generic business strategies l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Generic Business Strategies PowerPoint Presentation
Download Presentation
Generic Business Strategies

Loading in 2 Seconds...

play fullscreen
1 / 14

Generic Business Strategies - PowerPoint PPT Presentation


  • 365 Views
  • Uploaded on

Generic Business Strategies. Cost-based and Differentiation-based Competitive Strategies. Sources of Competitive Advantage. Competitive Advantages (Sources of Rates of Profit in Excess of the Competitive Level). Avoid Competitors. Be Better Than Competition. Attractive Industry.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Generic Business Strategies' - Leo


Download Now An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
generic business strategies

Generic Business Strategies

Cost-based and Differentiation-based Competitive Strategies

slide2

Sources of Competitive Advantage

Competitive Advantages

(Sources of Rates of Profit in Excess of the Competitive Level)

AvoidCompetitors

Be Better ThanCompetition

AttractiveIndustry

AttractiveNiche

AttractiveStrategic Group

CostAdvantage

DifferentiationAdvantage

Entry Barriers

Isolating Mechanisms

Mobility Barriers

slide3

Competitive Advantages as the Source of Superior Profitability

  • Competitive advantages work in two basic ways
      • avoiding competitors (ie. lock-outs/valuable resources)
      • outperforming competitors (ie. productivity and efficiency/distinctive competencies)
  • Best-practice and empirical research has identified two internally-consistent competitive business strategies:
      • Low Cost Leadership
      • Differentiation
  • Successful businesses use their competitive advantages and resources to develop one of these generic business strategies
slide4

Sources of Superior Profitability

  • A business can achieve a higher rate of profit (or potential profit) over a rival in one of two ways:
      • supplying an identical product/service at a lower cost (cost-based advantage)
      • supplying a differentiated product/service in such a way that the customer is willing to pay a price premium that exceeds the cost of the differentiation (differentiation-based advantage)
      • These two sources of competitive superiority define fundamentally different approaches to business strategy
      • A firm that attempts to achieve both or attains neither is “stuck in the middle”.
slide5

Market Share-Profitability Relationship:“Porter’s Bucket”

High

Low Cost Leadership Strategies

Differentiation-based Strategies

Profitability

Stuck-in-the-Middle

Low

Low

High

Market Share (Quantity)

slide6

Target and Advantage of Porter’s Generic Strategies

Strategic Advantage

Uniqueness Perceived

Low Cost Position

by the Customer

OVERALL

Industrywide

DIFFERENTIATION

COST LEADERSHIP

Strategic Target

Particular

FOCUS

Segment Only

Source: Porter (1980)

the sources of cost advantages
The Sources of Cost Advantages
  • Scale
  • Experience
  • Capacity Utilization
  • Product Design/Process Fit
  • Location
  • Integration/Purchasing
  • Organizational Skills
drivers of cost advantages
Drivers of Cost Advantages

ECONOMIES OF SCALE -Indivisibilities -Specialization & division of labor ECONOMIES OF LEARNING -Increased dexterity -Improved coordination/organization CAPACITY UTIIZATION -Ratio of fixed to variable costs PRODUCTION TECHNIQUES -Mechanization and automation -Efficient utilization of materials -Increased precision PRODUCT DESIGN -Design for automation -Designs to economize on materials INPUT COSTS -Location advantages -Ownership of low-cost inputs -Bargaining power -Supplier cooperation MANAGERIAL EFFICIENCY -Organizational slack

products in the differentiation hall of fame
Products in the Differentiation Hall of Fame

Products in the Differentiation Hall of Fame

Ford Mustang

VW Beetle

Honda Accord

Dodge Caravan

Sony Walkman

McDonalds restaurants

Apple Macintosh

IBM PC

Lotus 123

IBM 370 series

Federal Express

Timex watches

Louis Vuitton bags

Holiday Inns hotels

Disneyland

Boeing 747

Polaroid Land camera

Alcort Sunfish sailboat

Xerox photocopier

American Express credit cards and travelers checks

Numbered Swiss bank accounts

keys to successful differentiation
Keys to Successful Differentiation

• Understanding customer needs and preferences

• Commitment to customers

• Knowledge of company's capabilities

• Innovation

Source: Robert M. Grant,

Contemporary Strategy Analysis

, Basil Blackwell, 1991.

slide13
TANGIBLE DIFFERENTIATION

Observable product characteristics:

size, color, materials, etc.

performance

packaging

complementary services

INTANGIBLE DIFFERENTIATION

Unobservable and subjective characteristics relating to image status, exclusively, identity.

The Nature of Differentiation

“Differentiation means providing something unique that is valuable to the buyer beyond simply offering a low price.” (M. Porter)

THE KEY IS CREATING VALUE FOR THE CUSTOMER

TOTAL CUSTOMER RESPONSIVENESS: Differentiation not just about the product, it embraces the whole relationship between the supplier and the customer.

achieving differentiation advantage
Achieving Differentiation Advantage

How one goes about obtaining a differentiation advantage depends upon whether or not a product is an observable good, an experience good, or a communication good.

  • Observable Goods: the buyers can easily form accurate judgments about the quality of a product.
  • Experience Goods: the buyers finds it difficult and/or costly to determine the quality of the product prior to purchase and use.
  • Communication Goods: the value to the buyer rises as the number of buyers and users increases.