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    Generic Strategies

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    Anand
    The document discusses generic business strategies including cost leadership, differentiation, and focus. It explains that cost leadership involves becoming the industry's lowest cost provider. Differentiation relies on creating a product or service that is uniquely perceived in the industry. Focus involves targeting a niche market segment and becoming the top provider in that niche through cost leadership, differentiation, or both. The document also outlines risks associated with each generic strategy and provides examples.

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    Attribution Non-Commercial (BY-NC)
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    Generic Strategies

    Uploaded by

    Anand
    1K views32 pages
    The document discusses generic business strategies including cost leadership, differentiation, and focus. It explains that cost leadership involves becoming the industry's lowest cost provider. Differentiation relies on creating a product or service that is uniquely perceived in the industry. Focus involves targeting a niche market segment and becoming the top provider in that niche through cost leadership, differentiation, or both. The document also outlines risks associated with each generic strategy and provides examples.

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    The document discusses generic business strategies including cost leadership, differentiation, and focus. It explains that cost leadership involves becoming the industry's lowest cost provider. Differentiation relies on creating a product or service that is uniquely perceived in the industry. Focus involves targeting a niche market segment and becoming the top provider in that niche through cost leadership, differentiation, or both. The document also outlines risks associated with each generic strategy and provides examples.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    1K views32 pages

    Generic Strategies

    Uploaded by

    Anand
    The document discusses generic business strategies including cost leadership, differentiation, and focus. It explains that cost leadership involves becoming the industry's lowest cost provider. Differentiation relies on creating a product or service that is uniquely perceived in the industry. Focus involves targeting a niche market segment and becoming the top provider in that niche through cost leadership, differentiation, or both. The document also outlines risks associated with each generic strategy and provides examples.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 32

    Generic Strategies

    By
    Anand
    BUSINESS STRATEGY

    FOCUSES ON IMPROVING
    THE COMPETITIVE
    POSITION OF A COMPANY’S
    OR BUSINESS UNIT’S
    PRODUCTS OR SERVICES
    WITHIN THE SPECIFIC
    INDUSTRY OR MARKET
    SEGMENT THAT THE
    COMPANY OR BUSINESS
    UNIT SERVES
    • The central role of
    competitive advantage in
    the study of strategic
    management.

    • The generic study of


    strategic management.

    • tradeoff bet. cost


    leadership & differentiation
    The generic
    strategies
    overall cost
    leadership,
    differentiation,
    focus and
    best cost
    positions.
    Tasks for the
    strategist
    • How firms can effectively combine
    the generic strategies of overall
    cost leadership and differentiation.

    • The role of functional strategies in


    relation to business level strategies
    and need for internal consistency

    • The pitfalls managers must avoid in


    striving to attain generic strategies
    Questions to be
    answered
    • Should the firm compete
    on the basis of low cost or
    differentiate its products
    or services on some basis
    other than costs?

    • Should the firm compete


    head to head with the
    major competitors or
    should it focus on a niche?
    Ways of Generating
    Competitive
    Advantage

    • Prices Charged
    • Value Delivered
    Ways of Generating
    Competitive
    • Cost Leadership
    • Differentiation
    Ways of
    Generating
    Competitive
    Advantage
    Concepts

    • Lower cost strategy: the


    ability of a company or a
    business unit to design.
    Produce, and market a
    comparable product more
    efficiently than competitors
    • Differentiation Strategy:
    Ability of a firm to provide
    unique and superior value to
    the buyer in terms of product
    quality, special features, or
    after sale service
    INDUSTRY LIFE
    CYCLE
    Cost Leadership

    Characteristics
    • Become Industry’s lowest-
    cost provider rather than just
    a low cost provider
    • Aim for average customer/
    Large MS
    • Lower production costs
    • Few unique/new features that
    buyers consider essential
    • Difficult for rivals to copy or
    match
    Calls for

    • Leveraging Scale
    economies
    • Marketing: Wide product
    line/Aggressive
    • Pricing/Start-up Losses
    • Aggressive construction of
    efficient scale facilities
    • Vigorous pursuit of cost
    reduction
    Organizational
    Requirements
    • Efficient organizational
    systems & structures
    • Tight Cost & Overhead
    Controls
    • Incentives based on
    quantitative targets
    • Low cost distribution
    systems
    When Does a Low
    Cost Strategy Work
    Best?
    • Price competition is
    vigorous
    • Product
    standardized/readily
    available with many
    suppliers
    • Most buyers use product in
    same ways
    • Buyers incur low switching
    costs
    • Large buyers have
    significant bargaining power
    • Industry newcomers use low
    prices to attract buyers and
    build customer base buyers
    and build customer base
    Examples

    • WALMART
    • SOUTHWEST AIRLINES
    • TIMEX
    Differentiation

    Characteristics
    • Perceived
    Uniqueness/Quality/Service
    Based on
    • Design/Brand/Technology/F
    eatures/ Service
    Calls for

    • Strong marketing abilities


    • Product design skills/
    Creative flair
    • Strong cooperation from
    channels
    • Eschewing market share,
    being exclusive
    Organizational
    resources

    • Strong coordination skills


    • Subjective measurement
    incentives
    • Amenities to attract
    creative talent
    When Does a
    Differentiation
    Strategy Work Best?
    • There exist many ways to
    differentiate a product
    • Buyer needs and uses are
    diverse
    • Few rivals are following a
    similar differentiation
    approach
    • Technological change and
    product innovation are fast
    paced
    Types of
    Differentiation
    Themes
    • Multiple features -- Microsoft
    Windows and Office
    • Superior service -- FedEx, Ritz-
    Carlton
    • Spare parts availability – Caterpillar
    • Prestige – Rolex
    • Quality manufacture -- Honda,
    Toyota
    • Technological leadership -- 3M
    Corporation, Intel
    • Top-of-the-line image -- Ralph
    Lauren, Chanel
    Focus

    • Characteristics
    • Small overall share of
    market
    • Serves chosen/well defined
    mkt segment
    • Either a cost
    leader/differentiator or
    both
    Calls for

    • Choice of buyer group/


    product
    • segment/geographic
    market
    • Strong marketing abilities
    • Product design skills/
    Creative flair
    What Makes a Niche
    Attractive for
    Focusing?
    • Potentially profitable,
    offers growth potential
    • Not crucial to success of
    industry leaders
    • Costly or difficult for multi
    segment competitors
    • to meet specialized needs
    of niche members
    • Focuser has resources and
    capabilities to effectively
    serve an attractive niche
    • Few other rivals are
    specializing in same niche
    • Focuser can defend against
    challengers via superior
    ability to serve niche
    members superior ability to
    serve niche members
    Generic Strategies -
    Risks
    Overall Cost leadership
    • Technological change can
    nullify past investment &
    learning
    • Low-cost learning by new
    comers/followers
    • High attention on cost >>
    inability to foresee product-
    market changes
    • Inflation in costs can narrow
    price advtg.
    • Inflation in costs may increase
    attractiveness of differentiators
    Differentiation
    • Uniqueness that is not valuable
    • Too high a price premium
    • Differentiation that is easily imitated
    • Dilution of brand identification through
    product line extension
    • Perceptions of differentiation may vary
    between buyers and sellers
    • As buyers become more sophisticated fall
    in buyers need for differentiating factor
    • Imitation narrows perceived diffrtn.
    Focus
    • Narrowing prodt. Differences
    between niche and market as a
    whole
    • High cost differential compared to
    low cost may erode brand loyalty
    • Erosion of cost advantages within
    the narrow segment
    • Focused products and services still
    subject to competition from new
    entrants and from imitation.
    • Focusers can become too focused
    to satisfy buyer needs
    STUCK IN THE
    MIDDLE: HP’s PC
    DIVISION
    • A NICHE PLAYER
    • DIFFERENTIATION FOCUS
    • COMPETE IN BROAD TARGET
    MARKET DECIDED IN 1990
    • REDUCED PRICES
    • RESULTED IN 40% SALES
    GROWTH
    • BUT ONLY 4.6% OPERATING
    MARGIN
    COULD NOT KEEP UP ITS
    QUALITY IMAGE
    Competitive
    Positioning
    CORPORATE
    STRATEGY
    • FIRM’S OVERALL ORIENTATION
    TOWARDS GROWTH, STABILITY, OR
    RETRENCHMENT DIRECTIONAL
    STRATEGY
    • INDUSTRIES OR MARKETS IN
    WHICH FIRM COMPETES
    PORTFOLIO STRATEGY
    • MANNER IN WHICH MANAGEMENT
    CO ORDINATES ACTIVITIES,
    TRANSFERS RESOURCES, AND
    CULTIVATE CAPABILITIES AMONG
    PRODUCT LINES AND BUSINESS
    UNITS PARENTING STRATEGY

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