2. Introduction…
⚫ Michael Porter is a professor at Harward Business
School.
⚫ 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, generic strategies result:, Cost leadership
Differentiation, and Focus (Cost Focus and
Differentiation Focus)
3. Cost
Leadership
• Superior profits
through lower
costs.
• E.g. : Wal-Mart,
Micromax phone
Differentiation
• Creating a
product or service
that is perceived
as being unique
“throughout the
industry”
• E.g. : Mcdonald,
Nokia, Samsung
Focus
• Concentrating on
a limited part of
the market.
• Cost Focus
• Differentiation
Focus
• E.g. : PepsiCo,
Apple I-phone,
Vertu
Generic Strategies
6. Cost Leadership Strategy
⚫ Aiming to become Lowest Cost Producer
⚫ The firm can compete on the price with every other
industries and earn higher unit profits.
⚫ Cost reduction provides the focus of the organisation’s
strategy.
⚫ Targets a broad market.
⚫ Competitive advantage is achieved by driving down
costs.
⚫ A successful cost leadership strategy requires that the
firm is the cost leader and is unchallenged in this
position.
⚫ Especially beneficial : where customers are price
sensitive
7. :
:
:
Headquarters : Coca-Cola headquarters,
Atlanta, Georgia, U.S.
Number of locations
Area served
:
:
+200
Worldwide
Employees
Fla
:
:
Approx. 2.1 million (2011)
Cola, Cola Cherry, Cola Vanilla,
Cola Green Tea, Cola Lemon,
Cola Lemon Lime, Cola Lime,
Cola Orange and Cola Raspberry.
9. ⚫ Focusing on cost leadership through disciplined working capital
management and tight operating expenses control.
⚫ Optimization of the production and distribution infrastructure
⚫ Personal cost ownership throughout the organization
⚫ Logistic excellence
⚫ Daily Average serving from 9 peoples (1886) to 1.8 million people
now.
⚫ Ensure the strongest and most efficient production, distribution,
and marketing systems possible
⚫ The established Coca-Cola HBC Business Services Organization
(BSO) that standardizes, centralizes, coordinates and simplifies
certain Finance and Human Resources processes to improve
productivity and provide important transactional services at a
lower cost
10. ⚫ Access to the capital required to make a significant
investment in production assets.
⚫ Design skills for efficient manufacturing
⚫ High level of expertise in manufacturing process
engineering.
⚫ Efficient distribution channels.
Success Mantra…
11. Risks Involved..
⚫ Other firms may be able to lower their costs as well.
⚫ As technology improves, the competition may be able to
leapfrog the production capabilities, thus eliminating
the competitive advantage.
⚫ It could lead to a damaging price wars.
⚫ There might be difficulty in sustaining cost leadership
in the long run.
⚫ A firm following a focus strategy might be able to
achieve even lower cost within their segment.
12. Differentiation Strategy
⚫ A differentiation strategy calls for the development of a
product or service that offers unique attributes that are
valued by customers.
⚫ Customers perceive the product to be different and
better than that of rivals.
⚫ The value added by the uniqueness of the product may
allow the firm to charge a premium price for it.
⚫ Differentiation can be based on product image or
durability,after-sales,quality,additional features.
⚫ It requires flair,research capability and strong
marketing.
15. Type
Industry
Founded
:
:
:
Public
Restaurants
McDonald’s Corporation
Founder(s) :
J V in India :
Headquarters
Area served
Key people
:
:
:
Richard and Maurice
McDonald,( McDonald’s
restaurant concept )
Ray Kroc,( McDonald’s
Corporation founder )
Vikram Bakshi &
Amit Jatia
Oak Brook,Illinois,US
Worldwide
James A. Skinner
(Chairman & CEO)
16. Number of Restaurants
Customers
Products
:
:
:
+33,000 in 118 countries
appr. 67 million / day
Fast Food
(hamburgers , chicken ,
french fries , soft drinks ,
coffee , milkshakes , salads,
desserts , breakfast )
⚫ McDonald's customers are of all classes, but largely
working, and people of all ages.
⚫ McDonald’s strove to meet a customer wait time at no
more than one minute in line and 30 seconds at the
counter.
17. ⚫ McDonald's understood that the parent was making the
purchasing decision, most likely based solely on price.
What McDonald's marketing executives did was
ingenious. They put a toy in with the hamburger,
french fries, and Coke. Then they gave it a special
name, calling it a Happy Meal. Then they marketed it to
the kids.
⚫ McDonald's knows that some customers go to its stores
to take a quick break from their day's activities and not
because McDonald's was able to make their food ten
seconds faster than a competitor. So McDonald's
marketing executives then put together the phrase,
“Have you had your break today?”
⚫ They've taken competing on price right out of the
picture,” says Greshes. “They bring you quality,
convenience, service, and value — and they make you
feel like you are getting a break in your hectic day.
18. Success Mantra…
⚫ Access to leading scientific research.
⚫ Highly skilled and creative product development team.
⚫ Strong sales team with the ability to successfully
communicate the perceived strengths of the product.
⚫ Corporate reputation for quality and innovation.
19. Risks Involved…
⚫ Involves higher costs.
⚫ Customers might become price sensitive and choose on
price rather than uniqueness.
⚫ Customers may no longer need the differentiation
factor.
⚫ Imitation by competitors and changes in customer
tastes.
⚫ Rivals pursuing a focus strategy may be able to achieve
even greater differentiation in their market segments.
20. Focus Strategy
⚫ The focus strategy concentrates on a narrow segment
and within that segment attempts to achieve either a
cost advantage or differentiation.
⚫ The premise is that the needs of the group can be
better serviced by focusing entirely on it.
⚫ A firm using a focus strategy often enjoys a high degree
of customer loyalty, and this entrenched loyalty
discourages other firms from competing directly.
⚫ Because of their narrow market focus, firms pursuing a
focus strategy have lower volumes and therefore less
bargaining power with their suppliers
⚫ However, firms pursuing a differentiation-focused
strategy may be able to pass higher costs on to
customers since close substitute products do not exist.
22. ⚫ The company makes the market leaders Pedigree (dog food) and Whiskas
(cat food), as well as kitekat (cat food) and Pal (dog food).
⚫ By successfully adopting the 'focus' strategy since 1950, Mars Inc. has
emerged as the largest consumer animal food company.
⚫ The leading exporters of pet food for 2004 were France ($993 million),
United States ($786 million) and the Netherlands ($511 million),[6] while
the leading importers were Japan ($718 million), Germany ($617 million)
and the UK ($563 million)..
⚫ Top Brand are Cesar, Greenies, Nutro, Pedigree, Royal Canin, Sheba,
Whiskas, KiteKat, Chappi, Catsan
23.
24. Success Mantra…
⚫ Lower investment in resources.
⚫ The firm benefits from specialisation.
⚫ Provides scope for greater knowledge of a segment of
the market.
⚫ Makes entry to new markets easier and less costly.
⚫ Firms using a focus strategy often enjoy a high degree
of customer loyalty.
25. Risk Involved…
⚫ Limited opportunities for growth.
⚫ The firm could outgrow the market.
⚫ Danger of decline in the chosen segment or niche.
⚫ Risk of imitation.
⚫ Risk of changes in the target segment.
⚫ A reputation for specialisation inhibits move into new
sector.
26. ⚫ Cost Leadership
- Being the lowest cost producer in the industry as
a whole
⚫ Differentiation
- The exploitation of a product or service which
is believed to be unique
⚫ Focus
- Restricting activities to only part of the market through:
- Providing goods or services at lower cost to
that segment (cost focus)
- Providing a differentiated product or service to that
segment (differentiation focus)
We have Learnt…
