Every business enterprise occupies a place in the overall market of its chosen product line. The enterprise could be a market leader, a market challenger, or a market follower. Whichever posture an enterprise chooses; there are strategies to adopt.
A market challenger may adopt the following strategies:
Price-discount strategy – product offerings of comparable quality to the leaders at lower price. For this to work, the customer must be made to know the following:
- The challenger’s product or services is of comparable quality to market leaders
- Buyer must be sensitive to the price difference
- The price leader must stick to its price in spite of competitors’ attack.
Cheaper goods strategy – average or lower-quality product offering at much lower price. They must be sufficient segment of price conscious buyers for this strategy to succeed.
Prestige-goods strategy – higher-quality product offering and charging a higher price and later roll out lower price product.
Product-proliferation strategy – launching a large number of product variants.
Product-innovation strategy – pursuing the part of product innovation to attack leaders’ position.
Improved service strategy – creating ways to offer new service or better services.
Distribution innovation strategy – expanding market share by developing new channel of distribution.
Manufacturing cost-reduction strategy – achieving lower manufacturing cost than competitors through more efficient purchase of materials, lower labour cost, use of modern production equipment and using the lower costs to price more aggressively to gain market share.
Intensive advertising and promotion – increasing the quality and/or quantity of advertising and promotion. The promotion spending must not be substantial and that the advertising message exhibits some superiority over competitors.
Are you a challenger?
A challenger rarely succeeds in improving its market share by relying on only one strategy. Its success depends on designing a total strategy that will improve its position over time.
However, firms may choose not to challenge market leaders by adopting a market-follower strategy. They recognize that the leader can match and diffuse every step they take. This is not to say market-followers are without strategies.
Each follower must work a set of target markets to which it can bring distinctive advantages-location, services, financing. It must be ready to enter new markets that are opening up. The enterprise must keep its manufacturing cost low and its product quality and services high.
Bonus: Three secret tips to becoming the leader in your business
- Make your product the best
- Make your product the most useful
- Make your product the cheapest and setting the industry standard.