Scribd
Upload
43 views18 pages

Generic Competitive Strategies

The document discusses three generic competitive strategies - overall cost leadership, differentiation, and focus. It describes each strategy and provides examples. It also outlines some risks of each strategy, such as costs increasing or competitors imitating the strategy. The document emphasizes that firms must pursue at least one of these three strategies to avoid being "stuck in the middle". It concludes by discussing how the durability and imitability of a firm's competitive advantages impact their sustainability over time.

Uploaded by

Vineet Kumar Dixit
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
43 views18 pages

Generic Competitive Strategies

The document discusses three generic competitive strategies - overall cost leadership, differentiation, and focus. It describes each strategy and provides examples. It also outlines some risks of each strategy, such as costs increasing or competitors imitating the strategy. The document emphasizes that firms must pursue at least one of these three strategies to avoid being "stuck in the middle". It concludes by discussing how the durability and imitability of a firm's competitive advantages impact their sustainability over time.

Uploaded by

Vineet Kumar Dixit
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 18

Generic Competitive

Strategies
 To cope with the five competitive forces, the
firms can adopt the following strategies to
outperform other firms in an Industry
1.Overall Cost –Leadership
2.Differentiation
3.Focus
Three Generic Competitive Strategies
Over all cost Leadership
 Cost Leadership requires aggressive
construction of efficient scale facilities, tight
cost control, avoidance of marginal
customer accounts and cost minimisation.
 However quality, services and other areas
can not be ignored.
 Examples: Bajaj Motorcycles,Maruti,Nirma
 Ford in U.S.A
The Risks of Following an Overall Cost Leadership Strategy

It can be expensive as the organization continually updates its


capital equipment

Competitors may be able to imitate the activities of the cost


leader

A change in technology may nullify past investments in capital


equipment and allow competitors to take market share

Customer tastes may change which results in them being less


price sensitive and more willing to pay a higher price for a
differentiated product
Differentiation
 Differentiation implies creating something
that is perceived Industry wide as being
Unique. Approaches to differentiation can
take several forms
 E.g.Design or Brand Image(Mercedes)
 Technology (V-Tech by Honda)
 Customer Service
Differentiation Strategy

 Aimed at a broad market and involves the organization


competing on the basis of a product or service that is
recognised by consumers as unique

 This difference must be sufficiently valued by consumers


that they are willing to pay a premium price for it

 A major benefit of producing a differentiated product is


that rivals will find it difficult to imitate

 A differentiation strategy will involve different resources,


capabilities and organizational arrangements than a
strategy based on cost leadership
 Differentiation Strategy does not allow the
firms to ignore costs, but costs are not the
primary strategic target.
The Risks of Following a Differentiated
Strategy
 The high price charged for differentiation must not be
too far above competitors that it results in reduced
brand loyalty

 Buyers may decide that their need for a differentiated


product has declined

 Competitors may narrow the attributes of


differentiation which results in consumers being faced
with a viable substitute
Focus
 Focus can be on a particular buyer group, segment of the product line
or geographic market

 Serving a segment (or segments) of the market

 This might be a particular group of consumers, a specific


geographical market, in effect, any viable segment of the market

 Examples of focus strategies include Cartier for jewellery,


Burberry for fashion and Toyota for hybrid cars
 By focusing on a niche of the market, the organization may be
better placed to meet the needs of buyers than competitors who
are trying to compete across the whole industry
 An organization can achieve competitive advantage either
through lower costs or differentiation focus
The Risks of Following a Focus
Strategy
 Customer preferences may change and the niche
player may be unable to respond
 Broad based competitors believe the segment
represents an attractive submarket and outfocus the
focuser
 The difference between the segment and the main
market narrows leaving focus based competitors at a
disadvantage.
Stuck in the Middle
 An organization that fails to pursue at least
one of these generic strategies:

 lacks the market share, capital investment, and


resolve to play the low cost game, the industry
wide differentiation necessary to obviate the
need for a low-cost position, or the focus to
create differentiation or a low-cost position in a
more limited sphere.
Competetive Advantage of a Firm
 A firm can use it’s resources and capabilities
to develop competitive advantage. However
the sustainability of these advantages
depends on
1.Durability,and
2.Imitability
Durability
 It is the rate at which a firm’s core
competency can be duplicated by others.
 New technology can make a firm’s core
competency obsolete or irrelevant.
 Intel Corp
Imitability
 It is the rate at which a firm’s underlying
resources and capabilities can be duplicated
by others.
 Competitor’s effort may range from reverse
engineering to hiring employees from the
competitor to outright patent infringement
 A core competency can be easily imitated to
the extent it is transparent,transferable and
replicable.
 Transparency is the speed with which other
firms can understand the relationship of
resources and capabilities supporting a
successful firm’s strategy .
 E.g. Gillete
 Transferability-It is the ability of the
Competitor to gather the resources and
capabilities necessary to support a
competitive challenge.
 E.g. It may be difficult for a wine maker to
duplicate a French winery’s key resources
of land and climate ,especially if the imitator
is located in Iowa.
 Replicability-It is the ability of competitors to
use duplicated resources and capabilities to
imitate other firm’s success.
 For example,even though many companies
have tried to imitate P&G’s success with
brand management by hiring brand
managers away from P&G they have often
failed to duplicate P&G’s success.

You might also like