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Uma Shankar Singh (Full Time Research Scholar ) Institute of business & Computer Studies Siksha O Anusandhan University
Competitive strategies are designed to exploit an organizations competitive advantage Implies there are other competitors also trying to develop competitive advantage & attract customers Competitive advantage can be eroded easily (& often quickly) by rivals actions
Hypercompetition
A situation of intense and continually increasing levels of competition in todays business environment
High
Some firms are able to pull it together & develop distinctive capabilities, others dont Competitive advantage implies gaining the edge on others using resources & capabilities As firms strive for sustainable CA, stage for competition is set - intense, moderate, low
Another important factor is the scope of the product-market (broad or narrow) Mix of these factors provide basis for
Cost leadership strategy (low-cost strategy) Differentiation strategy Focus strategy
Focus (Differentiation)
Differentiation Strategy
Objective
Offering products/services perceived as unique over the brands of rivals in an industry
Keys to Success
Offer products/services that create value to
customers Offer products/services not easily matched or easily copied by rivals Not spending more to differentiate the firms products or service than the price premium that
can be charged
Differentiation Themes
Unique taste -- Dr. Pepper Special features -- America Online Superior service -- FedEx, Ritz-Carlton Spare parts availability -- Caterpillar More for your money -- McDonalds, Wal-Mart Engineering design and performance -- Mercedes Prestige -- Rolex Quality manufacture -- Honda , Toyota Technological leadership -- 3M Corporation, Intel Top-of-the-line image -- Ralph Lauren, Chanel
Benefits of Differentiation
A product / service with unique and appealing attributes allows a firm to
Command a premium price and/or Increase unit sales and/or Build brand loyalty = Competitive Advantage
Drawbacks of Differentiation
Trying to differentiate on a feature buyers do not perceive as lowering their cost or enhancing their well-being Over-differentiating such that product features exceed customers needs Charging a price premium that customers perceive is too high Failing to signal value Not understanding what customers want or prefer and differentiating on the wrong things Low-cost strategy can defeat a differentiation strategy when customers are satisfied with a standard product and do not see extra attributes as worth paying for!
Focus Strategy
Firm pursues either a cost leadership or differentiation strategy but in a narrow customer group of segment Concentrates on serving specific market niche
Geographical area Type of customer -- specific group of customers Specific & specialized product line
Focus Strategy
Objective
Serve the niche customers better than competitors
Keys to Success
Choose a market niche where buyers have
Focus Approaches
Approach 1: Cost Advantage
Achieve lower cost than rivals in serving the specific or narrow segment
Focus Differentiation
Rolex: Serve highest end of wristwatch market (premium pricing & image) Rolls-Royce: Serving luxurious end of automobile market (premium pricing & image)
Unprofitable strategic position/direction Becoming unstuck involves making consistent strategic decisions about what CA to pursue & doing so by aligning resources & capabilities
Technological advancements that make this hybrid competitive strategy possible are
Flexible manufacturing systems Just-in-time inventory systems Computer-integrated manufacturing systems
differentiation strategy
Toyota & Honda
Canon
Cost reduction through EOS and differentiation through design of copiers
Wal-Mart
Cost reduction through automation and differentiation through quality (more value)
Each of Porters competitive strategies requires certain skills, resources, & organizational requirements
Strategy of differentiation
Functional strategies must reflect choice
advantage
Although changing a firms competitive strategy isnt very likely, modifying the competitive strategy is