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    MB403 Unit 17 Generic Strategies

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    Arneet Sarna
    Generic business strategies include cost leadership, differentiation, and focus. Cost leadership involves achieving the lowest costs through economies of scale, experience effects, and technological advances. Differentiation creates value through uniqueness in areas like quality, innovation, brand image, and customer service. Companies pursuing a focus strategy specialize in a particular segment or niche, using either a low-cost or differentiation approach. The best cost strategy combines aspects of cost leadership and differentiation by providing good value through low prices and unique attributes. The appropriate strategy depends on factors like customer preferences, competitive pressures, and a company's resources and capabilities. All strategies carry risks like imitation and changes that could eliminate advantages.

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    MB403 Unit 17 Generic Strategies

    Uploaded by

    Arneet Sarna
    12 views19 pages
    Generic business strategies include cost leadership, differentiation, and focus. Cost leadership involves achieving the lowest costs through economies of scale, experience effects, and technological advances. Differentiation creates value through uniqueness in areas like quality, innovation, brand image, and customer service. Companies pursuing a focus strategy specialize in a particular segment or niche, using either a low-cost or differentiation approach. The best cost strategy combines aspects of cost leadership and differentiation by providing good value through low prices and unique attributes. The appropriate strategy depends on factors like customer preferences, competitive pressures, and a company's resources and capabilities. All strategies carry risks like imitation and changes that could eliminate advantages.

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    Generic business strategies include cost leadership, differentiation, and focus. Cost leadership involves achieving the lowest costs through economies of scale, experience effects, and technological advances. Differentiation creates value through uniqueness in areas like quality, innovation, brand image, and customer service. Companies pursuing a focus strategy specialize in a particular segment or niche, using either a low-cost or differentiation approach. The best cost strategy combines aspects of cost leadership and differentiation by providing good value through low prices and unique attributes. The appropriate strategy depends on factors like customer preferences, competitive pressures, and a company's resources and capabilities. All strategies carry risks like imitation and changes that could eliminate advantages.

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    12 views19 pages

    MB403 Unit 17 Generic Strategies

    Uploaded by

    Arneet Sarna
    Generic business strategies include cost leadership, differentiation, and focus. Cost leadership involves achieving the lowest costs through economies of scale, experience effects, and technological advances. Differentiation creates value through uniqueness in areas like quality, innovation, brand image, and customer service. Companies pursuing a focus strategy specialize in a particular segment or niche, using either a low-cost or differentiation approach. The best cost strategy combines aspects of cost leadership and differentiation by providing good value through low prices and unique attributes. The appropriate strategy depends on factors like customer preferences, competitive pressures, and a company's resources and capabilities. All strategies carry risks like imitation and changes that could eliminate advantages.

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    of 19

    Generic Strategies

    Dr Rajesh Tripathi
    Types of Business Level
    Strategies
    • Cost-Leadership
    • Differentiation
    • Focus
    • Cost Focus
    • Differentiation Focus
    Porter’s Three Generic Business Strategies

    Cost Differentiation
    Broad Leadership
    Target

    Competitive
    Scope

    Cost Focus Differentiation


    Narrow Focus
    Target

    Cost Efficiency Preferred Product/Service 3


    Cost Leadership

    • Accurate Demand Forecasting and


    High Capacity Utilization

    • Economies of Scale

    • Technological Advances

    • Learning/Experience Effects

    4
    Typical Learning/Experience
    Curve

    unit
    cost

    total cumulative output 5


    • Target and Condition for Low-cost
    strategy
    • Price sensitive markets…price conscious buyers
    • Segments with limited incomes
    • Price sensitive customers in greater numbers thereby
    • increasing profits (although thin profit margins)
    • Extreme price competitive markets
    • Products are essentially the same
    • Where brand differences are inconsequential to the
    consumer
    • When substitutes are readily available
    • Good strategy for new entrants
    Differentiation

    Create Value Through Uniqueness


    Superior Quality
    Innovations and Research
    Speed and Flexibility
    Reputation and Brand Name
    Creative advertising
    Customers Must Be Willing to Pay More for Uniqueness
    Prestige or brand image
    Features
    Customer service
    Dealer network
    7
    Conditions and Target for
    Differentiation Strategy
    • Customer service
    • Unique tangible and intangible attributes
    • Special order availability
    • Continuous product improvement and innovation (design and
    features)
    • Uninterrupted product availability
    • Value enhancement through efficient marketing channels
    • Coordination with suppliers
    • Marketing intensity
    • Make it more difficult for a competitor to copy it
    • Employee skill and knowledge of the product
    • Continuous improvement in organization
    Best Cost
    • Combination of Cost Leadership and Differentiation
    • May Actually Be the Dominant Strategy Among the
    Most Successful Companies Today
    • Either:
    The same resources/activities that allow cost
    reductions also allow differentiation. E.g.,
    automation that lowers costs and improves
    speed and service.
    Profits from cost reductions are used to invest in
    differentiating features, and vice versa.

    9
    Target for Best Cost Strategy

    • Low cost, differentiation markets (a hybrid)

    • Broad markets and market niches (middle ground)

    • Value conscious buyers

    • Those who shy away from cheap, low-end products and


    • expensive high-end products

    • Willing to pay a fair price for functionality and performance

    • More for the money


    Target and conditions for best
    cost strategy
    • Positioning near the middle of the market

    • Combines other basic strategies

    • Medium quality at below average price, or


    Somewhat higher quality at an average or slightly
    higher price

    • Adjust strategy for economic conditions, i.e. more


    value conscious

    • Match strategy to internal resources and capabilities


    Focus

    • Based on Differentiation or Lowest Cost


    • Key Is to Provide a Product or Service That Caters to
    a Particular Segment
    12
    Target and Conditions for
    focus strategy
    • Price conscious customers (similar to low cost
    provider strategy)

    • Well defined segments

    • Appealing to cultures and geographical


    preferences

    • Brand loyal customers

    • Appeal to broad market segments (low cost)

    • Wants and needs of narrow and unique market


    segment (niche)
    Resource and Capabilities for Business Level
    Strategies
    • Cost leadership
    • Sustained Capital Investment
    • Process engineering skills
    • Resilient manufacturing design
    • Labor supervisory skills
    • Low-cost distribution
    Resource and Capabilities for
    Business Level Strategies
    • Differentiation
    • Strong marketing abilities
    • Product engineering
    • Creative flair
    • Research
    • Reputation
    • Cooperation/relation
    Risk involved in strategies
    • Cost-leadership
    • Imitation
    • Technology change
    • Changes in cost bases
    • Differentiation proximity loss
    Risk involved in strategies
    • Differentiation
    • Imitation
    • Erosion of differentiation
    • Cost proximity loss
    Risk involved in strategies
    • Focus
    • Imitation
    • Segments erodes
    • Demand disappear
    • Emergence of broad line
    THANK YOU

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