Strategic Management

Part 5

Generic Competitive Strategy

Reference:
John E. Gamble, Margaret A. Peteraf, & Arthur A. Thompson. Jr.,. Essensials
of Strategic Management: The quest for competitive advantage, 4th Edition.
New York: McGraw-Hill Education, 2015.
 
 Five Generic Competitive Strategies

Low cost Strive to achieve lower overall costs than competitors

providers

Extensive Differentiating the company's product offerings from

remediation competitors with attractive offers for buyers

Low-cost niche Focus on narrow buyer segments with lower costs and prices
market focus

Market niche Focus on narrow buyer segments by meeting the specific tastes
focus with of niche consumer markets
differentiation

Best cost Give more value for their money by offering high-end (excellent)
providers products at lower prices than competitors
The key to reducing corporate costs
Value Chain Improvement
to reduce the company's costs

Sell directly to consumers without using distributors /

1
dealers

2 Simplifying the company's operations

Reduce material costs by means of suppliers make factories /

3 warehouses close to the company's production site
The Key to Corporate Success
be a low cost provider

1 Continuously review cost-effective resources

Careful estimate of how much cost savings you get before

2 investing in new technologies

Aggressively allocate resources and capabilities that can reduce

3 company costs
 Terms Low cost provider strategy can
work well

Very tight price Few ways to differentiate

competition products from competitors

Use of the product in the

same way

Many companies sell similar products There is no high cost to

switch products
 What to avoid in implementing a low-cost provider strategy

Have competitors who find cost-effective value chain technologies and

breakthroughs
Fixated with cost reductions so that product features are less attractive to
consumers
Price cuts are too aggressive so as not to return lost profits
1. Relying on unsustainable costs, because it is easy to copy paste competitors
Differentiation Strategy

Customer loyalty to the company's brand

Increased sales due to attractive differentiation
Advantage • Consumers are willing to buy at a premium price

Offer products with exciting features on an ongoing basis

Effective • Pay close attention to the needs, behaviors and maturity of consumers to purchase
differentiation unique products
The key to creating differentiation strategies
 Success tips for tasting
Sustainable Differentiation Strategy

Company reputation
Hard-to- Unique services and products
replicate • Long relationship with buyers (loyal)
differentiation

Patent protected product innovation

• Relationship-based customer service
Differentiation
that locks the
consumer
 Startegi focus niche market with low cost
and differentiation is very interesting
when

Big &profitable targets Lots of different niches

& segments

Expensive &hard for

Competitors to meet the
buyer's special tastes

Market leaders are not interested Few of its competitors

Compete in niche markets
Risk of market niche focus with differentiation

1 competitors will know how to beat

2 Consumer tastes change over time

Interestingly the appeal of the segment will increase competitors

3
 Things to avoid in realizing differentiation
strategies

Product prices Differentiation product

too high features that do not
interest consumers
Trivial improvisation
Has no effect on sales

Distinguish service, features &quality Overspending

of products outside the needs of
buyers
Best cost provider strategy

Differentiation: Low Cost Providers:

Provide quality, features, Deliver lower prices than
performance, & service that competitors with similar product
consumers want offerings

Best cost providers

Value-conscious buyers
 Startegi best cost provider
Works well when

Economic conditions

There are consumers of

middle-class products
Differentiation has become the
norm of the market
There is room to compete for competitors
with high quality products at average/
slightly higher prices