Chapter 4: Developing a Competitive Strategy and Contemporary Cost Management

Techniques

Recitation Equivalent Activity

1. Identify and explain the two types of competitive strategy.
The two types of competitive strategy are Cost Leadership and Product Differentiation.
Cost leadership focus on reducing the cost of the goods or services that will result to a lower
price to create more demand from their customers. While product differentiation is a strategy
that is implemented to create a product that is unique and has a higher quality and style than
the rest of the products. This type allows higher prices for it correlates to the strong appeal and
high features available.
2. Identify three or four well-known firms that succeed through cost leadership.
i. Pure Gold
ii. Panda Ballpen
iii. Uratex Foam
iv. SM Bonus
3. Identify three or four well-known firms that succeed through product differentiation.
i. Gucci Fashion Company
ii. Apple Technology Company
iii. BGC Shangri-La Hotel
iv. Patek Philippe SA Company (Genevan luxury watch manufacturer)
4. Explain the process of identifying a sustainable competitive advantage for a firm.
First, you must analyse internal and external factors that affect your line of business, this
is specifically called SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats
Analysis). Second, you need to match your strengths and opportunities to create an effective
and efficient strategies. Third, try to eliminate the weaknesses and threats or convert to become
your strengths. These steps should be used to have a competitive advantage for it helps you
analyse and determine the factors you needed and the factors you have to change for the
benefit of the firm. After this gain of information, use this to come up with great strategies and
goals for the success of the business.
5. What is the meaning of “getting stuck in the middle” in the context of competitive strategy,
and how does the situation arise?
“Getting stuck in the middle”, according to Michael, is when a firm applies both strategy
which is cost leadership and product differentiation to outperform competitors, however fails to
sustain competitive advantage by getting stuck with no direction. This arises because even if
you applied both strategy, the firm must still choose one significant strategy to follow that is
more likely to gain success.