Download - Ppt on Competitive Strategies
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 valueto the customer by satisfaction of their needs
Core Competencies and Strategy
Resources and superior capabilities that are sources of competitive advantage over a firm’s rivals
Providing value to customers and gaining competitive advantage by exploiting core competencies in individual product markets
Core Competencies
Strategy
Business-level Strategy
An integrated and coordinated set of actions taken to exploit core competencies and gain competitive advantage
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
Cost leadership
Differentiation
Focused cost leadership
Focused differentiation
Board target
Narrow target
COM
PETI
TIVE
SCO
PE
Low-cost products/services
Differentiated 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
ConditionsMarket for the product/service operate in such a away that price-based competition is vigorousStandardised product/service and its consumption takes place in such a manner that differentiation is superfluousLarge buyers and possess a significant bargaining power Lesser customer loyalty and the cost of switching from one seller to another is lowFew ways available for differentiation to take place
Benefits associated with cost leadership strategy
Cost advantage the best insurance against industry competitionLow-cost provides some protection from bargaining leverage of powerful BUYERS Low-cost provides some protection from bargaining leverage of powerful SUPPLIERSLow-cost provider’s pricing power acts as a significant barrier for POTENTIAL ENTRANTSLow 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 rivalsSevere 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 utilityLower the overall costRaise the performance
of the productIncrease the buyer
satisfaction in tangible or intangible ways
High quality of product/service
Which hat is
unique?
conditionsMarket is too large to be catered to by a few organisationsCustomers needs and preferences are too diversifiedOrganisation can charge premium price Nature of the product/service is such that brand loyalty is possibleScope 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 suppliersPowerful buyers do not usually negotiate price decrease Buyers develop loyalty to brand they like best--can beat rival competitors in the marketplaceBrand loyal customers are also less price sensitive
What Can Make aDifferentiation Strategy Fail
Charging a price premium that buyers perceive is too highOver-differentiating such that product features exceed buyers’ needsFirst-mover advantages associated with the differentiation strategy are limitedFailure 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 IndustriesAdopts differentiation strategyOffer gold, pearl and diamond jewellery for women and men treating it as fashionable items rather than an investmentDesigns 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 skillsCreating superior efficiencyAchieving lower
cost/differentiation Developing innovative ways in
managing the value chain
Conditions
Uniqueness in the segmentSpecialised requirements for using the products or services Niche market is big enough Potential for growthFocussing organisation can guard its turf from other predator organisations on the basis of customer relations and loyalty
Benefits Associated with Focus Strategies
Protected from competitionPrice increments can be passed on to the loyal customersPowerful buyers are less likely to shift loyaltiesSpecialisation of focused organisations act as a powerful barrier to substitute products/services
Risks Associated with Focus Strategies
Long-drawn and difficult processDifficult to move to other segments of the marketsCosts for the focussed organisation are higherNiches are often transient. May disappear owing to technology or market forcesNiches 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 costGive customers more value for the money
objectives
Create superior value by MEETING OR EXCEEDING buyer expectations on product attributes and BEATING their price expectationsBe the low-cost producer of a product with GOOD-TO-EXCELLENT product attributes, then use cost advantage to UNDERPRICE comparable brands