Flashcards
Strategic Mngment- Generic Competitive Strategies
Cards in this deck (6)
- 1—LOW-COST LEADERSHIP...
Firm sets out to be the low cost producer in its industry.
Sources of cost advantage are varied & depend on the structure of the industry.
You must find and exploit all sources of cost advantage.
Aims to drive cost down for all production elements from the sourcing of materials to labour costs.
Usually need large scale production so they can benefit from "economies of scale".
Involves firm winning market share by appealing to cost-conscious/price-sensitive customers.
((restaurant turns tables around quickly/ airline turns planes around quickly))
Acheive low direct and indirect operating costs..
Offering high volumes of standardized/ no frills products.
Ongoing efforts to benchmark costs.
Cost conscious culture*
A broad scope strategy.
WALMART & RYANAIR - 2WORKS BEST WHEN... Most rivals are trying to be best-cost providers. Buyer switching costs low. Price competition is vigorous. Most buyers use product in same way. Buyers are large and have significant bargaining power. Product is standardized so readily available from suppliers. PITFALLS... Overly aggressive in cutting price. Low-cost methods easily imitated by rivals. Too fixated on reducing cost & ignoring buyer interest in additional features.BROAD DIFFERENTIATION...
Differentiate products/services in some way to compete successfully.
Appropriate when target customers are not price sensitive, market is competitive & customers have specific needs.
Should be difficult to copy- Could include patents or other Intellectual Property.
Firm seeks to be unique in its industry.
Selects 1+ attributes that buyers may perceive as important and positions itself to meet those needs.
"Stand out from the competitors by developing a differentiation strategy."--Porter
((NORDSTROM)) - 3BENEFITS OF DIFFERENTIATION... Company's can command premium price for their product/service. Increase unit sales. Build brand loyalty. Customer needs are diverse.BEST-COST PROVIDER...
Giving customers value for money.
Goal is to keep costs and prices lower than competitors comparable quality and features.
Deliver superior value by meeting/exceeding buyer expectations on product & price.
((HONDA & TOYOTA)) - 4BEST-COST WORKS BEST WHEN... Where buyer diversity makes product differentiation the norm. Where buyers are also sensitive to price & value.FOCUS/NICHE STRATEGY...
Selects a segment or group of segments & tailors its strategy to serve them to the exclusion of others.
Must have buyers with unusual needs.
Business aims to become well-known for providing products/services to certain segment.
Concentrated attention on narrow piece of total market.
Buyers have distinctive preferences, special requirements.
((ROLLS ROYCE & BENTLEY)) - 5BOWMANS STRATEGY CLOCK...((1996, Cliff Bowman.))
Extends Porter's 3 strategic positions to 8, & explains the cost and perceived value combinations many firms use, as well as identifying the likelihood of success for each strategy.
Different strategies are identified by varying levels of price and value.
- 6POSITIONS 1+2; Price-based strategies. POSITIONS 3,4,5; Differentiation-based strategies. POSITIONS 6,7,8; Failure-based strategies.n/a