Generic competitive strategies

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Generic competitive strategies

  1. 1. GENERIC COMPETITIVE STRATEGIES BY, ROMEO. B Third Semester , “MBA” „B‟ Section SJBIT.
  2. 2. Introduction  A firm’s success in strategy rests upon how it positions itself in respect to its environment.  Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation.  By applying these strengths in either a broad or narrow scope, three generic strategies result:, cost leadership differentiation, and focus
  3. 3. Cost Leadership • Superior profits through lower costs. • E.g. : Wal-Mart. Differentiation • Creating a product or service that is perceived as being unique “throughout the industry” • E.g. : McDonald. Focus • Concentrating on a limited part of the market. • E.g. : PepsiCo Generic Strategies
  4. 4. Cost Leadership Strategy An integrated set of actions designed to produce or deliver goods or services at the  lowest cost relative to competitors  with features that are acceptable to customers This involves  relatively standardized products  features acceptable to many customers  lowest competitive price
  5. 5. How to Obtain a Cost Advantage Cost Drivers Value Chain Determine and control Reconfigure, if needed  Alter production process  Change in automation  New distribution channel  New advertising media  Direct sales in place of indirect sales  New raw material  Forward integration  Backward integration  Change location relative to suppliers or buyers
  6. 6. Major Risks of Cost Leadership Strategy  Expensive  Easy to imitate of strategy.  Temporary strategy.  Technological changes.
  7. 7. Differentiation Strategy An integrated set of actions designed by a firm to produce or deliver goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them  price for product can exceed what the firm‟s target customers are willing to pay  nonstandardized products  customers value differentiated features more than they value low cost
  8. 8. Factors That Drive Differentiation  Unique product features  Unique product performance  Exceptional services  New technologies  Quality of inputs  Detailed information
  9. 9. Major Risks of Differentiation Strategy  Experience may narrow customer‟s perceptions of the value of differentiated features of the firm‟s products  Makers of counterfeit goods may attempt to replicate differentiated features of the firm‟s products
  10. 10. Focused Business-Level Strategies A focus strategy must exploit a narrow target‟s differences from the balance of the industry by:  isolating a particular buyer group  isolating a unique segment of a product line  concentrating on a particular geographic market  finding their “niche”
  11. 11. Factors That May Drive Focused Strategies  Firm may lack resources to compete in the broader market  May be able to serve a narrow market segment more effectively than can larger industry-wide competitors  Focus may allow the firm to direct resources to certain value chain activities to build competitive advantage.
  12. 12. Major Risks of Focused Strategies  A large competitor may set its sights on your niche market.  Preferences of niche market may change to match those of broad market.  Its short term strategy.
  13. 13. Conclusion  Pursuing singular generic strategies is considered to be no longer sufficient in today‟s competitive environment. Increased competition and cost pressures as side effects of globalization as well as changing customer expectations require companies to adopt a multidimensional strategic approach.  These days, most customers expect to get everything at once: differentiated, high-quality products combined with excellent service at a low price. Hybrid strategies that integrate cost and differentiation advantages represent a way for companies to respond to these changes in the competitive environment more flexibly and effectively and stay competitive.

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