Types of Strategy

1. Types of Strategy Excerpt from Create and Implement the Best Strategy for your Business Harvard Business School Press, 2006

2. “Generic” StrategiesMichael Porter – Competitive StrategyThe Free Press, 1998 (1980) • How and Where to compete • Ways of competing • Low Cost, Differentiation, Focus • “Where’s” of competing • Variety- , Needs-, Access-based positions

3. Types of StrategiesCreate and Implement the Best Strategy for your BusinessHarvard Business School Press, 2006 • Cost Leadership • Differentiation • Customer Relationship • Network

4. Cost Leadership • Striving for lower operating costs (than the competition) • Wal*Mart, the real Canadian Superstore

5. Superstore savings • What are some of the things the real Canadian Superstore may be doing in order to lower its operating costs? • What tradeoffs does it make by so doing?

6. ImplementingCost Leadership • Economies of scale • Economies of scope • Product design • Organizational structure • Improvement in operating efficiency • Experience curve

7. Experience Curve • Overall costs decline in a predictable way as cumulative volume increases • X% decline as cumulative volume doubles • Implication, build volume (even by pricing at minimal or negative margins!) to drive down long-term costs

8. Differentiation • Striving to be different (than the competition) in ways for which the market is willing to pay a premium. • For example, Safeway, Sobey’s

9. Safeway / Sobey’sdifferentiation • What are some of the things Safeway (and / or Sobey’s) may be doing in order to differentiate themselves in ways for which the customer will pay? • What tradeoffs do they make by so doing?

10. ImplementingDifferentiation • Understanding customers’ desired package of benefits is the key • Ancillary features, complementary services can often be the basis for differentiation.

11. Stretching the profit

12. “Focus”way of competing • Consciously limiting the scope of the enterpriseby choice, not by necessity,to achieve a specific excellence (not necessarily defined in relation to competition). • For example, De Luca’s Specialty Foods, La Grotta Mediterranean Market

13. Tradeoffs • Does a Cost leader care about differentiation? • Does a Differentiator care about reducing costs? • What is the tradeoff of Focus as a way of competing?

14. “Stuck in the Middle” • What was Eaton’s basis of competition? • Certainly not a cost leader over Wal*Mart • As a department store, not at all focused • Sold food, clothing, electronics, books, furniture, appliances, stationery, etc., etc., etc. • Differentiation from Sears and The Bay not obvious

15. Customer Relationship • Building long term relationships with customers through • Personal contact, rapport • Personalized service, customized solutions • Ongoing, cumulative benefits • Saving customers switching costs • Best suited to smaller businesses

16. A North End institution

17. Network Effect “Strategy” • Some products become increasingly valuable as more people own / use them! • Wordprocessing software, auction sites • What is the fundamental characteristic of such products? • What is the critical imperative for producers of such products?

18. Comparisons and Contrasts • What do Cost Leadership and Network Effect strategies have in common?

19. Type of Strategies • Cost Leadership • Differentiation • (Focus) • Customer Relationship • Network Effect • Make choices consistently over time and throughout the organization to build understanding, synergy and momentum