1 © 2001 by The McGraw-Hill Companies, Inc. All McGraw-Hill"Irwin Copyrigh t Chapter #5 Outline Five Generic Competitive Strategies Low-Cost Leadership Strategy Broad Differentiation Strategies Best-Cost Provider Strategies Focused Low-Cost Strategies Focused Differentiation Strategies Vertica !ntegration Strategies "erger and #c$uisition Strategies Cooperative Strategies %ffensive and Defensive Strategies First-"over #dvantages and Disadvantages
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Copyrigh t
Copyrigh t
Strategy and Competitive Advantage
Competitive advantage e'ists when a firm(s strategy gives it an edge in Defending against competitive forces and Securing customers
Convince customers firm(s product ) service offers superior value %ffer *uyers a good product at a lower price +se differentiation to provide a better product
*uyers thin, is worth a premium price
Key to Gaining a Competitive Advantage
Copyrigh t
Figure 5.1: he Five !eneric Competitive Strategies
M a r k e t T a r g e t
Type of Advantage Sought
Copyrigh t
Find ways to drive costs out of *usiness year-
after-year
manufacturing or production costs
manufa$turing or produ$tion $osts)
Copyrigh t
Figure 5.': &econ(iguring $alue Chain Systems to "ower Costs So(tware )ndustry
A* +alue Chain System of Software "evelopers ,sing
Traditional holesale-%etail Channels - *ighest Cost
Software
development
a$tivities
Copyrigh t
Figure 5.': &econ(iguring $alue Chain Systems to "ower Costs So(tware )ndustry
!* +alue Chain System of Software "evelopers
,sing "ire$t Sales and hysi$al "elivery of C"s
Software
development
a$tivities
Cost
Software
development
a$tivities
Online
marketing
and
promotion
a$tivities
Copyrigh t
+i((erentiation Strategies
!ncorporate differentiating features that cause *uyers to prefer firm(s product or service over *rands of rivas
Find ways to differentiate that create value for *uyers and that are not easily matched or cheaply copied *y rivas
5ot spending more to achieve differentiation than the price premium that can *e charged
Keys to Su$$ess
Copyrigh t
,est Cost -rovider Strategies
Com*ine a strategic emphasis on lowcost with a strategic emphasis on di((erentiation "a,e an upscae product at a ower cost Give customers more vaue for the money
Deiver superior vaue *y meeting or eceeding *uyer e'pectations on product attri*utes and beating their price e'pectations
Be the ow-cost provider of a product with goodto ecellent product attri*utes/ then use cost advantage to underprice compara*e *rands
O.(e$tives
Copyrigh t
*ow a ,estCost Strategy +i((ers (rom a "owCost Strategy
#im of a ow-cost strategy-- Achieve lower costs than any other competitor in the industry
!ntent of a *est-cost strategy--/a0e a more upscale product at lower costs than the ma0ers o( other brands with comparable (eatures and attributes
Copyrigh t
Focus ) iche Strategies
!nvove concentrated attention on a narrow piece of the tota mar,et
Serve niche *uyers better than rivas
Choose a mar,et niche where *uyers have distinctive preferences/ specia re$uirements/ or uni$ue needs
Deveop uni$ue capa*iities to serve needs of target *uyer segment
O.(e$tive
Copyrigh t
Strategy and Competitive Advantage
Competitive advantage e'ists when a firm(s strategy gives it an edge in Defending against competitive forces and Securing customers
Convince customers firm(s product ) service offers superior value %ffer *uyers a good product at a lower price +se differentiation to provide a better product
*uyers thin, is worth a premium price
Key to Gaining a Competitive Advantage
Copyrigh t
Figure 5.1: he Five !eneric Competitive Strategies
M a r k e t T a r g e t
Type of Advantage Sought
Copyrigh t
Find ways to drive costs out of *usiness year-
after-year
manufacturing or production costs
manufa$turing or produ$tion $osts)
Copyrigh t
Figure 5.': &econ(iguring $alue Chain Systems to "ower Costs So(tware )ndustry
A* +alue Chain System of Software "evelopers ,sing
Traditional holesale-%etail Channels - *ighest Cost
Software
development
a$tivities
Copyrigh t
Figure 5.': &econ(iguring $alue Chain Systems to "ower Costs So(tware )ndustry
!* +alue Chain System of Software "evelopers
,sing "ire$t Sales and hysi$al "elivery of C"s
Software
development
a$tivities
Cost
Software
development
a$tivities
Online
marketing
and
promotion
a$tivities
Copyrigh t
+i((erentiation Strategies
!ncorporate differentiating features that cause *uyers to prefer firm(s product or service over *rands of rivas
Find ways to differentiate that create value for *uyers and that are not easily matched or cheaply copied *y rivas
5ot spending more to achieve differentiation than the price premium that can *e charged
Keys to Su$$ess
Copyrigh t
,est Cost -rovider Strategies
Com*ine a strategic emphasis on lowcost with a strategic emphasis on di((erentiation "a,e an upscae product at a ower cost Give customers more vaue for the money
Deiver superior vaue *y meeting or eceeding *uyer e'pectations on product attri*utes and beating their price e'pectations
Be the ow-cost provider of a product with goodto ecellent product attri*utes/ then use cost advantage to underprice compara*e *rands
O.(e$tives
Copyrigh t
*ow a ,estCost Strategy +i((ers (rom a "owCost Strategy
#im of a ow-cost strategy-- Achieve lower costs than any other competitor in the industry
!ntent of a *est-cost strategy--/a0e a more upscale product at lower costs than the ma0ers o( other brands with comparable (eatures and attributes
Copyrigh t
Focus ) iche Strategies
!nvove concentrated attention on a narrow piece of the tota mar,et
Serve niche *uyers better than rivas
Choose a mar,et niche where *uyers have distinctive preferences/ specia re$uirements/ or uni$ue needs
Deveop uni$ue capa*iities to serve needs of target *uyer segment
O.(e$tive
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