Competitive Strategies and Competitive Advantages Flashcards
(33 cards)
What are competitive marketing strategies?
Strongly position the company against competitors and give it the greatest possible competitive advantage
What is cost leadership?
When an organisation competes on the basis of having the lowest costs and offering the lowest prices in its industry
e.g. Aldi - private label branding lowers costs, cost cutting strategies such as keeping products in packaging.
How is cost leadership accomplished?
By offering a no-frills products or service to a brand target market using standardisation to derive the greatest benefits from economies of scales and experience.
Why should low cost not be pursued with total disregard?
Low cost should not be pursued in total disregard for quality, leaves businesses with 2 options:
1 - Parity - equivalent quality in terms of product or service features. Cost leader can then change the same price as rivals and make higher profits.
2 - Proximity - only slightly lower quality allows the cost leader to offer a slightly lower price and still make high profits.
What are the disadvantages of cost leadership?
- too much focus on one or a few value chain activities.W
- increase in cost of the inputs on which the advantages is based.
- a strategy that can be imitated to easily.
- a lack of priority on differentiation.
- reduced flexibility, obsolescence of the cost advantages.
What is differentiation?
When an organisation competes by offering unique products that are widely valued by customers. Differentiation can take many forms.
What are the different forms of differentiation?
Prestige, brand image, quality, product and service attributes, technology/innovation, people
What are disadvantages of differentiation?
- uniqueness is not that valuable
- too much differentiation
- a price premium that is too high
- differentiation that is easily imitated
- dilution of brand identification through product extensions
- perception of differentiation that vary between buyers and sellers
What is focus?
When a company focuses its efforts on serving a few market segments well rather than going after the whole market.
Focus strategies are able to seek out any weak spots of broad cost-leaders and differentiators.
What are cost focusers?
Identify areas where broader cost-based strategies fail due to the added costs of trying to satisfy a wide range of needs
What is a differentiation focusers?
Look for specific needs that broader differentiators do not serve so well
What does Porter argue about competitive strategies?
He argues that competitive strategies have a fundamental trade-off between a cost leadership and differentiation strategy and thus firms need to adopt and stick to one single generic strategy.
What happens if competitive strategies fail?
May lead to a danger of being ‘stuck in the middle’ - when costs are too high to compete with low cost leaders or when its products or services aren’t differentiated enough to complete with the differentiators.
Porter does acknowledge that the strategies can be combined under certain circumstances
When are hybrid competitive strategies used?
when an organisation combines generic strategies of cost leadership and differentiation. e.g. IKEA uses an interactive store experience of making customers walk through store to get them to buy more.
What is technological or managerial innovation?
when cost efficiency and quality are improved. competitive failures occur if rivals are similarly ‘stuck’ in the middle or if there are no significant competition then middle strategies may work.
What is a market leader and their strategy?
A firm in a industry with the largest market share - expand total market, protect market share, expand market share
What is a market challenger and their strategy?
A runner up firm that is fighting hard to increase its market share in an industry - full frontal attack, indirect attack
What is a market follower and their strategy?
a runner up firm that wants to hold its share in an industry without rocking the boat - follow closely, follow at a distance
What is a market nicher and their strategy?
firm that serves small segments that the other firms in an industry overlook or ignore - by customer market, quality, drive, service, multiple niching.
What are cooperative strategies?
Sometime too much competition can be damaging and it is in the interests of competitors to restrain competition. Collaboration with some competitors may give competitive advantage over competitors or potential entrants
What is a competitive advantage?
An advantage over competitors gained by offering consumers greater value. Resource based view (RBV) - asserts that the competitive advantage and surprise performance of an organisation are explained by the distinctiveness of its capabilities.
What are examples of resources?
physical - > machines, buildings, raw materials, patents, data, bases, computer systems.
financial -> balance sheet, cash flow, suppliers of funds
human -> managers, employees, partners, suppliers, customers
What are examples of capabilities?
physical - > ways of achieving utilisation of plant, efficiency, productivity, flexibility, marketing
financial - > ability to raise funds and manage cash flow, debtors, creditors etc.
human -> how people gain and use experience skills, knowledge, build relationships, motivate others and innovate.
What are the different forms of competitive advantage?
operational excellence (efficiency of company), product excellence (making the product the best), location excellence (airline located in Dubai - central location has advantages), customer excellence (providing excellent customer service)
E.g. Disneyland interactive with customers
