Both causal observation and research support the
notion that firms that identify with one or more of the forms of competitive advantage outperform those that do not
overall cost leaderships set of interrelated tactics:
- aggressive construction of efficient-scale facilities
- Vigorous pursuit of cost reductions from experience
- tight cost and overhead control
- avoidance of marginal customer accounts
- cost minimization in all actives in the firms value chain, such as R&D, service, sales force, and advertising
Differentiation strategy
creating differences in the firms product or service offering by creating something that is perceived industrywide as unique and valued by customers
overall cost leadership
appeal to industrywide market using a competitive advantage based on low-cost
differentiation strategy forms:
- prestige or brand image
- quality
- tech
- innovation
- features
- customer service
- dealer network
potential pitfalls of differentiation strategies
- too high a price premium
- differentiation that is easily imitated
- dilution of brand identification through product-line extensions
- perceptions of differentiation that vary between buyers and sellers
focus strategy
on the choice of a narrow competitive scope within an industry
- selects a segment or group of segments and tailors its strategy to serve them
combination strategies
firms that integrate low-cost and differentiation strategies is the difficulty for rivals to duplicate or imitate
- two types of value to customers: differentiated attributes and lower prices
A type of approach to combining overall low cost and differentiation
- adopting automated and flexible manufacturing systems: mass customization
integrated overall low-cost and differentiation strategies: improving competitive position via the Five Forces
firms that successfully integrate both differentiation and cost advantages create an enviable position
Pitfalls of integrated overall cost leadership and differentiation strategies
- filling to attain both strategies and possible ending up with neither, leaving the firm “stuck in the middle”
- underestimating the challenges and expenses associated with coordinating value-creating activities in the extended value chain
- miscalculating sources o revenue and profit pools in the firms industry
competitive advantage
- declining, especially in tech industries
- nothing is forever
due to changes in tech, globalization, and actions by rivals can quickly erode a firms advantage
strategies for platform markets
- firms act as intermediaries between two sets of platform users: buyers and sellers
- often do not produce the product
- create a business that attracts a large range of suppliers and a wide population of customers
ex: amazon, Airbnb, Spotify
industry life cycle
refers to the stages of introduction, growth, maturity, and decline that occur over the life of an industry
introduction stage
products are unfamiliar to consumers
- market segments are not well defined, and product features are not clearly specified
- early development involves low sales growth , rapid tech change, operating losses
challenges: developing product and finding a way for users to try it and generating enough exposure so the product emerges as the standard
growth stage
characterized by strong increases in sales
- build consumer preferences for specific brands
- strong brand recognition, differentiated products, and the financial resources to support a variety of value chain activities such as marketing and sales and R&D
maturity stage
aggregate industry demand softens
- few new adopters
- existing rivals intensifies
breakaway positioning
product escapes its category by deliberately associating with a different one
- consumers perceive the product as altogether different
- able to redefine its competition
this strategy permits the product to shift backward on the life cycle curve, moving forms he rather dismal maturity phase to a thriving growth opportunity
decline stage
- changes in business environment, taste, or tech innovation
- consumer. large share of management time and financial resources relative tot heir potential worth
- sales and profit decline
four basic strategies in decline phase
-maintaining: keep product going without significantly reducing marketing support, technological development, or other investments, in the hope that competitors will eventually exit the market
- harvesting
- exiting the market
-consolidation: involves one firm acquiring at a reasonable price the best of the serving firms in an industry. this enables firms to enhance market power and acquire valuable assets
turnaround strategy
involves reversing performance decline and reinvigorating growth toward profitability
- occurs usually in maturity or decline stage
turnaround: three strategies
- asset and cost surgery
- selective product and market pruning
- piecemeal productivity improvements: firm can eliminate costs and improve productivity ; improving business by reengineering them, benchmarking specific activities against industry leaders, encouraging employee input to identify excess costs…