Competitive dimensionsStrategic Management

Prepared By

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Manu Melwin JoyAssistant Professor

Ilahia School of Management Studies

Kerala, India.Phone – 9744551114

Mail – manu_melwinjoy@yahoo.com

Competitive dimensions• According to Porter, two

competitive dimensions are the keys to business-level strategy.

• The first dimension is a firm’s source of competitive advantage.

• The second dimension is firms’ scope of operations.

Cost Leadership• Perhaps the most famous

cost leader is Walmart, which has used a cost leadership strategy to become the largest company in the world.

• The firm’s advertising slogans such as “Always Low Prices” and “Save Money. Live Better” communicate Walmart’s emphasis on price slashing to potential customers.

Common characteristics

• The ability to charge low prices and still make a profit is challenging.

• Cost leaders manage to do so by emphasizing efficiency.

• As part of the effort to be efficient, most cost leaders spend little on advertising, market research, or research and development.

• Many cost leaders rely on economies of scale to achieve efficiency. Economies of scale are created by selling more items.

Examples of Cost leadership

• McDonald's - McDonald's has been extremely successful with this strategy by offering basic fast-food meals at low prices. They are able to keep prices low through a division of labor that allows it to hire and train inexperienced employees rather than trained cooks.

Examples of Cost leadership

• Ikea -The Swedish furniture retailer Ikea revolutionized the furniture industry by offering cheap but stylish furniture. Ikea is able to keep its prices low by sourcing its products in low-wage countries and by offering a very basic level of service.

Examples of Cost leadership

• Southwest Airlines - Southwest attempts to offer the lowest prices possible by being more efficient than traditional airlines. They minimize the time that their planes spend on the tarmac in order to keep them flying and to keep profits up.

Differentiation

• A firm following a

differentiation strategy

attempts to convince

customers to pay a premium

price for its good or services

by providing unique and

desirable features.

Examples of Differentiation

• Apple - Steve Jobs said this about the difference between Dell and Apple: Apple and Dell are the only ones in this industry making money. They make it by being Wal-Mart. We make it by innovation.

Examples of Differentiation

Examples of Differentiation

Examples of Differentiation

Focused cost leadership strategy• A focused cost leadership strategy

requires competing based on

price to target a narrow market.

• A firm that follows this strategy

does not necessarily charge the

lowest prices in the industry.

Instead, it charges low prices

relative to other firms that

compete within the target market.

Examples of Focused cost leadership

Redbox uses vending machines placed outside grocery stores and other retail outlets to rent DVDs of movies for $1.

Focused Differentiation strategy• A focused differentiation

strategy requires offering

unique features that fulfill the

demands of a narrow market.

• Some firms using a focused

differentiation strategy

concentrate their efforts on a

particular sales channel, such as

selling over the Internet only.

Examples of Focused Differentiation

The dedication of Mercedes-Benz to cutting-edge technology, styling, and safety innovations has made the firm’s vehicles prized by those who are rich

enough to afford them.