The Five Generic Competitive Strategies Chapter Summary Chapter 5 describes the five basic competitive strategy options – which of the five to employ is a company’s first and foremost choice in crafting overall strategy and beginning its quest for competitive advantage. Lecture Outline I. Introduction 1. By competitive strategy we mean the specifics of management’s game plan for competing successfully – how it plans to position the company in the marketplace, its specific efforts to please customers, and improve its competitive strength, and the type of competitive advantage it wants to establish. CORE CONCEPT: A competitive strategy concerns the specifics of management’s game plan for competing successfully and achieving a competitive edge over rivals. 2. A company achieves competitive advantage whenever it has some type of edge over rivals in attracting buyers and coping with competitive forces. 3. There are many routes to competitive advantage, but they all involve giving buyers what they perceive as superior value. 4. Delivering superior value – whatever form it takes – nearly always requires performing value chain activities differently than rivals and building competencies and resource capabilities that are not readily matched. II. Five Competitive Strategies 1. There are countless variations in the competitive strategies that companies employ, mainly because each company’s strategic approach entails custom-designed actions to fit its own circumstances and industry environment. 2. The biggest and most important differences among competitive strategies boil down to: a. Whether a company’s market target is broad or narrow b. Whether the company is pursuing a competitive advantage linked to low costs or product differentiation 3. Five distinct competitive strategy approaches stand out: a. A low-cost provider strategy: appealing to a broad spectrum of customers based by being the overall low-cost provider of a product or service
b. A broad differentiation strategy: seeking to differentiate the company’s product/service offering from rivals’ in ways that will appeal to a broad spectrum of buyers c. A best-cost provider strategy: giving customers more value for the money by incorporating good-to-excellent product attributes at a lower cost than rivals; the target is to have the lowest (best) costs and prices compared to rivals offering products with comparable attributes d. A focused or market niche strategy based on lower cost: concentrating on a narrow buyer segment and outcompeting rivals by serving niche members at a lower cost than rivals e. A focused or market niche strategy based on differentiation: concentrating on a narrow buyer segment and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals products 4. Figure 5.1, The Five Generic Competitive Strategies — Each Stakes Out a Different Position in the Marketplace , examines how each of the five strategies stake out a
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