3 Basic ways in which a company can react to a competitor's activities.

3 Basic ways in which a company can react to a competitor's activities.

3 Basic ways in which a company can react to a competitor's activities.




  1. Not taking action, 
  2. Repositioning the existing offerings, and 
  3. Adding new offerings.


Not taking action

The decision to ignore a competitor's actions reflects a company's belief that these actions either will have no material impact on the company's market position or that the competitive threat is not sustainable and will dissipate by itself. In the same vein, a company might not react to a competitor's price reduction if it believes that this low-priced position is not sustainable in the long-term.

Repositioning the existing offering

2 ways: It might change the offering's value proposition to increase its appeal to current customers or, alternatively, it might reposition the offering to appeal to a different customer segment.

Repositioning to increase the offering's value for current customers.

Because value is a function of benefits and costs, enhancing the value of an offering might be achieved in two ways: by increasing benefits and by decreasing costs.

Increasing an offering's benefits

To increase the attractiveness of its offering, a company might choose to


  1. enhance the functional benefits of the offering (by improving the offering's performance), 
  2. increase the monetary benefits (by adding monetary rewards), and 
  3. increase the psychological benefits (by enhancing the offering's image). 

For each of these strategies to succeed, the increase in benefits must actually be perceived as such by customers; improving the offering's performance on attributes that are unobservant by customers is not likely to enhance its customer value.

Decreasing an offering's costs - As in the case of increased benefits, decreasing an offering's costs can be achieved by decreasing its functional, monetary, and psychological costs. Because the price of an offering is typically the most important component of customers' costs, price reduction and adding monetary incentives are the most common forms of cost decreases.

Repositioning to attract new customers - In addition to increasing an offering's value for existing customers, a company might decide to reposition its offering to better address the needs of different target customers. Implies a change in the value proposition of a given offering in one of two ways: vertical or horizontal.


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