Q5 - Compare and contrast Porter’s concept of the three generic competitive strategies with Bowman’s Strategy Clock

Q5 - Compare and contrast Porter’s concept of the three generic competitive strategies with Bowman’s Strategy Clock

1. Porters Generic Strategies (Cost to Provider)

   • basic types of competitive strategy that hold across many kinds of business situations
   • Competitive Strategy
     • concerned with how a strategic business unit achieves competitive advantage in its domain of activity
   • Competitive Advantage
     • how an SBU creates value for its users both greater than the costs of supplying them and superior to that of rival SBUs
   • Cost Leadership
     • The competitive advantage of cost leadership is achieved by performing important value chain activities at lower cost than competitors Cost Leadership tends to be more competitors oriented rather than customer oriented
     • Cost Focus
     • Aim - to have the lowest production costs in the industry
     • Standard products, preferred in Asian countries due to low labour costs
     • Lowest cost of production for acceptable goods (to the customer)
     • Focus on cost optimistion thoughout the operations process
     • Benchmarking
       • firms pursuing a cost leadership strategy must continuously benchmark themselves against other competing firms in order to assess their relative cost (and therefore profitability) position in market place
       • aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas like research and development (R&D), services, sales force, advertising, etc
     • e.g. Toyota
   • Differentiation
     • differentiation firms are able to achieve competitive advantage over their rivals because of the perceived uniqueness of their products and services
     • Differentiation focus
     • Strategic Customers
     • Key competitors
     • Perceived Uniqueness
     • Features, performance or other factors
       • differentiation strategy is a business strategy that seeks to build competitive advantage with its product or service by having it “different” from other available competitive products based on features, performance, or other factors not directly related to cost and price
     • e.g. Apple

2. Bowman’s Strategy Clock (Price to consumer)

   • Bowmans Strategy Clock
   • Differentiation Zone (12-2)
     • Strategies in this zone seeks to provide products that offer benefits that differ from those offered by competitors
     • differentiation without price premium
       • used to increase market share
     • differentiation with price premium
       • used to increase profit margins
     • focused differentiation
       • used for customers that demand top quality and will pay a big premium.
   • Low Price (7-9)
     • low perceived product benefits
       • focusing on price sensitive market segments – a ‘no frills’ strategy typified by low cost airlines like Ryanair
     • lower price than competitors
       • while offering similar product benefits – aimed at increasing market share typified by Asda /Walmart in grocery retailing.
   • Hybrid (9-12)
     • Seeks to simultaneously achieve differentiation and low price relative to competitors
     • to enter markets and build position quickly
     • as an aggressive attempt to win market share
     • to build volume sales and gain from mass production.
   • non-competitive (2-7)
     • Increased prices without increasing service/product benefits
     • In competitive markets such strategies will be doomed to failure
     • Only feasible where there is strategic ‘lock-in’ or a near monopoly position
       • Strategic lock-in is where users become dependent on a supplier and are unable to use another supplier without substantial switching costs. 
       • Controlling complementary products or services
         • e.g. Razors
       • Creating a proprietary industry standard
         • e.g. MS Windows
       • Establishing Strategic Lock In
         • Size or market dominance
         • First-mover dominance
         • Self-reinforcing commitment
         • Insistence on preservation of position