chapter5 The Five Generic Competitive Strategies

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What Is Competitive Strategy"?

‹Deals exclusively with a company's business plans to compete successfully

Specific efforts to please customers

Offensive and defensive moves to counter maneuvers of rivals

Responses to prevailing market conditions

Initiatives to strengthen its market position

Strategy and Competitive Advantage

Attracting customers and

Defending against competitive forces

Key to Gaining a Competitive Advantage

Convince customers firm's product / service offers

superior value

A good product at a low price

A superior product worth paying more for

A best-value product

Low-Cost Provider Strategies

Keys to Success

Make achievement of meaningful lower costs than rivals

Include features and services in product offering that buyers consider essential

Find approaches to achieve a cost advantage in ways difficult for rivals to copy or match

"Low-cost leadership means lowoverall costs, not just low manufacturing or production costs!"

Options Achieving a Low-Cost Strategy

Open up a sustainable cost advantage over rivals, using lower-cost edge to either

Under-price rivals and market share gains OR Earn higher profit margin going price

Approaches to Securing a Cost Advantage

Approach 1: Do a better job than rivals of performing value chain activities efficiently and cost effectively

Approach 2: Revamp value chain to bypass cost-producing activities that add little value from the buyer's perspective

Controlling the Cost Drivers:

Capture scale economies; avoid scale diseconomies

Capture learning and experience curve effects

Manage costs of key resource inputs

Consider linkages with other activities in value chain

Find sharing opportunities with other business units

Compare vertical integration vs. outsourcing

Assess first-mover advantages vs. disadvantages

Control percentage of capacity utilization

Make prudent strategic choices related to operations

Revamping the Value Chain:

Abandon traditional business methods and shift to e-business

technologies and use of Internet

Use direct-to-end-user sales/marketing methods

Simplify product design

Offer basic, no-frills product/service

Shift to a simpler, less capital-intensive, or more flexible technological process

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