The Five Generic Competitive Strategies : Which One to Employ?

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A summary presentation of Chapter 5 of the book "Crafting and Executing Strategy, (SIE): The Quest for Competitive Advantage: Concepts and Cases, …

A summary presentation of Chapter 5 of the book "Crafting and Executing Strategy, (SIE): The Quest for Competitive Advantage: Concepts and Cases, 14/e"
http://highered.mcgraw-hill.com/sites/0070600899/information_center_view0/

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Transcript

  • 1. The Five Generic Competitive Strategies Which One to Employ? Part II
  • 2. The Agenda
    • Best Cost Provider Strategy
    • Focused Low-Cost Strategy
    • Focused Differentiation Strategy
    • Risks of Focused Strategies
    • Deciding Which One to Choose
  • 3. 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
  • 4. Best-Cost Provider Strategies
      • Give customers more value for money
    Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation
  • 5. 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
  • 6. 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
  • 7. 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
  • 8. 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
  • 9. Focused (Market Niche) Strategies
  • 10. 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
  • 11. 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
  • 12. 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
  • 13. 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
  • 14. Focused Low-Cost Strategy
  • 15. 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.
  • 16. 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
  • 17. 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
  • 18. Focused Differentiation Strategy
  • 19.
    • 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
  • 20.
    • 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
  • 21. 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
  • 22. 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
  • 23. This rarely produces a sustainable competitive advantage or a distinctive competitive position The big risk Selecting a “ stuck in the middle ” strategy!
  • 24. Thank You! www.amisampath.com