Company Competitive Strategies & SWOT Analysis
- Ronald van Rensburg
- Aug 18, 2023
- 2 min read
Having determined the industry business cycles, competitive nature of the industries as well as having selected the industry that is ripe with investment opportunities, there will be multiple companies which to choose from within that industry. The next step is to understand the companies’ approach to the strategies implemented in growing the respective businesses in relation to their industry and competition. This is done by combining competitive strategy and SWOT analysis.
Competitive Strategies
Defensive Strategy
To make decisions and implement business systems to mitigate the risk associated with the competitive environment.
Eg. investing in fixed assets, innovations that reduce business costs or creating a strong marketing brand.
Low Cost Strategy
Management decides to be a cost leader in the industry, reducing costs associated with production with new technologies or systems giving the business the leverage to discount prices below that of competitors.
Offensive strategies
To use the strengths of the business to affect the competitive environment.
Eg. to use buying power in obtaining price advantages and implementing improved delivery systems to grow against the competitors.
Differentiating Strategy
Creating a unique product or service which sets the business apart from its competitors to be able to benefit from higher returns generated, if the additional costs merit the higher price relating to the unique product or service.
SWOT Analysis
SWOT analysis is used to understand the strategies used by a company and its position within the respective competitive environment. By looking at the Strengths, Weaknesses, Opportunities and Threats of a company an investor can determine the competitive advantages and weaknesses of a company in its market.
Strengths and Weaknesses relates to a company’s internal structures and capabilities
Strengths - Points out the competitive advantages that a company has
Weaknesses - Points out the weaknesses which competitors can exploit over the company
Opportunities and Threats relates to the external environment that affects the company
Opportunities - Economic and industry factors which creates a favorable environment to the company
Threats - Economic and industry factors which makes it difficult for a company to achieve their maximum potential
In conclusion, by understanding the competitive strategy in conjunction with the information revealed by a SWOT analysis, an investor will be able to determine the effectiveness of management and whether the implemented strategies and business systems in relation to the competitive environment are producing growth in revenue and profitability.
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About the author:
Ronald van Rensburg
Analyst at Tradeview Markets
Email: rvrensburg@tvmarkets.com
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