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Generic stratgies


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Generic stratgies

  1. 1. CHAPTER 4Business-Level Strategy 4–1
  2. 2. “Competitive strategy is aboutbeing different. It meansdeliberately choosing to performactivities differently or to performdifferent activities than rivals todeliver a unique mix of value.” Michael E. Porter
  3. 3. K NOWLEDGE O BJECTIVES Studying this chapter should provide you with the strategic management knowledge needed to: 1. Define business-level strategy. 2. Discuss the relationship between customers and business-level strategies in terms of who, what, and how. 3. Explain the differences among business-level strategies. 4. Use the five forces of competition model to explain how above-average returns can be earned through each business-level strategy. 5. Describe the risks of using each of the business-level strategies. 4–3
  4. 4. Business-Level Strategy (Defined)• An integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets. 4–4
  5. 5. Strategy and Competitive Advantage • Competitive advantage exists when a firm’s strategy gives it an edge in  Attracting customers and  Defending against competitive forces Key to Gaining a Competitive Advantage • Convince customers firm’s product / service offers superior value  A good product at a low price  A superior product worth paying more for  A best-value product
  6. 6. What Is Competitive Strategy? • Deals exclusively with a company’s business plans to compete successfully  Specific efforts to please customers  Offensive and defensive moves to counter maneuvers of rivals  Responses to prevailing market conditions  Initiatives to strengthen its market position • Narrower in scope than business strategy
  7. 7. Core Competencies and Strategy Resources and superior capabilities that are Core sources of competitive advantage over a Competencies firm’s rivals An integrated and coordinated set of Strategy actions taken to exploit core competencies and gain competitive advantage Providing value to customers and gaining Business-level competitive advantage by exploiting core Strategy competencies in individual product markets 4–7
  8. 8. Customers: Their Relationship to Business-Level Strategies Who will be served? Key Issues in What needs will Business-level be satisfied? Strategy How will those needs be satisfied? 4–8
  9. 9. Effectively Managing Relationships withCustomers• Firms must manage all aspects of their relationship with customers.  Reach: firm’s success and connection to customers  Richness: depth and detail of two-way flow of information between the firm and the customer  Affiliation: facilitation of useful interactions with customers 4–9
  10. 10. Who: Determining the Customers to Serve• Market segmentation  A process used to cluster people with similar needs into individual and identifiable groups. All Customers Consumer Industrial Markets Markets 4–10
  11. 11. Market Segmentation• Consumer Markets • Industrial Markets  Demographic factors  End-use segments  Socioeconomic factors  Product segments  Geographic factors  Geographic segments  Psychological factors  Common buying factor segments  Consumption patterns  Customer size  Perceptual factors segments 4–11
  12. 12. TABLE 4.1 Basis for Customer Segmentation Consumer Markets • Demographic factors (age, income, sex, etc.) • Socioeconomic factors (social class, stage in the family life cycle) • Geographic factors (cultural, regional, and national differences) • Psychological factors (lifestyle, personality traits) • Consumption patterns (heavy, moderate, and light users) • Perceptual factors (benefit segmentation, perceptual mapping) Industrial Markets • End-use segments (identified by SIC code) • Product segments (based on technological differences or production economics) • Geographic segments (defined by boundaries between countries or by regional differences within them) • Common buying factor segments (cut across product market and geographic segments) • Customer size segments 4–12
  13. 13. What: Determining Which Customer Needs to Satisfy• Customer needs are related to a product’s benefits and features.• Customer needs are neither right nor wrong, good nor bad.• Customer needs represent desires in terms of features and performance capabilities. 4–13
  14. 14. How: Determining Core Competencies Necessary to Satisfy Customer Needs• Firms use core competencies to implement value creating strategies that satisfy customers’ needs.• Only firms with capacity to continuously improve, innovate and upgrade their competencies can expect to meet and/or exceed customer expectations across time. 4–14
  15. 15. The Purpose of a Business-Level Strategy• Business-Level Strategies  Are intended to create differences between the firm’s position relative to those of its rivals.• To position itself, the firm must decide whether it intends to:  Perform activities differently or  Perform different activities as compared to its rivals. 4–15
  16. 16. Types of Potential Competitive Advantage• Achieving lower overall costs than rivals  Performing activities differently (reducing process costs)• Possessing the capability to differentiate the firm’s product or service and command a premium price  Performing different (more highly valued) activities. 4–16
  17. 17. FIGURE 4.1 The External Environment 4–17
  18. 18. Competitive Scope• Broad Scope  The firm competes in many customer segments.• Narrow Scope  The firm selects a segment or group of segments in the industry and tailors its strategy to serving them at the exclusion of others. 4–18
  19. 19. Types of Business-Level Strategies Competitive Advantage Cost Uniqueness Broad Cost Leadership Differentiation Target Integrated CostCompetitive Leadership/ Scope Differentiation Narrow Focused Cost Focused Target Leadership Differentiation 4–19
  20. 20. FIGURE 4.2 Five Business-Level Strategies 4–20
  21. 21. Low-Cost Provider Strategies Keys to Success• Make achievement of meaningful lower costs than rivals the theme of firm’s strategy• Include features and services in product offering that buyers consider essential• Find approaches to achieve a cost advantage in ways difficult for rivals to copy or match Low-cost leadership means low overall costs, not just low manufacturing or production costs!
  22. 22. Translating a Low-Cost Advantage into HigherProfits: Two Options Option 1: Use lower-cost edge to under-price competitors and attract price-sensitive buyers in enough numbers to increase total profits Option 2: Maintain present price, be content with present market share, and use lower-cost edge to earn a higher profit margin on each unit sold, thereby increasing total profits
  23. 23. Approaches to Securinga Cost Advantage Approach 1 Do a better job than rivals of performing value chain activities efficiently and cost effectively Approach 2 Control Revamp value chain to bypass costs!cost-producing activities that add little By-pass value from the buyer’s perspective costs!
  24. 24. Approach 1: Controlling the Cost Drivers• Capture scale economies; avoid scale diseconomies• Capture learning and experience curve effects• Control percentage of capacity utilization• Pursue efforts to boost sales and spread costs such as R&D and advertising over more units• Improve supply chain efficiency• Substitute use of low-cost for high-cost raw materials• Use online systems and sophisticated software to achieve operating efficiencies• Adopt labor-saving operating methods• Use bargaining power to gain concessions from suppliers• Compare vertical integration vs. outsourcing
  25. 25. Approach 2: Revamping the Value Chain• Use direct-to-end-user sales/marketing methods• Make greater use of online technology applications• Streamline operations by eliminating low-value- added or unnecessary work steps• Relocate facilities closer to suppliers or customers• Offer basic, no-frills product/service• Offer a limited product/service as opposed to a full product/service line
  26. 26. Wal-Mart’s Approach toManaging Its Value ChainInstitute extensive information sharing with vendors via online Institute extensive information sharing with vendors via onlinesystems systemsPursue global procurement of some items and centralize most Pursue global procurement of some items and centralize mostpurchasing activities purchasing activitiesInvest in state-of-the-art automation at its distribution centers Invest in state-of-the-art automation at its distribution centersStrive to optimize the product mix and achieve greater sales Strive to optimize the product mix and achieve greater salesturnover turnoverInstall security systems and store operating procedures that lower Install security systems and store operating procedures that lowershrinkage rates shrinkage ratesNegotiate preferred real estate rental and leasing rates with real Negotiate preferred real estate rental and leasing rates with realestate developers and owners of its store sites estate developers and owners of its store sitesManage and compensate its workforce in a manner to yield lower Manage and compensate its workforce in a manner to yield lowerlabor costs labor costs
  27. 27. Keys to Success in AchievingLow-Cost Leadership • Scrutinize each cost-creating activity, identifying cost drivers • Use knowledge about cost drivers to manage costs of each activity down year after year • Find ways to restructure value chain to eliminate nonessential work steps and low-value activities • Work diligently to create cost-conscious corporate cultures  Feature broad employee participation in continuous cost- improvement efforts and limited perks for executives  Strive to operate with exceptionally small corporate staffs • Aggressively pursue investments in resources and capabilities that promise to drive costs out of the business
  28. 28. Characteristics of a Low-Cost Provider• Cost conscious corporate culture• Employee participation in cost-control efforts• Ongoing efforts to benchmark costs• Intensive scrutiny of budget requests• Programs promoting continuous cost improvement Successful low-cost producers champion frugality but wisely and aggressively invest in cost-saving improvements !
  29. 29. When Does a Low-CostStrategy Work Best?• Price competition is vigorous• Product is standardized or readily available from many suppliers• There are few ways to achieve differentiation that have value to buyers• Most buyers use product in same ways• Buyers incur low switching costs• Buyers are large and have significant bargaining power• Industry newcomers use introductory low prices to attract buyers and build customer base
  30. 30. Pitfalls of Low-Cost Strategies • Being overly aggressive in cutting price • Low cost methods are easily imitated by rivals • Becoming too fixated on reducing costs and ignoring  Buyer interest in additional features  Declining buyer sensitivity to price  Changes in how the product is used • Technological breakthroughs open up cost reductions for rivals
  31. 31. Cost Leadership Strategy• An integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors with features that are acceptable to customers.  Relatively standardized products  Features acceptable to many customers  Lowest competitive price 4–31
  32. 32. Cost Leadership Strategy• Cost saving actions required by this strategy:  Building efficient scale facilities  Tightly controlling production costs and overhead  Minimizing costs of sales, R&D and service  Building efficient manufacturing facilities  Monitoring costs of activities provided by outsiders  Simplifying production processes 4–32
  33. 33. How to Obtain a Cost Advantage Determine Reconfigure and control Value Chain Cost Drivers if needed  Alter production process  New raw material  Change in automation  Forward integration  New distribution channel  Backward integration  New advertising media  Change location relative  Direct sales in place of to suppliers or buyers indirect sales 4–33
  34. 34. FIGURE 4.3 Examples of Value-Creating Activities Associated with the Cost Leadership Strategy 4–34
  35. 35. Value-Creating Activities for Cost Leadership• Cost-effective MIS • Monitor suppliers’ performances• Few management layers • Link suppliers’ products to• Simplified planning production processes• Consistent policies • Economies of scale• Effecting training • Efficient-scale facilities• Easy-to-use manufacturing • Effective delivery schedules technologies • Low-cost transportation• Investments in technologies • Highly trained sales force• Finding low cost raw materials • Proper pricing 4–35
  36. 36. Cost Leadership Strategy: Competitors Rivalry with • Due to cost leader’s Existing Competitors advantageous position: Threat of  Rivals hesitate to compete new entrants on basis of price. Rivalry among Bargaining power of  Lack of price competition competing firms suppliers leads to greater profits. Threat of Bargaining substitute power of products buyers 4–36
  37. 37. Cost Leadership Strategy: Buyers Bargaining Power • Can mitigate buyers’ of Buyers power by:  Driving prices far below Threat of new competitors, causing entrants Rivalry them to exit, thus Bargaining among power of shifting power with competing firms suppliers buyers back to the firm. Threat of Bargaining substitute power of products buyers 4–37
  38. 38. Cost Leadership Strategy: Suppliers Bargaining Power • Can mitigate suppliers’ of Suppliers power by: Threat of  Being able to absorb new entrants cost increases due to Rivalry Bargaining low cost position. among competing power of firms suppliers  Being able to make very large purchases, Threat of substitute Bargaining power of reducing chance of products buyers supplier using power. 4–38
  39. 39. Cost Leadership Strategy: New Entrants The Threat of • Can frighten off new Potential Entrants entrants due to: Threat of  Their need to enter on a new entrants large scale in order to be Rivalry Bargaining cost competitive. among competing power of firms suppliers  The time it takes to move down the learning Threat of substitute Bargaining power of curve. products buyers 4–39
  40. 40. Cost Leadership Strategy: Substitutes Product • Cost leader is well Substitutes positioned to: Threat of  Make investments to be new entrants first to create substitutes. Rivalry among Bargaining  Buy patents developed by competing power of firms suppliers potential substitutes. Threat of Bargaining  Lower prices in order to substitute power of maintain value position. products buyers 4–40
  41. 41. Cost Leadership Strategy (cont’d)• Competitive Risks  Processes used to produce and distribute good or service may become obsolete due to competitors’ innovations.  Focus on cost reductions may occur at expense of customers’ perceptions of differentiation  Competitors, using their own core competencies, may successfully imitate the cost leader’s strategy. 4–41
  42. 42. Differentiation Strategies Objective• Incorporate differentiating features that cause buyers to prefer firm’s product or service over brands of rivals Keys to Success• Find ways to differentiate that create value for buyers and are not easily matched or cheaply copied by rivals• Not spending more to achieve differentiation than the price premium that can be charged
  43. 43. Benefits of Successful Differentiation A product / service with unique, appealing attributes allows a firm to  Command a premium price and/or Which  Increase unit sales and/or hat is unique?  Build brand loyalty = Competitive Advantage
  44. 44. Types of Differentiation Themes• Unique taste – Dr. Pepper• Multiple features – Microsoft Windows and Office• Wide selection and one-stop shopping – Home Depot,• Superior service -- FedEx, Ritz-Carlton• Spare parts availability – Caterpillar• Engineering design and performance – Mercedes, BMW• Prestige – Rolex• Product reliability – Johnson & Johnson• Quality manufacture – Karastan, Michelin, Toyota• Technological leadership – 3M Corporation• Top-of-line image – Ralph Lauren, Starbucks, Chanel
  45. 45. Sustaining Differentiation:Keys to Competitive Advantage • Most appealing approaches to differentiation  Those hardest for rivals to match or imitate  Those buyers will find most appealing • Best choices to gain a longer-lasting, more profitable competitive edge  New product innovation  Technical superiority  Product quality and reliability  Comprehensive customer service  Unique competitive capabilities
  46. 46. Where to Find DifferentiationOpportunities in the Value Chain • Purchasing and procurement activities • Product R&D and product design activities • Production process / technology-related activities • Manufacturing / production activities • Distribution-related activities • Marketing, sales, and customer service activities Internally Activities, Costs, Activities, Performed & Margins of Buyer/User Costs, & Activities, Forward Channel Value Margins of Costs, & Allies & Chains Suppliers Margins Strategic Partners
  47. 47. How to Achieve aDifferentiation-Based Advantage Approach 1 Incorporate product features/attributes that lower buyer’s overall costs of using product Approach 2 Incorporate features/attributes that raise the performance a buyer gets out of the product Approach 3 Incorporate features/attributes that enhance buyer satisfaction in non-economic or intangible ways Approach 4 Compete on the basis of superior capabilities
  48. 48. Importance of Perceived Value• Buyers seldom pay for value that is not perceived• Price premium of a differentiation strategy reflects  Value actually delivered to the buyer and  Value perceived by the buyer• Actual and perceived value can differ when buyers are unable to assess their experience
  49. 49. Signaling Value as Wellas Delivering Value• Incomplete knowledge of buyers causes them to judge value based on such signals as  Price  Attractive packaging  Extensive ad campaigns  Ad content and image  Seller facilities or professionalism and personality of employees  Having a list of prestigious customers• Signals of value may be as important as actual value when  Nature of differentiation is hard to quantify  Buyers are making first-time purchases  Repurchase is infrequent  Buyers are unsophisticated
  50. 50. For Discussion: Your OpinionA low-cost provider strategy can defeat adifferentiation strategy when buyers are satisfiedwith a basic product and don’t think “extra”attributes are worth a higher price. True or false?Explain.
  51. 51. Differentiation Strategy• An integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.  Focus is on nonstandardized products  Appropriate when customers value differentiated features more than they value low cost. 4–51
  52. 52. How to Obtain a Differentiation Advantage Control Reconfigure Cost Drivers Value Chain to if needed maximize  Lower buyers’ costs  Raise performance of product or service  Create sustainability through:  Customer perceptions of uniqueness  Customer reluctance to switch to non- unique product or service 4–52
  53. 53. Figure 4.4 Examples of Value-Creating Activities Associated with the Differentiation Strategy 4–53
  54. 54. Value-Creating Activities and Differentiation• Highly developed MIS • High quality replacement parts• Emphasis on quality • Superior handling of incoming raw materials• Worker compensation for creativity/productivity • Attractive products• Use of subjective performance • Rapid response to customer measures specifications• Basic research capability • Order-processing procedures• Technology • Customer credit• High quality raw materials • Personal relationships• Delivery of products 4–54
  55. 55. Differentiation Strategy: Competitors Rivalry with • Defends against Competitors competitors because brand loyalty to differentiated Threat of product offsets price new entrants competition. Rivalry among Bargaining competing power of firms suppliers Threat of Bargaining substitute power of products buyers 4–55
  56. 56. Differentiation Strategy: Buyers Bargaining Power • Can mitigate buyers’ power of Buyers because well differentiated products reduce customer Threat of sensitivity to price increases. new entrants Rivalry among Bargaining competing power of firms suppliers Threat of Bargaining substitute power of products buyers 4–56
  57. 57. Differentiation Strategy: Suppliers Bargaining Power • Can mitigate suppliers’ of Suppliers power by:  Absorbing price increases Threat of due to higher margins. new entrants  Passing along higher Rivalry among Bargaining supplier prices because power of competing suppliers buyers are loyal to firms differentiated brand. Threat of Bargaining substitute power of products buyers 4–57
  58. 58. Differentiation Strategy: New Entrants The Threat of • Can defend against new Potential Entrants entrants because:  New products must surpass Threat of proven products. new entrants  New products must be at least Rivalry among Bargaining equal to performance of proven power of competing suppliers products, but offered at lower firms prices. Threat of Bargaining substitute power of products buyers 4–58
  59. 59. Differentiation Strategy: Substitutes Product • Well positioned relative to Substitutes substitutes because:  Brand loyalty to a Threat of differentiated product tends new to reduce customers’ testing entrants Rivalry of new products or switching Bargaining among power of brands. competing firms suppliers Threat of Bargaining substitute power of products buyers 4–59
  60. 60. Competitive Risks of Differentiation• The price differential between the differentiator’s product and the cost leader’s product becomes too large.• Differentiation ceases to provide value for which customers are willing to pay.• Experience narrows customers’ perceptions of the value of differentiated features.• Counterfeit goods replicate differentiated features of the firm’s products. 4–60
  61. 61. When Does a DifferentiationStrategy Work Best? • There are many ways to differentiate a product that have value and please customers • Buyer needs and uses are diverse • Few rivals are following a similar differentiation approach • Technological change and product innovation are fast-paced
  62. 62. Pitfalls of Differentiation Strategies • Appealing product features are easily copied by rivals • Buyers see little value in unique attributes of product • Overspending on efforts to differentiate the product offering, thus eroding profitability • Over-differentiating such that product features exceed buyers’ needs • Charging a price premium buyers perceive is too high • Not striving to open up meaningful gaps in quality, service, or performance features vis-à-vis rivals’ products
  63. 63. Focus / Niche Strategies • Involve concentrated attention on a narrow piece of the total market Objective Serve niche buyers better than rivals Keys to Success • Choose a market niche where buyers have distinctive preferences, special requirements, or unique needs • Develop unique capabilities to serve needs of target buyer segment
  64. 64. Approaches to Defining a Market Niche• Geographic uniqueness• Specialized requirements in using product/service• Special product attributes appealing only to niche buyers
  65. 65. Examples of Focus Strategies • Animal Planet and History Channel  Cable TV • Google  Internet search engines • Porsche  Sports cars • Cannondale  Top-of-the line mountain bikes • Enterprise Rent-a-Car  Provides rental cars to repair garage customers • Bandag  Specialist in truck tire recapping
  66. 66. Focus / Niche Strategiesand Competitive Advantage Approach 1• Achieve lower costs than rivals in serving a well-defined buyer segment – Focused low-cost strategy Approach 2 Which hat is unique?• Offer a product appealing to unique preferences of a well-defined buyer segment – Focused differentiation strategy
  67. 67. What Makes a NicheAttractive for Focusing? • 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
  68. 68. Risks of a Focus Strategy• Competitors find effective ways to match a focuser’s capabilities in serving 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
  69. 69. Focus Strategies• An integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment.  Particular buyer group—youths or senior citizens  Different segment of a product line—professional craftsmen versus do-it-yourselfers  Different geographic markets—East coast versus West coast 4–69
  70. 70. Focus Strategies (cont’d)• Types of focused strategies  Focused cost leadership strategy  Focused differentiation strategy• To implement a focus strategy, firms must be able to:  Complete various primary and support activities in a competitively superior manner, in order to develop and sustain a competitive advantage and earn above- average returns. 4–70
  71. 71. Factors That Drive Focused Strategies• Large firms may overlook small niches.• A firm may lack the resources needed to compete in the broader market.• A firm is able to serve a narrow market segment more effectively than can its larger industry-wide competitors.• Focusing allows the firm to direct its resources to certain value chain activities to build competitive advantage. 4–71
  72. 72. Competitive Risks of Focus Strategies• A focusing firm may be “outfocused” by its competitors.• A large competitor may set its sights on a firm’s niche market.• Customer preferences in niche market may change to more closely resemble those of the broader market. 4–72
  73. 73. Best-Cost Provider Strategies • Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation  Make an upscale product at a lower cost  Give customers more value for the money Objectives • Deliver superior value by meeting or exceeding buyer expectations on product attributes and beating their price expectations • Be the low-cost provider of a product with good- to-excellent product attributes, then use cost advantage to underprice comparable brands
  74. 74. Competitive Strength of aBest-Cost Provider Strategy• A best-cost provider’s competitive advantage is based on its capability to include upscale attributes at a lower cost than rivals’ comparable products• To achieve competitive advantage, a company must be able to  Incorporate attractive features at a lower cost than rivals  Manufacture a good-to-excellent quality product at a lower cost than rivals  Develop a product that delivers good-to-excellent performance at a lower cost than rivals  Provide attractive customer service at a lower cost than rivals
  75. 75. When Does a Best-CostProvider Strategy Work Best? • Where buyer diversity makes product differentiation the norm and • Where many buyers are also sensitive to price and value
  76. 76. Risk of a Best-Cost Provider Strategy• 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
  77. 77. Test Your KnowledgeWhich of the following are distinguishing features of a best-cost provider strategy (based on the comparisons of the fivegeneric competitive strategies shown in Figure 5.1)? A. The strategic target is price-conscious buyers B. A marketing emphasis on charging a slightly higher price than rival brands having comparable features and attributes C. A product line that stresses wide selection, many product variations, and emphasis on differentiating features D. A competitive advantage based on more value for the money E. Using constant product innovation, excellent R&D skills, and periodic technological breakthroughs to sustain the
  78. 78. Integrated Cost Leadership/Differentiation Strategy• A firm that successfully uses an integrated cost leadership/differentiation strategy should be in a better position to:  Adapt quickly to environmental changes.  Learn new skills and technologies more quickly.  Effectively leverage its core competencies while competing against its rivals. 4–78
  79. 79. Integrated Cost Leadership/Differentiation Strategy (cont’d)• Commitment to strategic flexibility is necessary for implementation of integrated cost leadership/differentiation strategy.  Flexible manufacturing systems (FMS)  Information networks  Total quality management (TQM) systems 4–79
  80. 80. Flexible Manufacturing Systems• Computer-controlled processes used to produce a variety of products in moderate, flexible quantities with a minimum of manual intervention.  Goal is to eliminate the “low-cost-versus-wide product-variety” tradeoff.  Allows firms to produce large variety of products at relatively low costs. 4–80
  81. 81. Information Networks• Link companies electronically with their suppliers, distributors, and customers.  Facilitate efforts to satisfy customer expectations in terms of product quality and delivery speed.  Improve flow of work among employees in the firm and their counterparts at suppliers and distributors.  Customer relationship management (CRM) 4–81
  82. 82. Total Quality Management (TQM) Systems• Emphasize total commitment to the customer through continuous improvement using:  Data-driven, problem-solving approaches  Empowerment of employee groups and teams• Benefits  Increased customer satisfaction  Lower costs  Reduced time-to-market for innovative products 4–82
  83. 83. Risks of the Integrated Cost Leadership/Differentiation Strategy• Often involves compromises  Becoming neither the lowest cost nor the most differentiated firm.• Becoming “stuck in the middle”  Lacking the strong commitment and expertise that accompanies firms following either a cost leadership or a differentiated strategy. 4–83
  84. 84. Deciding Which GenericCompetitive Strategy to Use • Each positions a company differently in its market and competitive environment • Each establishes a central theme for how a company will endeavor to outcompete rivals • Each creates some boundaries for maneuvering as market circumstances unfold • 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 The big risk – Selecting a “stuck in the middle” strategy! This rarely produces a sustainable competitive advantage or a distinctive competitive position!