Professional Documents
Culture Documents
NPD
Quality
Superior customer service
Achieving lower costs
Better geographic location
Technical expertise
Supply chain management
Brand image / reputation
5 Generic Competitive Strategies
TYPE OF COMPETITIVE ADVANTAGE
BEING PURSUED
Lower Cost Differentiation
Broad buyer OVERALL COST BROAD
segment LEADERSHIP DIFFERENTIATION
STRATEGY BEST STRATEGY
MARKET
COST
TARGET
PROVIDER FOCUSED
FOCUSED
Narrow buyer LOW-COST STRATEGY DIFF.
segment STRATEGY STRATEGY
PORTER, 1980.
Low Cost Leadership
2 overall ways:
Control cost drivers of internal value chain activities
Re-vamp value chain to bypass some cost-producing
activities
Controlling the Cost Drivers
Economies of scale eg Category Mgt,
Salesforce mgt, Simplifying pdt design
Learning / experience curve effects
Costs of key resources
Manage linked costs
Vertical integration
Cross-functional coordination
Timing of strategic moves
% Capacity utilisation
Low Cost Leadership Strategy
- Re-vamping the Value Chain
Profitability
Sustainability
Over fixation
Broad Differentiation Strategy
Premium price
Brand loyalty
Purchasing
Product R&D
Production R&D
Outbound distribution / logistics
Marketing, sales, customer service
Differentiation & Value
Value Signals:
Price
Packaging
Advertising
Brochures
Sellers facilities, appearance etc
Differentiation - Caution!
Caution!
Easily imitated
Change in buyer preferences
Segment becomes too attractive
Vertical Integration & Competitive
Advantage
Backward
Same economies as suppliers
Suppliers are too powerful
Supply/quality/quantity/price is uncertain
Co. is low priority for supplier
Where item is a major cost component
When technology is easily mastered
Vertical Integration & Competitive
Advantage
Forward
eg. co. owned distribution, franchised dealer
networks
Undependable distribution
High retailer margins
Vertical Integration & Competitive
Advantage
Caution!
Capital investment
Risk
Decreased flexibility
Balancing capacity at each stage -
under/over supply
Getting the right skills right
Lead times
Vertical De-integration
Outsourcing as many activities in the value chain as
possible.
Strategic Benefits?
Improved / Faster NPD
More efficient SCM
Economies of scale in production / mkg
Gain expertise
Gain / improve mkt access
Offensive Strategies
Moves calculated to yield a competitive advantage
Size of
C. Ad.
Build Benefit
Up Period Erosion
Time
Types of Strategic Offensive
Market leaders?
Runner-up firms?
Weakest firms?
Defensive Strategies
Purpose?
- expense
- rapid change may lead to obsoletion
- weak customer loyalty
- easily imitated