What does a firm’s competitive strategy primarily define?

A firm's competitive strategy primarily defines how it will compete in the market and create customer value. This involves outlining the plans and actions that a company will take to differentiate itself from competitors, effectively targeting desired customers, and leveraging its unique strengths to deliver superior products or services.

The essence of a competitive strategy lies in understanding the market dynamics, customer preferences, and the competitive landscape, allowing a firm to carve out a specific position that effectively meets the needs of its target audience. By focusing on how to compete—whether through cost leadership, differentiation, or niche strategies—a firm can align its resources and capabilities to enhance customer satisfaction and achieve a sustainable competitive advantage in the marketplace.

This focus differentiates it from other strategic areas such as financial management, research and development, or environmental impact, which, while important, do not primarily encapsulate the direct approach of competing within the market and creating value for customers.