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Strategy and Competitive Advantage

Strategy and Competitive Advantage. COMPETITIVE ADVANTAGE exists when a firm’s strategy gives it an edge in Defending against competitive forces and Securing customers Convince customers firm’s product / service offers SUPERIOR VALUE Offer buyers a good product at a lower price

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Strategy and Competitive Advantage

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  1. Strategy andCompetitive Advantage • COMPETITIVE ADVANTAGEexists when a firm’s strategy gives it an edge in • Defending against competitive forces and • Securing customers • Convince customers firm’s product / service offers SUPERIOR VALUE • Offer buyers a good product at a lower price • Use differentiation to provide a better productbuyers think is worth a premium price Key to Success

  2. The Five GenericCompetitive Strategies Type of Advantage Sought Lower Cost Differentiation Overall Low-Cost Leadership Strategy Broad Differentiation Strategy Broad Range of Buyers Best-Cost Provider Strategy Market Target Focused Low-Cost Strategy Focused Differentiation Strategy Narrow Buyer Segment or Niche

  3. Sustaining Differentiation: The Key to Competitive Advantage • Most appealing approaches to differentiation: • Those hardest for rivals to match or imitate • Those buyers will find most appealing • Best choices for gaining a longer-lasting, more profitable competitiveedge: • New product innovation • Technical superiority • Product quality and reliability • Comprehensive customer service

  4. Activities, Costs, & Margins of Suppliers Internally Performed Activities, Costs, & Margins Buyer/User Value Chains Activities, Costs, & Margins of Forward Channel Allies & Strategic Partners Where to Find Differentiation Opportunities in the Value Chain • Purchasing and procurement activities • Product R&D activities • Production R&D; technology-related activities • Manufacturing activities • Outbound logistics and distribution activities • Marketing, sales, and customer service activities

  5. The Competitive Strength ofFocus/Niche Strategies • RIVAL COMPETITORS do not have matching capabilities to meet specialized needs of niche members • Focuser’s competencies/capabilities act as a barrierto POTENTIAL ENTRANTS • Focuser’s competencies/capabilities pose obstacle to sellers of SUBSTITUTES • Focuser’s unique ability to meet niche buyers’ needs can blunt bargaining leverage of powerful BUYERS

  6. Activities, Costs, & Margins of Suppliers Internally Performed Activities, Costs, & Margins Buyer/User Value Chains Activities, Costs, & Margins of Forward Channel Allies & Strategic Partners Vertical Integration Strategies • Vertical integration extends a firm’s competitive scope within same industry • Backward into sources of supply • Forward toward end-users of final product • Can aim at either full or partial integration

  7. The Building and Eroding of Competitive Advantage Buildup Period Benefit Period Erosion Period Size of Competitive Advantage Size of Competitive Advantage Achieved Strategic Moves Produce Competitive Advantage Moves by Rivals Reduce Competitive Advantage Time

  8. Offensive Strategy andCompetitive Advantage • STRATEGIC OFFENSIVEoptions offering strongest basis for COMPETITIVE ADVANTAGE • Develop lower-cost product design • Make changes in production operations that lower costs or enhance differentiation • Develop product features that deliver superior performance or lower users’ costs • Give more responsive customer service • Escalate marketing effort • Pioneer new distribution channel • Sell direct to end-users

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