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Assignment On Example of Five Generic Competitive Strategies
Assignment On Example of Five Generic Competitive Strategies
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ID: 2017-2-95-060
To succeed with a low-cost-provider strategy, company managers have to scrutinize each cost-
creating activity and determine what factors cause costs to be high or low. Then they have to use
this knowledge to keep the unit costs of each activity low, exhaustively pursuing cost efficiencies
throughout the value chain. They have to be proactive in restructuring the value chain to
eliminate nonessential work steps and lowvalue activities. Normally, low-cost producers work
diligently to create cost-conscious corporate cultures that feature broad employee participation in
continuous cost improvement efforts and limited perks and frills for executives. They strive to
operate with exceptionally small corporate staffs to keep administrative costs to a minimum.
Wal-Mart has achieved a very substantial cost and pricing advantage over rival supermarket
chains both by revamping portions of the grocery retailing value chain and by out managing its
rivals in efficiently performing various value chain activities. Its cost advantage stems from a
series of initiatives and practices. makes daily deliveries to Wal-Mart's stores, and putting
assorted other cost-saving practices into place at its headquarters, distribution centers, and.
Striving to optimize the product mix and achieve greater sales turnover (resulting in about a 2
percent cost advantage). Installing security systems and store operating procedures that lower
shrinkage rates (producing a cost advantage of about 0.5 percent). Negotiating preferred real
estate rental and leasing rates with real estate developers and owners of its store sites (yielding a
cost advantage of2 percent). Managing and compensating its workforce in a manner that
produces lower labor costs.
The broad differentiation generic strategy has significant implications on Apple’s strategic
objectives. For example, to apply this strategy, the company must continue emphasizing
innovation through research and development. Apple must keep developing innovative products
so that the business maintains its competitive advantage. Competitors eventually catch up with
new technologies and new products, so the broad differentiation generic strategy compels the
company to continuously innovate to keep itself always ahead of the competition. Thus,
continuous innovation is one of Apple’s strategic objectives based on the broad differentiation
generic competitive strategy. In addition, to maintain business growth, the company must keep
growing its market reach, such as in the global consumer electronics market. In its generic
strategy for competitive advantage, Apple does not focus on any specific market segment.
Instead, the company competes by selling various goods and services that suit the various
segments of the consumer electronics and information technology services industries. Thus,
another of Apple’s strategic objectives based on its generic strategy is to penetrate markets to
ensure a broad reach. Such expansion and business growth are achieved through intensive
strategies for growth.
Best-Cost Strategy:
The competitive advantage of a best-cost provider is lower costs than rivals in incorporating
upscale attributes, putting the company in a position to underprice rivals whose products have
similar upscale attributes. Best-cost provider strategies aim at giving customers more value for
the money. The objective is to deliver superior value to buyers by satisfying their expectations on
key quality or features or performance or service attributes and beating their expectations on
price. A company achieves best-cost status from an ability to incorporate attractive or upscale
attributes at a lower cost than rivals. The attractive attributes can take the form of appealing
features, good-to-excellent product performance or quality, or attractive customer service. When
a company has the resource strengths and competitive capabilities to incorporate these upscale
attributes into its product offering at a lower cost than rivals, it enjoys best-cost status.
A best-cost provider strategy works best in markets where buyer diversity makes product
differentiation the norm and where many buyers are also sensitive to price and value. This is
because a best-cost provider can position itself near the middle of the market with either a
medium-quality product at a below-average price or a high-quality product at an average or
slightly higher price. Often, substantial numbers of buyers prefer midrange products rather than
the cheap, basic products of low-cost producers or the expensive products of top-of-the-line
differentiators. But unless a company has the resources, know-how, and capabilities to
incorporate upscale product or service attributes at a lower cost than rivals, adopting a best-cost
strategy is ill advised-a winning strategy must always be matched to a company's resource
strengths and capabilities.
IKEA is a Swedish company registered in the Netherlands that designs and sells ready-to-
assemble furniture (such as beds, chairs, and desks), appliances, and home accessories.
Since January 2008, the company has been the world’s largest furniture retailer. Ikea was
founded in Sweden in 1943 by then-17-year-old Ingvar Kamprad, who was listed as one of the
world’s richest people in 2013. Kampard’s fortune peaked at $33 billion, but he has transferred
the vast majority of his economic stake in the retailer to his philanthropic foundations. The
company is known for its modern architectural designs for various types of appliances and
furniture, and its interior design work is often associated with an eco-friendly simplicity. In
addition, the firm is known for its attention to cost control, operational details, and continuous
product development, corporate attributes that allowed IKEA to lower its prices by an average of
2 to 3 percent over the decade to 2010 during a period of global expansion.
IKEA revolutionized the furniture industry by offering cheap but stylish furniture. Ikea is able to
keep its prices low by sourcing its products in low-wage countries and offering a very basic level
of service. Ikea will assemble or deliver furniture for an additional cost; otherwise, customers
must collect the furniture in the warehouse and assemble at home themselves. While this is less
convenient than traditional retailers, it allows Ikea to offer lower prices that attract customers.
As of January 2014, IKEA owns and operates stores in 26 countries, with 227 of its 298 stores in
Europe. It sells 9,500 products and its stores received 690 million store visits in 2013. The
company uses approximately 1 percent of the Earth’s wood supply, making it one of the largest
users of wood in the retail sector.