance of a company that has chosen a focus strategy will be above the industry average if

a) the company will be able to achieve sustainable leadership in its segment in minimizing costs (focusing on costs) or to differentiate its product in this segment as much as possible (focusing on differentiation);

b) in this case, the segment will be attractive in terms of its structure. The structural attractiveness of a segment is a prerequisite, as some segments in an industry will be inherently less profitable than others.

Often, the industry provides opportunities for the successful implementation of several long-term focus strategies, but only if the companies choosing this strategy pursue it in different segments. In most industries, several different segments can be identified, with specific customer needs or specific production and delivery systems, making these segments excellent testing grounds for a focus strategy.

So. Cost leadership and differentiation strategies typically focus on gaining competitive advantage across a broad range of industry segments, while focus strategies focus on gaining cost advantage or differentiation in narrow industry segments. The specific actions required to implement each strategy will vary depending on the type of industry, and the possibilities of implementing a particular general strategy in a particular industry will also be different. It is not easy to choose a general strategy, and even more difficult to implement it in practice, but there are logically "built" ways to gain competitive advantage, and these ways can be tried in any industry.

Can more than one strategy be implemented at the same time?

Any of the most common competitive strategies is a fundamentally different approach to gaining competitive advantage and how to maintain it over a long period of time. Each such strategy combines a certain type of competitive advantage that the firm is trying to achieve, as well as the scope of the strategic goal.

Usually a company must choose for itself a specific type of both, otherwise it will find itself stuck between leaders and laggards. For example, if a company tries to simultaneously serve a large number of diverse market segments by choosing to focus on cost or differentiation, it loses the benefits that it could gain by optimizing its strategy for a specific target segment (focusing).