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Five generic competitive strategies

Five generic competitive strategies






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    Five generic competitive strategies Five generic competitive strategies Presentation Transcript

    • Five Generic Competitive Strategies
    • Type of advantage sought
      Low costDifferentiation
      Broad differentiation
      Overall low-cost provider
      of buyers
      Market Target
      Best-cost provider
      Focused differentiation
      Focused low-cost
      of buyers
    • How to compete
      Low cost provider
      Obsessively control costs
      Closely examine the value chain
      Broad differentiation
      Buyers have diverse needs
      Buyers pay a premium for a good fit
      Best cost provider
      Need to create the perception of value compared to competitors
    • How to compete (continued)
      Low-cost niche
      Narrow band of price conscious customers
      Big enough and concentrated enough
      Differentiation niche
      High end customers
      High quality
      Customized, rare or exclusive products and services
    • When to go low-cost
      Heavy price competition
      Standardized product
      Hard to differentiate
      Consumers use product in similar ways
      Low switching costs for users
      Buyers have bargaining power
      Newcomers use pricing to get into the market
    • Downside to low-cost
      Heavy pricecutting can lead to losses
      Train consumers to expect ever lower prices
      Maybe easy for competitors to copy strategy
      New technology may give rivals a pricing edge
      Over focus on costs may mean;
      Failure to notice change in usage
      Failire to notice desire for additional benefits/ features
      Failure to respond to changes in price sensitivity equated to growing spending power
    • When to used differentiation
      Customers have diverse needs
      Firm has the ability to create diverse products
      Rivals unable or unwilling to use a differentiation strategy
      Rapid pace of design and technology change
    • Downside to differentiation
      Buyers may not care about the perceived benefits
      Firm may not be able to create the perception of value
      Competitors copy so no longer unique
      Differentiation obsession may lead to unacceptable costs
      Feature creep
    • When to be a best-cost provider
      Firm can provide a quality product at a relatively low cost
      Firm can provide a better performance at cost lower than rivals
      Firm can provide a higher level of customer service than rivals at no or low cost to customer
    • Downside of best-cost provider
      Danger of being stuck in the middle
      Low cost providers draw away the price conscious
      Focused differentiators draw away the more discerning
    • When to use a niche focus
      Segment not important for industry leaders
      Availability of relatively rare resources and skills
      Few rivals in the niche
      Customers perceive firm to be experts and / or have high credibility
      The niche is big enough to be profitable
    • Downside of niche focus
      Changes in technology and fashion may render product / service irrelevant
      Profits in the segment make it attractive to new rivals