- overall low-cost
- broad differentiation
- focused low-cost
- focused differentiation
- best-cost provider.
Competitive Strategy
- Deals exclusively with management’s game plan for competing successfully and securing a competitive advantage over rivals
- Specific efforts to give customers superior value
- A good product at a lower price
- A superior product worth paying more for
- An attractive mix of price, features, quality, service, and other appealing attributes
Competitive Strategies and Industry Positioning
Approaches to Achieving Low Costs
- Perform essential value chain activities more cost-effectively than rivals
- Revamp the firm’s overall value chain to eliminate or bypass some cost-producing activities altogether
When a Low Cost Strategy Works Best
- Price competition is vigorous
- Product is standardized
- There are few ways to achieve differentiation
- 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
Differentiation Strategies
- Powerful competitive approach whenever buyers’ needs and preferences are too diverse to be fully satisfied by a standardized product or service
- Incorporate differentiating features that cause buyers to prefer firm’s product or service over brands of rivals
- Not spending more to achieve differentiation than the price premium that customers are willing to pay for all the differentiating extras
Benefits of Successful Differentiation
- Successfully executed differentiation strategies allow a company to:
- Command a premium price, and/or
- Increase unit sales, and/or
- Gain buyer loyalty to its brand
Where to Find Opportunities to Differentiate
- Supply chain activities
- Product R&D and product design activities
- Production R&D and technology-related activities
- Manufacturing activities
- Distribution-related activities
- Marketing, sales, and customer service activities
Market Conditions Favoring a Differentiation Strategy
- 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
Market Conditions Making a Focused Strategy Viable
- The target niche is big enough to be profitable and offers good growth potential
- Industry leaders have chosen not to compete in the niche
- It is costly or difficult for multisegment competitors to meet the specialized needs of niche buyers
- Industry has many niches and segments
- Few rivals are attempting to specialize in the niche
Best Cost Provider Strategies
- A hybrid of low cost provider and differentiation strategies
- Giving customers more value for money by satisfying buyer expectations on key quality/features/performance/service attributes and beat customer expectations on price
- Powerful competitive approach with value-conscious buyers
Employing Best Cost Strategies
Best Cost Strategies are contingent on:
- A superior value chain configuration that eliminates or minimizes activities that do not add value
- Unmatched efficiency in managing essential value chain activities
- Resource strengths and core competencies that allow differentiating attributes to be incorporated at a low cost.
Danger of Unsound Best Cost Provider Strategy
- Lack of requisite core competencies, efficiencies, and resources allowing the addition of differentiating features without significantly increasing costs could result in high prices relative to low-cost providers and poor product attributes relative to high-end differentiators.
Perils of “Stuck in the Middle” Strategy
- Compromise strategies end up with a middle-of-the-pack industry rankings and provide for average performance
- An average cost structure
- Minimal product differentiation relative to rivals
- An average image and reputation
- Limited prospect of industry leadership
- Compromise or middle-ground strategies rarely produce sustainable competitive advantage
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