Crafting AND Executing Strategy: The Quest For Competitive Advantage

19e
CRAFTING
AND
EXECUTING
STRATEGY
The Quest For
Competitive Advantage
Concepts and Cases
Thompson | Peteraf | Gamble | Strickland | Jain

5–1
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
EMPLOY?
STRATEGIES: WHICH ONE TO
THE FIVE GENERIC COMPETITIVE
CHAPTER 5
5–2
WHY DO STRATEGIES DIFFER?
Is the firm’s market target

broad or narrow?
Key factors that
distinguish one strategy
from another
Is the competitive advantage
pursued linked to low costs
or product differentiation?
5–4
THE FIVE GENERIC COMPETITIVE STRATEGIES
5–5
COST-EFFICIENT MANAGEMENT
OF VALUE CHAIN ACTIVITIES

• Cost Driver
– Is a factor with a strong influence on a firm’s costs.
– Can be asset- or activity-based.
• Securing a Cost Advantage:
– Use lower-cost inputs and hold minimal assets
– Offer only “essential” product features or services
– Offer only limited product lines
– Use low-cost distribution channels
– Use the most economical delivery methods
5–12
COST DRIVERS: THE KEYS TO DRIVING DOWN
COMPANY COSTS
Labour
Arbitrage Core Late Mover
Competencies Advantage ?
5–13
PUREVAMPING THE VALUE CHAIN SYSTEM TO LOWER
COSTSTTING THE STRATEGIC VISION IN PLACE
• Use a direct sales force and a company website

to bypass the activities and costs of
distributors and dealers.
• Streamline operations by eliminating low
value-added or unnecessary work steps and
activities.
• Reduce materials handling and shipping costs
by having suppliers locate their plants or
warehouses close to the firm’s own facilities.
5–16
WHEN A LOW-COST PROVIDER STRATEGY
WORKS BEST
• Price competition among rival sellers is vigorous.
• Identical products are available from many sellers.
• There are few ways to differentiate industry
products.
• Most buyers use the product in the same ways.
• Buyers incur low costs in switching among sellers.
• The majority of industry sales are made to a few,
large volume buyers.
• New entrants can use introductory low prices to
attract buyers and build a customer base.
5–20
BROAD DIFFERENTIATION STRATEGIES

• Effective Differentiation Approaches:
– Carefully study buyer needs and behaviors, values and
willingness to pay for a unique product or service.
– Incorporate features that both appeal to buyers and
create a sustainably distinctive product offering.
– Use higher prices to recoup differentiation costs.
• Advantages of Differentiation:
– Command premium prices for the firm’s products
– Increased unit sales due to attractive differentiation
– Brand loyalty that bonds buyers to the firm’s products
5–25
Differentiations are many !

Differentiating Feature Company-1 Company-2
Unique Taste
Multiple Features
Wide selection and one-stop shopping
Superior Service
Engineering design and Performance
Luxury and Prestige
Product Reliability
Technology Leadership
Environment Friendly
Life-time of Free service
5–29
DIFFERENTIATION ADVANTAGE
UNIQUENESS DRIVERS: THE KEYS TO CREATING A
5–30
REVAMPING THE VALUE CHAIN SYSTEM TO INCREASE
DIFFERENTIATION
Coordinating with
channel allies to enhance
Approaches customer perceptions of
to enhancing value
differentiation
through changes
in the value chain
system Coordinating with
suppliers to better
address customer needs
5–32
WHEN A DIFFERENTIATION STRATEGY WORKS
BEST
Market Circumstances
Favoring Differentiation
Diversity of Many ways that Few rival firms Rapid change

buyer needs differentiation follow a similar in technology
and uses for can have value differentiation and product
the product to buyers approach features
Creating Differentiation in Commodity Space through

Value Added Services
5–36
FOCUSED (OR MARKET NICHE) STRATEGIES
Focused Strategy
Approaches
Focused Focused
Low-Cost Market Niche
Strategy Strategy
Thyrocare Aravind Eye Care Tesla Trader Joe Bread-basket

(Godrej) 5–38
BEST-COST PROVIDER STRATEGIES
Differentiation: Low Cost Provider:

Providing desired quality/ Charging a lower price
features/performance/ than rivals with similar
service attributes caliber product offerings
Best-Cost Provider
Hybrid Approach
Value-Conscious Buyer
5–43
THE BIG RISK OF A BEST-COST PROVIDER STRATEGY
— GETTING SQUEEZED ON BOTH SIDES
Best-Cost
Low-Cost High-End
Provider
Providers Differentiators
Strategy
Toyota ?
Lexus ?
5–46
THE CONTRASTING FEATURES OF
THE FIVE GENERIC COMPETITIVE STRATEGIES:

A SUMMARY
• Each Generic Strategy:
– Positions the firm differently in its market.
– Establishes a central theme for how the
firm intends to outcompete rivals.
– Creates boundaries or guidelines for
strategic change as market circumstances
unfold.
– Entails different ways and means of
maintaining the basic strategy.
5–48

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19e

Thompson | Peteraf | Gamble | Strickland | Jain

WHY DO STRATEGIES DIFFER?

Is the firm’s market target

THE FIVE GENERIC COMPETITIVE STRATEGIES

OF VALUE CHAIN ACTIVITIES

COSTSTTING THE STRATEGIC VISION IN PLACE

• Use a direct sales force and a company website

BROAD DIFFERENTIATION STRATEGIES

Differentiations are many !

Diversity of Many ways that Few rival firms Rapid change

Creating Differentiation in Commodity Space through

FOCUSED (OR MARKET NICHE) STRATEGIES

Thyrocare Aravind Eye Care Tesla Trader Joe Bread-basket

BEST-COST PROVIDER STRATEGIES

Differentiation: Low Cost Provider:

— GETTING SQUEEZED ON BOTH SIDES

THE FIVE GENERIC COMPETITIVE STRATEGIES:

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