Scholars have developed response models to provide the criteria for understanding how consumers respond to market activities and as well, to provide a thorough understanding regarding interaction between competitors. Such models have helped in advancing marketing knowledge and easing decision making processes. Developing appropriate strategies to improve the competitive advantage of a firm is achieved by evaluating the nature of the market and a firms’ competitive position. Valle-Cabrera (2006) argues that pressures exerted by institutional and competitive market pressures force managers to make strategic decisions that conform to these pressures. Valle-Cabrera (2006) further states that following the resource-based view of the firm, chances of improved competitive advantage using resources and capabilities are higher. According to the resource-based view, a firm can employ distinctive strategic resources to enhance its competitive advantage. Equally, differentiation enables a firm to minimize the effects of competition and helps in improving the firm’s performance. Unfortunately, the idea of conforming to the institutional and competitive market pressures leads similarity in strategies adopted by firms in a market hence leading to heightened competition.
Kim and Mauborgne (2009) are against the idea of allowing market and environmental pressures to define strategies aimed at creating sustained competitive advantage. Instead, they support the idea of conducting a through environmental analysis and then findings from the analysis are used to craft the right strategic approach. As such, the major items to be considered in crafting the appropriate approach include examination of the resource and capabilities, analysis of the structural conditions, and examining the strategic mind-set of the organization. To make this work, a firm must align these factors to three prepositions as defined under the Blue Ocean Strategy. These propositions are value proposition, profit proposition, and people proposition. Aligning these strategic propositions can enable firms to develop strategies that create sustainable competitive advantages.
Treacy and Wiersema (2000) cite value creation, strong cohesive business systems, and meeting customer expectations as the most powerful strategies for overcoming direct competition. Simply put, developing customer-centered approaches enables firms to satisfy the needs and expectations of customers. Traditionally, price and quality were used in defining the value of products but things have changed such that consumers value products in terms of additional attributes such as after sale services, convenient of purchase, and reliability. Companies such as Home Depot and Dell have capitalized on these attributes to improve on their strategic capabilities.
In practice, the factors identified in the scholarly literature depict actual case scenarios where firms develop strategies to overcome the increasing competitive pressures in the market. First, the idea of value creation among firms attracts many consumers because the contemporary consumer has access to information and would prefer to purchase products that offer great quality, convenience, and satisfaction. Customized products are gaining popularity among consumers because every consumer would love to appear unique. Second, market and institutional pressures do play a role in influencing strategic approaches among firms because firms often develop strategies to counter other strategies adopted by the competitors. Alternatively, firms conduct market researches aimed at understanding consumer behavior and format their strategies to suit these needs. Last yet important, conducting a situational analysis (both internal and external analysis) helps many firms to gain a clear picture of the competitive environment and formulate strategies that capitalize on their strengths and make the best out of their weaknesses.
The differences and similarities in strategic approaches adopted by firms to create sustainable competitive advantage imply that formulation of appropriate strategies is dependent on several factors. Not all strategic approaches can deliver equal results if applied by firms because a strategy that works in one firm cannot work if adopted in another firm. Another key observation is that strategy formulation is guided by existing strategic theories and theoretical models. Other important determinant factors in strategy formulation include consumer perception, a firms resources and capabilities, value leadership, and a firm’s structure.
Valle-Cabrera (2006). Reconciling institutional theory with organizational theories; how neoinstitutionalism resolves resolves five paradoxes. Journal