Collusion can have negative effects on companies that operate in countries where explicit collusion is considered to be illegal and therefore leads to prosecution. Many countries have banned collusion as well as some trading associations that operate regionally including the European Union. An example of a company that applied collusion and suffered severely is the Archer Daniels Midland which is a large agricultural products firm based in the United States of America where it decided to collaborate with its competitors and they would jointly limit the amount of a food additive known as lysine and consequently increase its price to increase their price margins. The top managers in three Japanese as well as South Korean lysine producing companies testified that they held several meetings in different hotels across the globe to plan and execute their collusion strategy that placed the customers at a disadvantage. All the three companies involved in the collision plot that is not allowed in the United States ended up paying a fine of more than twenty million dollars as ordered by the federal government (Wheelen & Hunger, 2011). Collusion strategy when used in most countries can lead to the loss of assets if a company is ordered to pay a huge fine.
When the business environment becomes hypercompetitive, it becomes tough for any company to maintain its competitive advantage for a long time. Companies that survive in a hypercompetitive environment usually understand that their survival does not only lie in offering prices at the lowest price in the market but value addition to the products that they produce. Companies also focus on satisfying the stakeholders in the business as a strategy. The customers are the primary stakeholders but also employees ought to be empowered because they create the competitive advantage through innovation, new methods and processes that attract more customers. Companies also use strategic soothsaying by predicting what the customers might want in the future and lay plans to develop such products as a way of remaining competitive in the market before the competitors adapt to the new needs of the customer (Akan, Allen, Helms & Spralls, 2006). Apple company has been able to survive in the hypercompetitive market of computers and electronics especially by predicting the future. Steve Jobs understood that not all customers would be happy to work with computers that run in the windows environment and placed the company in a strategic path of developing unique computers that run using Apple’s operating system and becoming a dominant player in the market.
Cost leadership strategy focuses on offering products at a lower price than of the competitor while maintaining high quality that is satisfactory to the customers and still making significant profits. The differentiation strategy on the other hand involves working hard to come up with unique services or products in the market and therefore the competitors are outshined (David, 2011). It is possible to combine cost leadership and differentiation strategies and come with some form of a hybrid strategy where differentiation is simultaneously achieved with producing low cost products that are appealing to the customers. Combining the two strategies requires a company to work towards developing new products that are unique in the market from which they can charge premium and at the same time offering the products at the lowest possible competitive price. The company therefore needs to provide unique products that attract customers but at the same time customers are motivated to buy the products because they are not only of high quality than those of the competitors but also affordable. There are several companies that have implemented the combined strategies and they include Canon, Toyota and Honda.
The main difference between cooperative and competitive strategies is that, in competitive strategies companies work against each other while in the cooperative strategies companies work with each other for their mutual benefit or to control the market. It therefore means that in the competitive strategies companies aim at reducing the competitor’s market share and even pushing the competitor out of the market but on the other hand in the cooperative strategies, competing companies have some form of an agreement to ensure that they work together for them to remain in the market. An example of a company applying competitive strategy is Walmart through offering discounts and causing the small retailers to struggle in the market while the IBM Company applied a cooperative strategy and decided to work with Toshiba and Sony electronics in the development of the computer chips to be used in the next generation of computers. Companies in cooperative strategies usually share in the profits that are generated from their agreements of business but in the competitive strategy each company strives to increase its profit margins and mainly results in placing the competitor at a disadvantage and most often reducing their profit. For example in cooperation the Yum! Brand used franchising to sell its products giving the sellers a profit as opposed to Timex in the competitive strategy and does not share profits from sale of watches with other companies in the business.
Akan, O., Allen, R. S., Helms, M. M., & Spralls III, S. A. (2006). Critical tactics for implementing Porter’s generic strategies. Journal of Business Strategy, 27(1), 43-53.
David, F. R. (2011). Strategic management: Concepts and cases. Peaeson/Prentice Hall.
Wheelen, T. L., & Hunger, J. D. (2011). Concepts in strategic management and business policy. Pearson Education India.