1.Who will be served? 2.What needs will be satisfied? 3.How will those needs be satisfied?
1. Achieving lower cost than rival 2. Possessing the capability to differentiate the firm’s product or service and command a premium price Competitive Scope Broad Scope: The firm competes in many customer segments Narrow Scope: The firm selects a segment and tailors its strategy to serving them at the exclusion of others. Cost Leadership : Set of actions taken to produce goods that are acceptable to customers at lowest cost. Due to cost leader’s position, rivals hesitate to compete on basis of price. Can mitigate buyers’ power by driving prices far below competitors. Can mitigate suppliers’ power by being able to absorb cost increases due to low cost position. Can frighten off new entrants due to their need to enter on a large scale in order to be cost competitive. Cost leader is positioned to lower prices in order to maintain value position. Differentiation Strategy: An integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.
- Focus is on non-standardized products - Appropriate when customers value differentiated features more than they value low cost. Defends against competitors because customer’s brand loyalty to differentiated product offsets price competition. Can mitigate buyers’ power because well differentiated products reduce customer sensitivity to price increases. Can mitigate suppliers’ power by absorbing price increases due to higher margins. Can defend against new entrants because new products must surpass proven products. Well-positioned relative to substitutes because brand loyalty. Focus Strategy: A set of actions taken to produce goods or services that serve the needs of a particular competitive segment (focused cost leadership, focused differentiation). Integrated Cost Leadership/Differentiation Strategy: Can adapt quickly to environmental changes, learn new skills, and effectively leverage its core competencies while competing against its rivals. - Often involves compromises and lacks the strong commitment and expertise that accompanies firms following either a cost leadership or a differentiated strategy. Chapter 5: Competitive Rivalry and Competitive Dynamics Competitors: Firms operating in the same market, offering similar products and targeting similar customers. Competitive Rivalry: Ongoing set of competitive actions and responses occurring between competitors. Influences and individual firm’s ability to gain and sustain competitive advantages (individual firms).
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- Spring '10
- Management, global competitive landscape