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Competition strategies

  1. Discuss how collusion can have a negative effect as a business strategy. Give an actual example of a collusion strategy used by a company.

The collusion between organizations is a cooperative strategy implemented by either direct or indirect communication in the bid of reducing output while raising prices. It helps in getting around the standard laws of demand and supply. Better communication among companies reduces competition and enables them to compete for good business prices in the market typically. Most commercial legislation in some countries and trade organizations prohibit collusion. From a legislative standpoint, the act could result in criminal charges for individuals and companies to face hefty fines. Socially, cooperation is perceived by the general public as a fraudulent transaction that can lead to a public backlash hence long-term revenue loss. In April 2012, the US State Department for colluding sued Apple and five e-book publishers to fix the price of the e-books to be sold in Apple’s iBook store.

  1. Describe how a firm develops a business strategy when in a hypercompetitive industry. Hypercompetitive industries are associated with a significant number of high-quality products available at comparatively low prices. It creates difficulty in development a business strategy, and the companies must be in a position to change its core approach depending on the amount of competition in the industry and the current demands of the consumer. Competition in a hyper-competitive industry is like a series of the wave. The waves of different intensity but needs adjustments in the hyper-competitive market. The atmosphere, therefore, requires innovation and flexibility.
  2. Explain how a company can have a successful business strategy based on both the cost leadership and differentiation strategies.

A company could potentially be successful in using differentiation and a hybrid strategy of cost leadership. The differentiation strategy needs high capital being invested in the branding of the product.

  1. Evaluate the differences between cooperative and competitive strategies. Give specific examples of each type in your analysis.

Companies conduct the competitive strategies with the expectation of gaining a competitive advantage in the market. Cost leadership, differentiation, and focus are Porter’s three generic competitive strategies. Differentiation, for instance, is the act of a company trying to gain the advantage by offering unique branding and aggressive marketing to enhance the individual factors of their product. They apply to any business, thus being general strategies.

 

Reference

Deckelbaum, A., & Micali, S. (2016). Collusion, efficiency, and dominant strategies. Games and Economic Behavior.

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