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CHAPTER 5 The five generic competitive strategies

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Joaquin Bracho

on 27 January 2014

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Transcript of CHAPTER 5 The five generic competitive strategies


A low-cost provider strategy

Striving to achieve lower overall costs than rivals on comparable products that attract a broad spectrum of buyers.
Two major avenues for achieving low-cost edge over rivals
Cost-efficient management of value chain using cost drivers
Revamping the value chain system to lower costs
When does a low-cost provider strategy work best?

A broad differentiation strategy
Seeking to differentiate the company’s product offering from rivals’ with superior attributes that will appeal to a broad spectrum of buyers.
Uniqueness drivers - a set of factors effective in creating differentiation
Managing the value chain to create differentiating attributes
·When does a differentiation strategy work best?
Potential pitfalls
A focused low-cost strategy
Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals on costs, thus being able to serve niche members at a lower price.
Based on low cost aims at securing a competitive advantage (lower cost and lower price than those of rival competitors).
Difference between a low-cost provider strategy and focused low-cost strategy.
Focused low-cost strategies are fairly common.
Aravind’s low-cost strategy
A focused differentiation strategy
Focus on low cost strategy and market niche strategy (Buyer segment)
Line-up of models, styles and product section
Few rivals specializing in the same target segment (avoid overcrowding or matching capabilities)
Capacity of shifting over time towards product attributes desired by the majority of buyers
Segment increases leads to more competitors, intensifies rivalry and splinters segment profits
A best-cost provider strategy
Goal pursuing low cost and differentiation advantage (Best-cost provider - great value to buyer)
The market norm must be product differentiation
It works in markets with large number of value-conscious buyers (economic conditions)
Firms must provide an excellent strategy relating to low-cost production and aggressive marketing
Low cost provider features reach best cost provider strategy that look forward to high-end differentiators
CHAPTER 5 The five generic competitive strategies
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