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On Competitive Strategies

Generic competitive strategies include cost leadership, differentiation, and focus. Cost leadership involves achieving lower costs than rivals through economies of scale, standardization, and cost-saving technologies. Differentiation involves creating unique product features that customers value and are willing to pay a premium for. Focus strategies rely on either cost leadership or differentiation within a narrow market segment. Integrating cost leadership and differentiation aims to provide more value at a lower cost than competitors.

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2K views33 pages

On Competitive Strategies

Generic competitive strategies include cost leadership, differentiation, and focus. Cost leadership involves achieving lower costs than rivals through economies of scale, standardization, and cost-saving technologies. Differentiation involves creating unique product features that customers value and are willing to pay a premium for. Focus strategies rely on either cost leadership or differentiation within a narrow market segment. Integrating cost leadership and differentiation aims to provide more value at a lower cost than competitors.

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mmjmmj
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© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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GENERIC

COMPETITIVE STRATEGIES

PRESENTED BY

SIKHA JAIN
(MFC PART II)
Business-Level
Strategies

Courses of action adopted by an organization


for each of its businesses separately, to serve
identified customer groups and provide value
to the customer by satisfaction of their needs
Core Competencies and Strategy

Core Resources and superior capabilities that


Competencies are sources of competitive advantage over
a firm’s rivals

An integrated and coordinated set of


actions taken to exploit core
Strategy
competencies and gain competitive
advantage
Providing value to customers and gaining
Business-level competitive advantage by exploiting core
Strategy competencies in individual product
markets
Dynamic factors that determine the choice
of a competitive strategy

According to porter, are two, namely

Industry structure

Positioning of a firm in the industry


Industry structure
Positioning of firm in Industry
Porter considers positioning as the overall
approach of the firm towards competing. It is
based on two variables :

Competitive advantage

Competitive scope
Types of Potential Competitive Advantage
Achieving lower overall costs than rivals
Possessing the capability to differentiate the
firm’s product or service and command a
premium price
Two Targets of Competitive Scope
Broad Scope
The firm competes in many customer segments
Narrow Scope
The firm selects a segment or group of segments in the
industry and tailors its strategy to serving them at the
exclusion of others
Porter’s generic business strategies
COMPETITIVE SCOPE

Cost Differentiation
Board target
leadership

Focused cost Focused


Narrow target leadership differentiation

Low-cost Differentiated
products/services products/services
COMPETITIVE ADVANTAGE
Generic competitive strategies

Cost leadership (low cost/broad target)

Differentiation (differentiation/broad
target)

Focus (lower cost or differentiation/narrow


target)
Cost Leadership Business Strategy

When the competitive advantage of an


organization lies in its lower cost of
products or services relative to what the
competitors have to offer
Amul The Taste of India
The three tier- Amul Model
Responsible for Marketing of Milk & Milk
Products Responsible for Procurement &
Processing of Milk Responsible for Collection of
Milk Responsible for Milk Production

Cold chain of supplying its refrigerated products


through an efficient distribution network

Found everywhere including STD booths, kirana


shops, chemists and bakers
Actions taken for achieving cost leadership

•Accurate demand forecasting and high


capacity utilisation
•Attaining economies of scale
•High level of standardisation of
products and offering uniform service
packages using mass production
techniques
•Aiming at the average customer
•Investments in cost-saving technologies
•Withholding differentiation
Conditions
Market for the product/service operate in such
a away that price-based competition is vigorous
Standardised product/service and its
consumption takes place in such a manner that
differentiation is superfluous
Large buyers and possess a significant
bargaining power
Lesser customer loyalty and the cost of
switching from one seller to another is low
Few ways available for differentiation to take
place
Benefits associated with cost
leadership strategy
Cost advantage the best insurance against
industry competition
Low-cost provides some protection from
bargaining leverage of powerful BUYERS
Low-cost provides some protection from
bargaining leverage of powerful SUPPLIERS
Low-cost provider’s pricing power acts as a
significant barrier for POTENTIAL
ENTRANTS
Low cost puts a company in position to use
low price as a defense against
SUBSTITUTES
Pitfalls of cost Leadership Strategy
Low cost methods are easily imitated by rivals
Severe cost reduction can dilute customer
focus and limit experimentation with
product attributes
Technological shifts are a great
threat to the cost leader
Depending on the industry
structure, sometimes less efficient
Producers may not choose to
remain in the market
Differentiation Business Strategy
When the competitive advantage of an
organisation lies in special features
incorporated into the product/service which
is demanded by the customers, who are
willing to pay for it, then the strategy
adopted is the differentiation business
strategy
Multimodal transport company in the express
cargo delivery business

Services like risk insurance offer for shipments,


refund on failure to deliver on time, door-to-
door pick up and delivery and online tracking
Measures that a differentiator
organisation can adopt
Offer utility
Lower the overall cost Which
hat is
Raise the performance unique?

of the product
Increase the buyer
satisfaction in tangible or
intangible ways
High quality of product/service
conditions
Market is too large to be catered to by a few
organisations
Customers needs and preferences are too
diversified
Organisation can charge premium price
Nature of the product/service is such that
brand loyalty is possible
Scope for increasing the sale of the
product/service on the basis of differentiated
features and premium pricing
Benefits Associated with
Differentiation strategy
Act as a formidable entry barrier to new entrants
and substitutes product/service suppliers
Powerful buyers do not usually negotiate price
decrease
Buyers develop loyalty to brand they like best--
can beat rival competitors in the marketplace
Brand loyal customers are also less price
sensitive
What Can Make a
Differentiation Strategy Fail
Charging a price premium that
buyers perceive is too high
Over-differentiating such that product
features exceed buyers’ needs
First-mover advantages associated with the
differentiation strategy are limited
Failure on the part of the organisation to
communicate adequately the benefit arising out
of differentiation
Focus Business Strategies
Focus business strategies essentially
rely on either cost leadership or
differentiation, but cater to a
narrow segment of the total market
Branded jewellery business of Titan Industries
Adopts differentiation strategy
Offer gold, pearl and diamond jewellery for
women and men treating it as fashionable
items rather than an investment
Designs are made on the basis of continual
feedback from its extensive retail network of
showrooms
Measures that a focussed organisation can adopt

Choosing specific niches


Creating superior skills
Creating superior efficiency
Achieving lower
cost/differentiation
Developing innovative ways in
managing the value chain
Conditions
Uniqueness in the segment
Specialised requirements for using the
products or services
Niche market is big enough
Potential for growth
Focussing organisation can guard its turf from
other predator organisations on the basis of
customer relations and loyalty
Benefits Associated with Focus Strategies

Protected from competition


Price increments can be
passed on to the loyal
customers
Powerful buyers are less
likely to shift loyalties
Specialisation of focused
organisations act as a
powerful barrier to
substitute products/services
Risks Associated with Focus
Strategies
Long-drawn and difficult process
Difficult to move to other segments of the
markets
Costs for the focussed organisation are higher
Niches are often transient. May disappear
owing to technology or market forces
Niches may sometimes become attractive
enough for the big players
Rivals can out-focus the focussed
organisations by devising ways to
serve niche markets in a better manner
Integrating Cost Leadership and
Differentiation

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
objectives

Create superior value by MEETING OR


EXCEEDING buyer expectations on
product attributes and BEATING their
price expectations
Be the low-cost producer of a product
with GOOD-TO-EXCELLENT product
attributes, then use cost advantage to
UNDERPRICE comparable brands

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