Competitive position

From CEOpedia | Management online

Competitive position refers to the place of the company, its products or services on the widely understood market. It describes its market share relative to all other companies acting on the market and defines the opportunities and threats that arise from it. Usually company has a significant impact on its market position. Strategies pursued by the company, ways of achieving goals and use of the marketing mix (4P - product, price, promotion, placement) instruments determines its competitive position in the market. It is also strongly affected by reputation, financial performance, product variety, etc.

Types of competitive position

Competitive position can be classified in different ways - by a company's reputation, its financial results or by the size of the market share. Competitive position dictates the intensity and choice of strategies. If it is strong, company should apply a strong strategy in all segments of the market. If the position is weak, then company should apply a selective strategy, which is to focus on a limited number of segments and market niches.

There is a number of competitive positions, among them:

  • Market leader
  • Aggressive market participant
  • Quiet market participant
  • Niche player
  • Follower
  • Challenger
  • Underdog
  • Late entrant

Market leader

Fig.1. Competitive position and marketing strategy

Creates new strategies, tries to search for and create new needs, gaining new markets - expanding its target markets, expands the existing demand, attracts new customers

A market leader is a company or product that has the highest market share in a particular market. A market leader's competitive position is often strong, as they have a dominant presence in the market and a significant advantage over their competitors. Some key characteristics of a market leader's competitive position include:

  • High market share: A market leader typically has a large share of the market, which allows them to exert significant influence over pricing and product development.
  • Strong brand recognition: A market leader often has a well-established brand that is easily recognizable by consumers. This can make it easier for the company to introduce new products and expand into new markets.
  • Wide distribution: A market leader often has a wide distribution network, which allows them to reach a large number of customers.
  • Strong customer loyalty: A market leader often has a large and loyal customer base, which can be difficult for competitors to break into.
  • Strong financial position: A market leader often has a strong financial position, which allows them to invest in research and development, marketing, and other activities to maintain their competitive position.
  • High barriers to entry: Due to the dominance of the market leader, the barriers to entry for other companies are high, which makes it difficult for new competitors to enter the market.
  • Innovation: Market leaders are often at the forefront of innovation in the industry, introducing new products and services that competitors struggle to match.

It is important to note that being a market leader does not mean that a company is invincible, and even market leaders have to adapt and evolve to remain competitive.

Aggressive market participant

In relation to the market leader is in second or third position on the market. It is characterized by high activity in striving to increase its market share

An aggressive market participant is a company or product that is actively seeking to increase its market share and gain a competitive advantage over its rivals. Some key characteristics of an aggressive market participant's competitive position include:

  • Rapid growth: An aggressive market participant is often characterized by rapid growth in terms of market share and revenue.
  • Innovative products or services: Aggressive market participants often introduce new and innovative products or services to the market, which can give them a competitive edge over rivals.
  • Aggressive pricing: An aggressive market participant may use aggressive pricing strategies, such as undercutting the prices of competitors, to gain market share.
  • Heavy investment in marketing and advertising: An aggressive market participant may invest heavily in marketing and advertising to raise awareness of their products or services and build their brand.
  • Strong distribution: Aggressive market participants often have a strong distribution network which allows them to reach a wide customer base.
  • Risk-taking attitude: Aggressive market participants often have a risk-taking attitude and are willing to take on more risk than their rivals in pursuit of growth and market share.
  • Expansive geographic or segment coverage: An aggressive market participant may be expanding its reach to new geographic or market segments.

It is important to note that being an aggressive market participant can be both positive and negative, as the company may achieve significant growth, but it can also lead to financial losses if the aggressive strategies fail to pay off. Additionally, the strong competition can lead to price wars and other negative effects for the market as a whole.

Quiet market participant

It is a passive participant in the market, it does not care for increasing market share adapts its strategies to the emerging market conditions.

A quiet market participant is a company or product that is not actively seeking to increase its market share and may be content with its current position within the market. Some key characteristics of a quiet market participant's competitive position include:

  • Stable market share: A quiet market participant typically has a stable market share, which may not be growing, but also not shrinking.
  • Limited product or service offerings: Quiet market participants may have a limited product or service offering, which allows them to focus on a specific niche or target market.
  • Limited marketing and advertising: Quiet market participants may not invest heavily in marketing and advertising, instead relying on word-of-mouth or customer loyalty to maintain their market share.
  • Limited distribution: Quiet market participants may have a limited distribution network, which allows them to focus on a specific geographic area or customer segment.
  • Conservative approach: Quiet market participants tend to take a more conservative approach to business, avoiding risks and focusing on maintaining their current market position.
  • Price stability: Quiet market participants may not engage in price wars, instead they tend to maintain a stable pricing strategy that allows them to maintain their profit margin.
  • Brand recognition: Quiet market participants may have a good brand recognition within their specific niche or target market.

It's important to note that being a quiet market participant doesn't mean that a company is not competitive, it just means that the company is not actively seeking to gain market share or expand its presence in the market. A quiet market participant can still be a profitable and successful business.

Other competitive positions

There are several other competitive positions that a company or product can occupy within a market, including:

  • Niche player: A niche player is a company or product that specializes in a specific niche or target market. Niche players may have a smaller market share than the market leader, but they can still be profitable by focusing on a specific market segment and catering to the unique needs of that segment.
  • Follower: A follower is a company or product that follows the market leader and other competitors, imitating their strategies and products. Followers may be able to gain market share by copying the strategies of the market leader, but they are also at risk of losing market share if the market leader changes direction.
  • Challenger: A challenger is a company or product that is actively seeking to compete with the market leader and gain market share. Challengers may have a smaller market share than the market leader, but they can still be a strong competitor by focusing on specific product features or targeting specific market segments.
  • Underdog: An underdog is a company or product that is relatively new to the market and has a small market share. Underdogs may be at a disadvantage compared to established market players, but they can still be successful by focusing on innovative products or services, or by targeting niche markets.
  • Late entrant: A late entrant is a company or product that enters the market after other competitors have already established themselves. Late entrants may face challenges in gaining market share, but they can still be successful by leveraging new technologies or unique product features.

Each of these positions can have different advantages and disadvantages depending on the specific market and the company's goals. It's important for a company to understand its competitive position and develop strategies to improve it, in order to increase its chances of success.

Methods of analysis of competitive positions

There are several methods that can be used to analyze a company's competitive position in the market, including:

  • Porter's Five Forces: This framework developed by Michael Porter, is a tool for analyzing the competitive forces in an industry, including the threat of new entrants, the bargaining power of suppliers and customers, the threat of substitute products or services, and the intensity of competitive rivalry.
  • SWOT Analysis: SWOT analysis is a tool that helps a company identify its strengths, weaknesses, opportunities, and threats. This can help a company understand its competitive position and develop strategies for improving it.
  • Market Share Analysis: This method involves analyzing a company's market share compared to its competitors. A company with a higher market share is considered to have a stronger competitive position than one with a lower market share.
  • Brand Analysis: This method involves analyzing a company's brand recognition and reputation compared to its competitors. A company with a strong brand and reputation is considered to have a stronger competitive position.
  • Product Analysis: This method involves analyzing a company's product or service offerings compared to its competitors. A company with unique or superior products or services is considered to have a stronger competitive position.
  • Competitive Benchmarking: This method involves comparing a company's performance to that of its competitors in areas such as cost, quality, and customer service. This helps a company identify areas where it needs to improve to enhance its competitive position.
  • PESTEL analysis: This method is a framework that helps to analyze and evaluate the macro-environmental factors that can affect a company's competitiveness, such as political, economic, social, technological, environmental, and legal factors.

Other methods are: strategic portfolio analysis, BCG matrix, McKinsey matrix. Each of these methods can provide valuable insights into a company's competitive position, and can be used together to provide a comprehensive picture of the company's strengths and weaknesses in relation to its competitors.


Competitive position — recommended articles
Strategic position — Threat of new entrants — Concentrated marketing — Competitive environment — Focus strategy — Market opportunity — Competitive positioning — Market development — Global marketing strategy

References

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