Crafting a strategy
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Chapter 4 . Crafting a Strategy. Screen graphics created by: Jana F. Kuzmicki , PhD Troy University - Florida and Western Region . Quote . . . . “Successful business strategy is about actively shaping the game you play, not just playing the game you find.” .

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Crafting a strategy

Chapter 4

Crafting a Strategy

Screen graphics created by:

Jana F. Kuzmicki, PhD

Troy University - Florida and Western Region


Crafting a strategy

Quote . . .

“Successful business strategy is about actively shaping the game you play, not just playing the game you find.”

Adam M. Brandenburger and Barry J. Nalebuff


Fig 4 1 a company s menu of strategy options

Fig. 4.1: A Company’s Menu of Strategy Options


Crafting a strategy

BCG MATRIX – BUSINESS PORTFOLIO


What is competitive strategy

What Is “Competitive Strategy”?

  • Deals exclusively with a company’sbusinessplans to compete successfully

    • Specific efforts to please customers

    • Offensive and defensive movesto counter maneuversof rivals

    • Responses to prevailing market conditions

    • Initiativesto strengthen its market position

  • Narrower in scope than business strategy


Fig 4 2 the five generic competitive strategies

Fig. 4.2: The Five Generic Competitive Strategies


Low cost provider strategies

Low-Cost Provider Strategies

Keys to Success

  • Make achievement of meaningful lower costs than rivals the theme of firm’s strategy

  • Include features and services in product offering that buyers consider essential

  • Find approaches to achieve a cost advantage in ways difficult for rivals to copy or match

Low-cost leadership meanslow

overall costs,not just low

manufacturing or production costs!


Keys to success in achieving low cost leadership

Keys to Success inAchieving Low-Cost Leadership

  • Scrutinize each value chain activity toidentify what factors drive the costs of performing the activity

  • Use knowledge about cost drivers tomanage costs of each activity down year after year

  • Find ways to restructure value chain to eliminate nonessential work steps and low-value activities

  • Aggressively pursue investments in resources and capabilities that promise to drive costs out of the business


Characteristics of a low cost provider

Characteristics of aLow-Cost Provider

  • Cost conscious corporate culture

  • Broad employee participation in cost-control efforts

  • Ongoing efforts to benchmark costs

  • Intensive scrutiny of budget requests

  • Programs promoting continuous cost improvement

Successful low-cost producers champion

frugality but wisely and aggressively

invest in cost-saving improvements !


Differentiation strategies

Differentiation Strategies

Objective

  • Incorporate differentiating features that cause buyers to prefer firm’s product or service over brands of rivals

  • Finding ways to differentiate that create valuefor buyers and that are not easily matchedorcheaply copiedby rivals

  • Not spending more to achieve differentiation than the price premium that customers are willing to pay for all the differentiating extras

Keys to Success


Benefits of successful differentiation

Whichhat is unique?

Benefits of Successful Differentiation

  • A product / service with unique, appealing attributes allows a firm to

    • Command a premium priceand/or

    • Increase unit sales and/or

    • Buildbrand loyalty

  • = Competitive Advantage


How to achieve a differentiation based advantage

How to Achieve aDifferentiation-Based Advantage

Approach 1

Incorporate product features/attributes that lowerbuyer’s overall costs of using product

Approach 2

Incorporate features/attributesthat raise product performance

Approach 3

Incorporate features/attributes that enhance buyer satisfaction in non-economic or intangible ways

Approach 4

Develop superior competencies and competitive capabilities that rivals don’t have and can’t match


Best cost provider strategies

Best-Cost Provider Strategies

  • Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation

    • Make an upscale product at a lower cost

    • Give customers more value for the money

  • Deliver superior value by meeting or exceeding buyer expectations on product attributes and beating their expectations on what price they will have to pay

  • Be the low-cost provider of a product with good-to-excellent product attributes, then use cost advantage to underprice comparable brands

Objectives


Competitive strength of a best cost provider strategy

Competitive Strength of a Best-Cost Provider Strategy

  • A best-cost provider’s competitive advantagecomes from matching close rivals on key product attributes and beating them on price

  • Success depends on having the skills and capabilities to provide attractive performance and features at a lower cost than rivals

  • A best-cost producer can often out-compete both a low-cost provider and a differentiator when

    • Standardized features/attributes won’t meet diverse needs of buyers

    • Many buyers are price and value sensitive


Focus niche strategies

Focus / Niche Strategies

  • Involve concentrated attention on a narrow pieceof the total market

    • Serve needs of niche buyers better than rivals

  • Choose a market niche where buyers have distinctive preferences, special requirements, or unique needs

  • Develop unique capabilities and product attributes to serve needs of target buyer segment

Objective

Keys to Success


Approaches to defining a market niche

Approaches to Defining a Market Niche

  • Geographic uniqueness

  • Specialized requirements inusing product/service

  • Special product attributes appealing only to niche buyers


Examples of focus strategies

Examples of Focus Strategies

  • eBay

    • Online auctions

  • Porsche

    • Sports cars

  • Jiffy Lube International

    • Quick maintenance for motor vehicles

  • Pottery Barn Kids

    • Children’s furniture and accessories

  • Bandag

    • Specialist in truck tire recapping


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