Differentiate strategies for adaptive market entry and competitive positioning

Strategy Development

A directional strategy is a strategy to take the organization in a specific direction. For example Pepsi bought a Russian diary as part of its strategy to create a $20 billion nutrition business. This is not related to market conditions as such, just a focus on growing an area of business. In contrast, an adaptive strategy is one where the company needs a strategy to adjust to some sort of change in the marketplace. An example of this would be an old-school grocery store adding more organic foods to its shelves in response to that market trend.

A market entry strategy is a strategy used to enter a market. There are several of these: exporting, licensing, joint venture, and direct investment (QuickMBA, 2010). These work for entering new domestic markets as well. New products or changes to existing products would also qualify, perhaps, as entering a new market. All strategy is competitive, unless you are in a monopoly. Inherently, firms in competitive markets set strategy in order to better compete and thereby meet their operational and financial objectives.

A value-added service would be a valet service at a hotel. The hotel provides a basic service (lodging) and the valet provides an additional service that adds value to your experience. This is a competitive strategy. Indeed, value-added services tend to be competitive. The hotel can function just fine without the valet, and the valet only services the hotel, so there is no new market that is being entered. However, the hotel is using the valet as a means of enhancing its competitiveness, by offering something that the competition does not offer.

A cost leadership strategy is one where the company seeks to gain advantage in the marketplace by offering goods or services at the lowest cost. The underlying theory is that there will always be some consumers in any market that purchase based on price as the main criterion. As such, any firm that offers the lowest possible price will be able to capture some of the market. The key to this strategy is that the company needs to be able to do this profitably, which means that there needs to be an emphasis on driving down costs in all aspects of the business. Management therefore needs to be very efficient. A look at different cost leaders highlights that there are many different ways to achieve this, and it is not just about cutting costs.

Wal-Mart succeeds as a cost leader because it invests heavily in distribution and logistics. The company has become a leader in the field and the result is that it holds inventory for a relatively short period, and invests less in warehousing space than competitors. This allows it to have goods in stores ready to be sold, rather than in warehouses or on trucks. But it is a leader in the field because of its thinking on the subject and its investments in technology. Another cost leader is Costco, and they pay their workers high wages and benefits, much higher than the industry. This works for them because the workers stay with the company. The expertise they bring allows for the company to utilize fewer workers, and for the operations to be incredibly efficient with very few errors of any type.