When I was studying my MBA I was introduced to the ideas of Michael Porter who wrote a book called Competitive Strategy. In this article I’ll look at one of the main concepts from that book – the three types of Competitive Strategy.
Firstly, I’ll give a quick overview of the book. Porter places a lot of emphasis on doing your research on your competitors and the environment your business exists in. By looking externally and knowing about the competitive factors that are present in your markets, you can make better decisions about your strategies.
Porter suggests there are three types of competitive strategies your business can adopt:
- Overall cost leadership
- Differentiation, and
Overall Cost Leadership
This is a pretty simple strategy – create a product with low costs so you can make more profit. You can choose to sell it with a low price, or at the same price as everyone else, but make more profit on the sales.
You see this a lot in retail markets, particularly where the product being sold is a common, generic product. Think about television sets. Go into any retailer and look at their range of large screen TVs. You’ll seen TVs with the same size screen at a range of different price points. Some manufacturers will take a low-cost position in this market, creating the product for a lower cost then their competitors and usually selling it at a lower price.
The dangers of trying a low-cost strategy is the risk of someone else coming in and undercutting your prices or cost structure.
This type of strategy can work effectively, but in my opinion the other two strategies are more suited to bloggers looking to build an online business.
I like the Differentiation strategy. It’s all about creating something unique that sets you apart from your competitors. I believe blogging gives you an amazing opportunity to do this.
Differentiation helps you on two levels – by being unique you’re creating a group of loyal fans – your tribe. This brand loyalty makes them less likely to switch to someone else. Also, by providing unique products or services you can command a higher profit margin – if you’ve got a product that can only be bought from you, you can set the price!
If you sell a generic product that has a lot of competition and alternate products, you’re more likely to compete on price. If you can differentiate and create something that’s different from everything else that’s out there you become less price-driven.
In a focus strategy, you concentrate on a particular sector. You narrow your market by zeroing in on a particular group.
The focus can be geographic (in a particular town or region), it can be based on certain industries or it can be based on demographics i.e. people interested in knitting.
You can adapt the Focus strategy to either differentiate within your niche, or take a low-cost position within the niche.
I see this in the financial planning world where planners focus on a particular target market i.e. retirees. By specialising in this area the planner is seen as an expert in that niche. Because of this they can command higher prices and can do the work more efficiently.
Competitive Strategy for Bloggers
So how do you apply this to your blogging?
As part of the business planning process I help bloggers analyse the markets they’re in, and look at what their competitors are doing. When you define who your target market is, what their issues or concerns are, and how your product meets their needs, you’re in a good position to look at the appropriate strategy.
I believe that blogging makes it easy to make your services or products unique – every blogger has a different (and unique) opinion or experience. Because of this, I’m not a fan of taking a low cost approach over the long term.
For many bloggers, having a Focus strategy can be a powerful approach to growing your business. Assuming you have a product that can be sold worldwide, there’s probably enough people in your target-market in the world who could purchase your product.
A great example is guitar lessons. Targeting the broad ‘guitar lessons’ niche may be a bit hard – there’s already plenty of people in that area. But maybe you can focus on a particular area – maybe ‘Blues Guitar Lessons’. There’s a lot less competition in this market and it’s easier to become seen as an authority in this area.
Also, by specialising in this niche you don’t need to become an expert in other guitar styles and you can instead focus all your efforts in learning (and teaching) this one style.
A Differentiation strategy is also suitable for bloggers. If your niche is still broad, think about how you can set yourself apart from your competitors. We take for granted our individual skills and talents and don’t spend enough time thinking about ways to use them to differentiate ourselves.
Applying The Strategies To Your Blog
Take some time to think about the concepts I’ve introduced here and look at how you can apply them to your blog.
Do you know enough about your niche to be able to decide on a strategy, or do you need to do more competitive analysis?
Have you been competing on price rather than differentiating yourself?
Let me know what you think by leaving a comment below. Also, I recommend the Competitive Strategy book by Michael Porter – if this article has been valuable you’ll probably love the book.
Photo Credit – hikingartist/
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