Who This Article Is For
- Owners reviewing their competitive strategy
- People unsure how to allocate limited resources
- People seeking an objective view of their market position
Choose a Strategy That Fits Your Business With Kotler’s Competitive Positions
Understand market leaders, challengers, followers, and nichers, then define your market and choose actions that fit your position and available resources.
Published
Identify Your Market Position and Choose a Strategy That Fits Your Resources
Competitive strategy requires choosing a suitable way to compete. The same strategy does not work for every company.
Kotler's competitive positions help identify whether a company is a leader, challenger, follower, or niche specialist. Understanding that position clarifies the direction of action.
What Are Kotler's Competitive Positions?
This framework divides a company's position in a market into four types. Its value is in considering relationships with competitors alongside company size.
The positions are:
- Leader
- Challenger
- Follower
- Nicher
Even companies selling similar products need different actions when their positions differ. Copying a leading company may fail when this distinction is ignored.
Strategy Changes With Position
Misunderstanding your position makes strategy ineffective. A small company attacking broadly like a market leader lacks the necessary resources. A leading company defending too narrowly can miss opportunities.
Identifying position helps in three ways:
- Clarifying which resources to use
- Identifying whom customers compare you with
- Changing how you develop a viable competitive approach
Strategy needs to begin from the current position rather than an idealized one.
The Four Competitive Positions
Each position has a different role and approach.
How a Leader Defends Its Position
The leader is the largest presence in a market. It tends to benefit from recognition, distribution, and an established record, while also helping expand the market itself.
Its actions include:
- Serving a broad customer base
- Expanding overall market demand
- Incorporating responses to new competitors' moves
A leader needs to defend its position alongside pursuing growth.
How a Challenger Competes
A challenger seeks a higher position. Copying the leader is unlikely to be enough, so differentiation matters.
It might differentiate through:
- Price
- Features
- Service
- Superior performance in a particular area
Look for areas the leader serves weakly. Identify a vulnerable part rather than relying on direct confrontation.
Followers and Nichers
Followers use the success of earlier companies as a reference and earn profit through improvements or efficiency. Nichers specialize in a narrow market and seek to be the preferred choice there.
| Position | Main approach |
|---|---|
| Follower | Develop efficiently using established examples |
| Nicher | Concentrate on a narrow market and deliver deeply relevant value |
The nicher perspective is particularly relevant to smaller businesses.
Choosing an Approach That Fits Your Company
Knowing the four labels is only the beginning. Apply them to your own situation.
Define the Competitive Ground
First clarify which market you compete in. An excessively broad definition hides your position.
Possible boundaries include:
- Region
- Customer group
- Product category
- Problem addressed
A defined market also makes the relevant competitors visible.
Consider Your Distance From Competitors
Position is relative. Examine the criteria customers use: sales scale, recognition, customer numbers, or expertise.
Ask whether you are:
- The overwhelmingly dominant company
- A company pursuing the leaders
- A company earning profit by following established examples
- A specialist strongly preferred in a narrow market
This perspective helps avoid contests beyond your means.
Maintain Consistent Actions
Once the position is understood, continue with actions that fit it. A nicher advertising broadly or a follower stretching to compete through innovation can exhaust resources.
The broad direction is:
- Leaders: defense and expansion
- Challengers: differentiation
- Followers: efficiency
- Nichers: concentration
Consistency makes the strategy easier to understand.
Why Smaller Businesses Benefit From Thinking Like Nichers
For many small and medium-sized companies, a niche approach is the most realistic. Becoming the preferred choice in a narrow market can be more valuable than disappearing in a broad one.
The Value of Winning in a Small Market
A small market can feel worrying. Yet companies chosen deeply within a narrow area can avoid some price competition.
Benefits include:
- Deeper customer understanding
- Clearer expertise
- Fewer direct comparisons
- More opportunities for referrals
Depth can be a stronger asset than breadth.
See Assessing Sustainable Competitive Advantage for protecting strengths gained in a narrow market. It helps examine whether those strengths form a system competitors will find difficult to catch up with.
Finding a Useful Market Boundary
Niches can be found by changing the angle of view, including:
- A particular industry
- A particular difficulty
- A particular region
- A particular price range
A seemingly narrow market can contain substantial value when explored deeply.
Expand in a Deliberate Order
After establishing a niche, expansion order matters. Moving gradually into adjacent markets generally creates fewer mistakes than pursuing a wide market immediately.
The record and trust gained in the original market provide a foundation for the next. Accumulating small areas of leadership can be effective.
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Frequently Asked Questions
Q: Can I use this without knowing exact market share?
A: Yes. Relative positioning against major competitors is useful even without precise figures. Understanding the relationships matters.
Q: Which position should smaller companies seek?
A: A nicher approach is often useful. Building a position of strong preference in a narrow market can produce better results than being overlooked in a broad one.
Q: What if the company operates several businesses?
A: Assess each business separately. One may be a nicher while another is a follower.
Q: Can competitive position change?
A: Yes. Market conditions and competitors' actions can shift it. Review the position periodically and adjust the strategy to the current situation.
