Professional Documents
Culture Documents
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WHY DO STRATEGIES DIFFER?
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THE FIVE GENERIC COMPETITIVE STRATEGIES
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FIGURE 5.1 The Five Generic Competitive Strategies
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LOW-COST PROVIDER STRATEGIES
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CORE CONCEPT
♦ A low-cost provider’s basis for competitive
advantage is lower overall costs than competitors.
Successful low-cost leaders, who have the lowest
industry costs, are exceptionally good at finding ways
to drive costs out of their businesses and still provide a
product or service that buyers find acceptable.
♦ A cost driver is a factor that has
a strong influence on a firm’s costs.
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MAJOR AVENUES FOR ACHIEVING
A COST ADVANTAGE
Low-Cost Advantage
● A firm’s cumulative costs across its overall value
chain must be lower than competitors’ cumulative
costs.
How to Gain a Low-cost Advantage:
1. Perform value chain activities more cost-effectively
than rivals.
2. Revamp the firm’s overall value chain to eliminate or
bypass cost-producing activities.
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COST-EFFICIENT MANAGEMENT
OF VALUE CHAIN ACTIVITIES
Cost Driver
● Is a factor with a strong influence on a firm’s costs.
● Can be asset- or activity-based.
Securing a Cost Advantage:
● Use lower-cost inputs and hold minimal assets
● Offer only “essential” product features or services
● Offer only limited product lines
● Use low-cost distribution channels
● Use the most economical delivery methods
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FIGURE 5.2 Cost Drivers: The Keys to Driving Down Company Costs
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COST-CUTTING METHODS
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REVAMPING THE VALUE CHAIN SYSTEM
TO LOWER COSTS
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THE KEYS TO BEING A SUCCESSFUL
LOW-COST PROVIDER
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PITFALLS TO AVOID IN PURSUING
A LOW-COST PROVIDER STRATEGY
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COST-EFFICIENT MANAGEMENT
OF VALUE CHAIN ACTIVITIES
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MANAGING THE VALUE CHAIN TO CREATE
THE DIFFERENTIATING ATTRIBUTES
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REVAMPING THE VALUE CHAIN SYSTEM
TO INCREASE DIFFERENTIATION
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DELIVERING SUPERIOR VALUE VIA
A BROAD DIFFERENTIATION STRATEGY
Broad Differentiation:
Offering Customers Something That Rivals Cannot
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SUCCESSFUL APPROACHES
TO SUSTAINABLE DIFFERENTIATION
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PITFALLS TO AVOID IN PURSUING
A DIFFERENTIATION STRATEGY
Focused Strategy
Approaches
Focused Focused
Low-Cost Differentiation
Strategy Strategy
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WHEN A FOCUSED LOW-COST OR FOCUSED
DIFFERENTIATION STRATEGY IS ATTRACTIVE
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THE RISKS OF A FOCUSED LOW-COST OR
FOCUSED DIFFERENTIATION STRATEGY
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BEST-COST PROVIDER STRATEGIES
Best-Cost Provider
Hybrid Approach
Value-Conscious Buyer
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CORE CONCEPT
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THE BIG RISK OF A BEST-COST PROVIDER STRATEGY—
GETTING SQUEEZED ON BOTH SIDES
Best-Cost
Low-Cost High-End
Provider
Providers Differentiators
Strategy
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THE CONTRASTING FEATURES OF THE FIVE
GENERIC COMPETITIVE STRATEGIES:
A SUMMARY
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SUCCESSFUL COMPETITIVE STRATEGIES ARE
RESOURCE-BASED
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