The Five Generic Competitive Strategies Which One to Employ? Part II

The Agenda Best Cost Provider Strategy Focused Low-Cost Strategy Focused Differentiation Strategy Risks of Focused Strategies Deciding Which One to Choose

Best Cost Provider Strategy

Focused Low-Cost Strategy

Focused Differentiation Strategy

Risks of Focused Strategies

Deciding Which One to Choose

Best-Cost Provider Strategies Make an upscale product at a lower cost Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation

Make an upscale product at a lower cost

Best-Cost Provider Strategies Give customers more value for money Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation

Give customers more value for money

Best-Cost Provider Strategic Targets Value-conscious customers Competitive Advantage Ability to give customers more value for money Product Line Items with appealing attributes, assorted upscale features

Strategic Targets

Value-conscious customers

Competitive Advantage

Ability to give customers more value for money

Product Line

Items with appealing attributes, assorted upscale features

Best-Cost Provider Marketing Emphasis Tout delivery of best value Either deliver comparable features at a lower price than rivals or match rivals on prices and provide better features Keys to Sustain Unique expertise in simultaneously managing costs down while incorporating upscale features and attributes

Marketing Emphasis

Tout delivery of best value

Either deliver comparable features at a lower price than rivals or match rivals on prices and provide better features

Keys to Sustain

Unique expertise in simultaneously managing costs down while

incorporating upscale features and attributes

Risk of a Best-Cost Provider Strategy Low-cost leaders may be able to siphon customers away with a lower price High-end differentiators may be able to steal customers away with better product attributes A best-cost provider may get squeezed between strategies of firms using low-cost and differentiation strategies

Low-cost leaders may be able to siphon customers away with a lower price

High-end differentiators may be able to steal customers away with better product attributes

Focused (Market Niche) Strategies Concentrated attention on a narrow piece of the total market Objective is to serve niche buyers better than rivals Niche can be defined by geographic uniqueness, specialized requirements in using the product, or by special product attributes appealing only to the selected niche Introduction

Concentrated attention on a narrow piece of the total market

Objective is to serve niche buyers better than rivals

Niche can be defined by geographic uniqueness, specialized requirements in using the product, or by special product attributes appealing only to the selected niche

Focused (Market Niche) Strategies

FUNCTIONAL EXPERIENTIAL RELATIONAL PSYCHOLOGICAL Value for me SOCIAL Value of me Source: Adopted from “A Customer Value Typology: Beyond the Functional – Emotional Dichotomy., Liyanage (2003) Re-Visiting Value Based Segmentation

Focused Low-Cost Strategy Securing a competitive advantage by serving a lower price than rival competitors Introduction How? Out-manage rivals in controlling the factors that drive costs Reconfigure the firm’s value chain in ways that yield a cost edge over rivals

Out-manage rivals in controlling the factors that drive costs

Reconfigure the firm’s value chain in ways that yield a cost edge over rivals

Focused Low-Cost Strategy Strategic Target A narrow market niche where buyer needs and preferences are distinctively different Basis of Competitive Advantage Low overall cost than rivals in serving niche members Product Line Features and attributes tailored to the tastes and requirements of niche members

Strategic Target

A narrow market niche where buyer needs and preferences are distinctively different

Basis of Competitive Advantage

Low overall cost than rivals in serving niche members

Product Line

Features and attributes tailored to the tastes and requirements of niche members

Focused Low-Cost Strategy Production Emphasis A continuous search for cost reduction while incorporating features and attributes matched to niche member preferences Marketing Emphasis Communicate attractive features of a budget-priced product offering that fits niche buyers’ expectations Keys to Sustaining the Strategy Stay committed to serving the niche at lowest overall cost; don’t blur the firm’s image by entering other market segments or adding other products to widen market appeal

Production Emphasis

A continuous search for cost reduction while incorporating features and attributes matched to niche member preferences

Marketing Emphasis

Communicate attractive features of a budget-priced product offering that fits niche buyers’ expectations

Keys to Sustaining the Strategy

Stay committed to serving the niche at lowest overall cost; don’t blur the firm’s image by entering other market segments or adding other products to widen market appeal

Focused Low-Cost Strategy

Focused Differentiation Strategy Introduction Aims at securing a competitive advantage by offering niche members a product they perceive as, well suited to their own unique tastes and preferences Targets upscale buyers who desire products and services with world class attributes.

Focused Differentiation Strategy Strategic Target A narrow market niche where buyer needs and preferences are distinctively different Basis for Competitive Advantage Attributes that appeal specifically to niche members Product Line Features and attributes tailored to the tastes and requirements of niche members

Strategic Target

A narrow market niche where buyer needs and preferences are distinctively different

Basis for Competitive Advantage

Attributes that appeal specifically to niche members

Product Line

Features and attributes tailored to the tastes and requirements of niche members

Focused Differentiation Strategy Production Emphasis Custom made products that match the tastes and requirements of niche members Marketing Emphasis Communicate how products offering does the best job of meeting niche buyers’ expectations Keys to Sustaining the Strategy Stay committed to serving the niche better than rivals; don’t blur the firm’s image by entering other market segments or adding other products to widen market appeal

Production Emphasis

Custom made products that match the tastes and requirements of niche members

Marketing Emphasis

Communicate how products offering does the best job of meeting niche buyers’ expectations

Keys to Sustaining the Strategy

Stay committed to serving the niche better than rivals; don’t blur the firm’s image by entering other market segments or adding other products to widen market appeal

Focused Differentiation Strategy

Big enough to be profitable and offers good growth potential Not crucial to success of industry leaders Costly or difficult for multi-segment competitors to meet specialized needs of niche members Focuser has resources and capabilities to effectively serve an attractive niche Few other rivals are specializing in same niche Focuser can defend against challengers via superior ability to serve niche members When a Focused Low-Cost Strategy or Focused Differentiation Strategy is Attractive

Big enough to be profitable and offers good growth potential

Not crucial to success of industry leaders

Costly or difficult for multi-segment competitors to meet specialized needs of niche members

Focuser has resources and capabilities to effectively serve an attractive niche

Few other rivals are specializing in same niche

Focuser can defend against challengers via superior ability to serve niche members

Competitors find effective ways to match a focuser’s capabilities in serving a niche Niche buyers’ preferences shift towards product attributes desired by majority of buyers – niche becomes part of overall market Segment becomes so attractive it becomes crowded with rivals, causing segment profits to be splintered The Risks of Focused Strategies

Competitors find effective ways to match a focuser’s capabilities in serving a niche

Niche buyers’ preferences shift towards product attributes desired by majority of buyers – niche becomes part of overall market

Segment becomes so attractive it becomes crowded with rivals, causing segment profits to be splintered

Deciding Which Generic Competitive Strategy to Use Each positions a company differently in its market Each establishes a central theme for how a company will endeavor to out-compete rivals Each creates some boundaries for maneuvering as market circumstances unfold

Each positions a company differently in its market

Each establishes a central theme for how a company will endeavor to out-compete rivals

Each creates some boundaries for maneuvering as market circumstances unfold

Deciding Which Generic Competitive Strategy to Use Each points to different ways of experimenting with the basics of the strategy Each entails differences in product line, production emphasis, marketing emphasis, and means to sustain the strategy

Each points to different ways of experimenting with the basics of the strategy

Each entails differences in product line, production emphasis, marketing emphasis, and means to sustain the strategy

This rarely produces a sustainable competitive advantage or a distinctive competitive position The big risk Selecting a “ stuck in the middle ” strategy!

Thank You! www.amisampath.com