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Best 6... Competitve Service Startegiues

This document discusses competitive service strategies and the role of information technology in achieving competitiveness. It outlines three main generic competitive strategies: overall cost leadership, differentiation, and focus. Cost leadership involves having the lowest costs in the industry. Differentiation means providing uniquely perceived services that customers will pay a premium for. Focus involves targeting a narrow customer segment. Information and IT are important for competitiveness by reducing costs, enabling new service combinations, and strengthening supply chain linkages. Examples like Walmart and Emirates Airlines are provided to illustrate these strategies.

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Kartik Bhatia
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42 views8 pages

Best 6... Competitve Service Startegiues

This document discusses competitive service strategies and the role of information technology in achieving competitiveness. It outlines three main generic competitive strategies: overall cost leadership, differentiation, and focus. Cost leadership involves having the lowest costs in the industry. Differentiation means providing uniquely perceived services that customers will pay a premium for. Focus involves targeting a narrow customer segment. Information and IT are important for competitiveness by reducing costs, enabling new service combinations, and strengthening supply chain linkages. Examples like Walmart and Emirates Airlines are provided to illustrate these strategies.

Uploaded by

Kartik Bhatia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
You are on page 1/ 8

LECTURE - 2

COMPETITIVE SERVICE STRATEGIES

Learning objective: To discuss various service strategies to


achieve competitive advantage

2.5 Generic competitive strategies


Overall cost leadership
Differentiation
Focus
Fragmented Industries

2.5.1 Overall Cost Leadership


This overall cost leadership strategy can be attained by being the low cost
producer in the industry while providing almost same benefits as of
competitors.
Sources of overall cost leadership strategy are:
Achieving economies of scale
Leveraging on learning curve effects
Introducing innovative techniques
Minimizing and controlling overheads

How to achieve cost advantage?


Provide standard services
Routine professional services
Offer no-frill service products
Spice jet is a no frill airlines in India

Reduce transaction costs


ATMs have reduced the personal element in banking sector
tremendously
Run service operations like factory
A small restaurant offering limited menu helps in quick table
turnover, hence hires less skilled employee at lower wages.
Seeking out low cost customers
Spice jet airlines targets price sensitive customers

Low Cost Leadership Competitive Strategy Example


Wal-Mart has no-frills self-service stores which provide lowest prices. WalMart has a very good supplier and distribution network. Wal-Mart
collaborates with suppliers to develop them and help them in their
manufacturing processes to minimize the overall cost and hence charge less
price to the customer.

2.5.2 Differentiation
Differentiation strategy is achieved by a service organization when the
service provided is perceived to be unique by the customers.
Customers generally are willing to pay a premium price for the uniqueness
of a service and will become loyal customers of the service organization
Differentiation can be achieved by offering unique or different features

Product attributes
Brand image
Delivery system
Technology
Customization
Location
Quality (warranties, reliability, after sales service)

Differentiation Competitive Strategy Example


Emirates leveraged on location based differentiation strategy by based at
Dubai. Emirates considered the fact that of the seven billion people on the
planet; about 3.5 billion live within an eight-hour flight of Dubai.
Emirates positioned the airlines to take advantage of developments in the
fast-growing and heavily populated economies of India and China.

2.5.3 Focus
Focus

strategy

involves

concentrating

on

narrow

customer/product segment.
Serve narrow segment effectively and efficiently by having
Cost focus within a limited market
Differentiation focus for limited market

or

limited

Cost Focus
Serve set of customers which are inexpensive to serve
Differentiation Focus
This strategy is best suited to situations where customers have
distinctive preferences or specialized needs
The focus can be specific to
Particular Buyer Group: METRO only members can access
Service Offered: Specialized hospitals
Geographic region: Nilgiris grocery chain in south India

Focus Competitive Strategy: Examples


Cost focus
Companies selling software with yearly updates over internet to
leverage on costs by charging minimal subscription fee
Differentiation focus
SankaraNethralaya in Tamil Nadu is a focused eye hospital offering
expert ophthalmic care for a segment of patients offering all
treatments for blurred vision, double vision, white reflex in eye,
watering etc.

2.5.4 Fragmented Industries


An industry comprise of many companies where no company has a
dominant position or significant market share
Such industry is comprised of large number of small and medium size firms
Laundry and dry cleaning
Shoe repair (Mr. pronto)
Auto repair

2.6 ROLE OF INFORMATION IN THE


COMPETITIVENESS OF SERVICES
2.6 Competitive Role of Information and Information Technology in Services
2.6.1 Information in any Service Organization
Represents large percentage of cost structure to manage and store
Example: A hospital captures, stores and process information on patient
records, physical notes, test results and insurance claims
Determine the relative bargaining power of players.
Example: Auto dealers can have information on types of repairs the customers
ask for their auto vehicles. Such information can act as a source to achieve
competitiveness by taking action on changing design of vehicles or improving
the parts and components which seeks frequent repair.

The retailers of supermarket have information on the sales of different products


which can be acquired by various companies supplying to supermarkets to
analyze customers preferences or choices or buying behavior.
Act as a glue that holds the whole value chain.
2.6.2 Information Technology forms Basis to Achieve Competitive Advantage
IT based entry barrier. American Airlines introduced SABRE reservation
system which altered industry structure by creating switching costs among
reservation agents. It helped American airlines to achieve higher level of
capacity utilization than its competitors.
IT helps in eliminating cost and time utilized for manually undertaking
repetitive tasks of information processing. This helps in reducing overall
cost and companies can exhibit overall low cost strategy.
IT can be utilized to merge various services like banking and insurance to
provide differential service products with large variety.
IT helps in achieving lower overall costs by avoiding traditional distribution
channels and by avoiding physical search of suppliers and buyers.
Examples
1. Many software vendors or anti-virus vendors use internet to distribute
softwares with some subscription fee.
2. E-market place helps in searching for suppliers and buyers and conduct
auctions to finalize deals over internet.
IT links the supply chain entities and increase inventory turnover.

Example
Walmart utilizes point of sales data with item-by-item sales to plan for
reordering of inventory. Walmarts stores are linked to the suppliers
for automatic reordering with visible information on available
inventory. So, as compared to the competitors, Walmart tie up less
money in the inventory.

2.6.3 Economies of Information


Reach
Number of people at home or at work exchanging information
Richness
Bandwidth (Amount of information)
Degree to which an information can be customized
Interactivity (Dialogue possible?)

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