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TheChapter
Five Generic
Title
Competitive
Strategies
The
Contrasting Features of the Five Generic
Competitive Strategies: A Summary
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Strategy and Competitive Advantage
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Low-Cost Provider Strategies
Keys to Success
Make achievement of meaningful lower costs
than rivals the theme of firms strategy
Strive hard for continuous improvement in the efficiency of its plants and
frequently invest in state-of-the art equipment to reduce unit costs
Approach 1
Do a better job than rivals of
performing value chain activities
efficiently and cost effectively
Approach 2
Control
Revamp value chain to bypass costs!
cost-producing activities that add little
By-pass
value from the buyers perspective costs!
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Approach 1: Controlling the Cost Drivers
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Wal-Marts Approach to
Managing Its Value Chain
Institute extensive information sharing with vendors via online
systems
Pursue global procurement of some items and centralize most
purchasing activities
Strive to optimize the product mix and achieve greater sales turnover
Objective
Incorporate differentiating features that cause
buyers to prefer firms product or service over
brands of rivals
Keys to Success
Findways to differentiate that create value for
buyers and are not easily matched or cheaply
copied by rivals
Not spending more to achieve differentiation
than the price premium that can be charged
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Benefits of Successful Differentiation
= Competitive Advantage
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Types of Differentiation Themes
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How to Achieve a
Differentiation-Based Advantage
Approach 1
Incorporate product features/attributes that
lower buyers overall costs of using product
Approach 2
Incorporate features/attributes that raise the
performance a buyer gets out of the product
Approach 3
Incorporate features/attributes that enhance buyer
satisfaction in non-economic or intangible ways
Approach 4
Compete on the basis of superior capabilities
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Test Your Knowledge
Which of the following is not one of the four basic routes to
achieving a differentiation-based competitive advantage?
A. Appealing to high-income buyers who are willing and able to
pay a premium price for a high-performing, multi-featured
product
B. Incorporating features that raise product performance
C. Incorporating product attributes and user features that lower
the buyers overall costs of using the companys product
D. Delivering value to customers via competencies and
competitive capabilities that rivals dont have or cant afford to
match
E. Incorporating features that enhance buyer satisfaction in
intangible or non-economic ways
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Importance of Perceived Value
and
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Best-Cost Provider Strategies
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Risk of a Best-Cost Provider Strategy
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Test Your Knowledge
Which of the following are distinguishing features of a best-
cost provider strategy (based on the comparisons of the five
generic competitive strategies shown in Figure 5.1)?
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Focus / Niche Strategies
Geographic uniqueness
Specializedrequirements in
using product/service
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Examples of Focus Strategies
Approach 1
Approach 2 hat is
unique?
Amazon.com
Avon Products
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Deciding Which Generic
Competitive Strategy to Use
Each positions a company differently in its market and
competitive environment
Each establishes a central theme for how a company will
endeavor to outcompete rivals
Each creates some boundaries for maneuvering as market
circumstances unfold
Each points to different ways of experimenting with the
basics of the strategy
Each entails differences in product line, production
emphasis, marketing emphasis, and means to sustain the
strategy
The big risk Selecting a stuck in the middle strategy!
This rarely produces a sustainable competitive
advantage or a distinctive competitive position!
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