What do you do to court your customer's attention amidst the intense competition in a congested market?
Do you trace the path towed by your rivals, or do you blaze your trail? The answer to this question lies in creating a hyper-competitive strategy, as you'll find out in this article.
What is it?
Hyper-competition is a market situation characterized by several businesses competing for market share. It is the struggle to command a greater market presence and customer appeal through a series of disruptive tactics.
This situation often creates market instabilities and makes it difficult for businesses to sustain their competitive advantage.
To thrive under such intense conditions, businesses must create a hyper-competitive strategy. This strategy must be flexible enough to adapt to any conditions. It must also revolve around creative and innovative solutions that disrupt the competitive advantages held by rival businesses.
Factors that lead to hyper-competition
These are the most common factors that cause hyper-competition.
Innovation and Technological advancement
As more technologies emerge, the power to disrupt the market takes shape. And when a new technology comes around, it can open up the market to new possibilities for market capture.
Low entry barriers
Also known as the "decline of boundaries," this is the liberty to throw your hat in the ring. It is the ability to enter a business space (or a market) without dealing with any serious entry conditions.
Customer changes
It is easier to cater to customers' current preferences when more businesses attend to them. So when the customer ditches vanilla for strawberries, they can always find the shop that offers their requests.
Access to funding
The market is thrown open when your competitors can afford the resources needed to compete. And if you have deep pockets, exploring any market prospect that opens up anywhere becomes easier.
When do we use it?
Below is a list of practical situations where you can use the hyper-competitive strategy.
In new or emerging markets and industries
When a new market opens up, the struggle to capture the largest market space catches up among the new entries. You must strategize and get creative to make your mark as a fellow competitor.
In creating strategic advantages
Strategic advantages can flow into whatever shape the market assumes. This is very important when considering today's markets' dynamic and competitive nature.
In adapting to changing customer needs
Predicting your customer's needs is no easy task. So you must factor in multiple possibilities when planning for them. A hyper-competitive strategy is flexible enough to cater to any outcome or drastic change.
In highly competitive markets
A hyper-competitive strategy helps you create sustainable advantages—a key resource in crowded market spaces. It drives you to think outside the box while competing with your peers to capture your market space.
What business questions is it helping us to answer?
Below is a few questions that hyper-competition helps to answer.
What can I do to remain competitive?
With competition at its highest level, you must find a way to survive or be thrown off your perch. Hyper-competition drives the need to create strategic advantages which are more sustainable than competitive advantages.
What is my best strategic position?
You don't plunge into hyper-competitive industries unprepared. You must have a business strategy that is both flexible and sustainable.
How best can I meet my customer's needs?
The customer is king and deserves nothing less than a treat whenever they come knocking. So you must always strive to provide value to them, or they'll take the next door.
How can I do things differently?
You can always attract customers by creating a differentiated product in the market. This means that you must be creative and innovative in your approach to capture market space.
How do we use it?
Below, we've outlined a series of actions to develop and implement a hyper-competitive strategy.
Study the competition
Your competitors will likely not let you in on their business. So you must find clever means to learn about their pricing and marketing strategy, supply system, and other aspects of their operation.
Study the market
The aim is to find those market segments with the best prospects and focus on them. Instead of trying out in several different places, you can pick a spot and deploy all your resources there.
Create strategic advantages
A strategic advantage will thrive amidst the market flux and intense rivalry in your business space. It'll involve many innovative solutions and flexible tactics to tackle any outcome.
Work on your pricing strategy
A good pricing strategy ensures that your business remains profitable amidst the urge to lower prices. So while your sticker prices reflect the current market situation, they must also be sustainable for your business long-term.
Focus on improving quality
The tendency is to lower your prices in hyper-competitive markets to court customers. However, by improving the quality of your offerings, you can offer something better and different to others.
Practical Example
A fashion house has just set up shop in Paris, France's haute couture hotspot. It is thrust into intense competition in no time and has to capture its own market space. After spending considerable time understudying the market and its closest competition, it settles on a creative strategy.
It fits its showrooms with virtual fitting rooms where customers can visualize themselves in the most elegant dresses. It also introduces 3D printing to build prototype dresses and enable customization. This way, they can always create clothes to suit their customer's changing fashion tastes and preferences. This is an ideal use of innovation to attract customers in a market where they are so easily distracted.
Advantages
It creates options for the customers
The customer is spoilt for choice in a hyper-competitive market space. They can always find the right prices for every quality of product they need.
It throws the market open for everyone
One major feature of a hyper-competitive market is the removal of entry barriers. Once you have the resources needed to take off, you can join the fray and level the playing field for your business.
It promotes sustainable advantages
Sustainable advantages can help you stay afloat amid the high tides of competing forces and market fluctuations. In essence, hyper-competition shifts the focus from competitive advantage to strategic competition.
It encourages innovation
The saying "necessity is the mother of invention" holds for businesses competing in hyper-competitive spaces. Thus, you must devise unique and creative ways to compete, or you'll be swept away by the competition.
Disadvantages
It may be less suited to small businesses
If your pockets are not deep enough, you may have trouble surviving in hyper-competitive markets.
Customer loyalty is difficult
Building customer loyalty is a difficult process in hyper-competitive business spaces. The latest shop can turn your customer's heads off the block if you don't offer enough to keep them in your corner.
It may not be profitable in the short-term
It takes some time to build strategic advantages in any business space. And you may struggle if you don't have enough to sustain yourself in the short term.
Continue to explore strategy tools here.
Comments