Académique Documents
Professionnel Documents
Culture Documents
2019
Creating and After reading this chapter, you should have a good LO5.3 The pitfalls managers must avoid in striving
understanding of:
Sustaining to attain generic strategies.
LO5.1 The central role of competitive advantage in LO5.4 How firms can effectively combine the
Competitive the study of strategic management and the three generic strategies of overall cost leadership and
Advantages generic strategies: overall cost leadership, differentiation.
differentiation, and focus.
LO5.5 What factors determine the sustainability of
chapter 5 LO5.2 How the successful attainment of generic
a firm’s competitive advantage.
strategies can improve the firm’s relative power
vis-à-vis the five forces that determine an
Copyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. industry’s average profitability.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
LO5.6 The importance of considering the industry Consider . . . ▪ Business-level strategies require a choice:
life cycle to determine a firm’s business-level ▪ How to overcome the five forces and achieve
The viability of a firm’s success is driven by both
strategy and its relative emphasis on functional competitive advantage?
the internal operations of the firm and the desires
area strategies and value-creating activities.
and preferences of the market. Firms that succeed ▪ Suggestion – use Porter’s three generic
LO5.7 The need for turnaround strategies that have the appropriate resources and cost structure strategies:
enable a firm to reposition its competitive position to meet the needs of the environment. ▪ Overall cost leadership
in an industry. They also have a strategy… ▪ Differentiation
▪ Focus
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1
11.4.2019
▪ Cost leadership involves ▪ Cost leadership requires Aldi, a discount supermarket retailer, has grown from its German
base to the rest of Europe, Australia, and the United States by
▪ Aggressive construction of efficient scale facilities ▪ Learning to lower costs through experience: the replicating a simple business format.
▪ Vigorous pursuit of cost reductions from experience curve
experience ▪ With experience, unit costs of production processes
▪Aldi limits the number of products (SKUs in the grocery business)
decline as output increases in each category to ensure product turn, to ease stocking shelves,
▪ Tight cost & overhead control
▪ This strategy also requires competitive parity and to increase its power over suppliers.
▪ Cost minimization in all activities in the firm’s
▪ Being “on par” with competitors with respect to low- ▪It also sells mostly private label products to minimize cost.
value chain, such as R&D, service, sales force, &
cost, differentiation, or other strategic product ▪It has small, efficient, and simply designed stores. It offers
advertising characteristics limited services and expects customers to bring their own bags
▪ Permits cost leaders to translate cost advantages and bag their own groceries.
directly into higher profits
As a result, Aldi can offer their products at prices 40 percent
lower than competing supermarkets.
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
An overall low-cost position ▪ Too much focus on one or a few value chain
An overall low-cost position
activities.
▪ Protects a firm against ▪ Provides substantial Managers may decide to cut selling and marketing expenses
rivalry from competitors entry barriers due to but ignore manufacturing expenses.
▪ Protects the firm against economies of scale and Explore all value-chain activities.
powerful buyers cost advantages ▪ Increase in the cost of the inputs on which the
▪ Provides more flexibility ▪ Puts the firm in a advantage is based
to cope with demands favorable position with For example, consider manufacturing firms based in China
from powerful suppliers respect to substitute which rely on low labor costs.
who want to increase products The supply of workers 16 to 24 years old has peaked and will
input costs drop by a third in the next 12 years, thanks to stringent
family-planning policies that have sharply reduced China’s
population growth.
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
2
11.4.2019
▪ The strategy is imitated too easily ▪ A differentiation strategy can take many ▪ Differentiation requires:
▪ A lack of parity on differentiation forms: ▪ A level of cost parity relative to competitors
Online degree programs may offer low prices. However, ▪ Prestige or brand image (Adam’s Mark hotels, BMW ▪ Integration of multiple points along the value chain
they may not be successful unless they can offer automobiles). ▪ Superior material handling operations to minimize
instruction that is perceived as comparable to traditional ▪ Technology (Martin guitars, Marantz stereo damage
providers. Parity can be achieved on differentiation components, North Face camping equipment). ▪ Low defect rates to improve quality
dimensions such as reputation and quality and through ▪ Innovation (Medtronic medical equipment, Apple’s ▪ Accurate and responsive order processing
signaling mechanisms such as accreditation agencies. iPhones and iPads). ▪ Personal relationships with key customers
▪ Reduced flexibility ▪ Features (Cannondale mountain bikes, Honda ▪ Rapid response to customer service requests
Goldwing motorcycles).
▪ Differentiation along several different dimensions
▪ Customer service (Nordstrom department stores,
Sears lawn equipment retailing).
at once
▪ Dealer network (Lexus automobiles, Caterpillar
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
earthmoving equipment).
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Improving Competitive Position Insights from Research: Creating Insights from Research:
vis-à-vis the Five Forces Customer Loyalty Creating Customer Loyalty
5-22 5-23 5-24
▪ A differentiation advantage can be driven by a ▪ People have a need for genuine self-expression
An overall differentiation strategy customer service strategy, but this may be hard and authentic functioning
An overall differentiation strategy
to do: ▪ Requiring employees to obey rules may cause
▪ Creates higher entry ▪ Reduces buyer power ▪ Can management require employees to behave them to become “numb” to their real feelings
barriers due to because buyers lack positively toward customers? ▪ Scripted responses to customer complaints leave
customer loyalty suitable alternatives ▪ Can management use control systems to reward no opportunity for authentic response
▪ Provides higher ▪ Establishes customer positive employee-customer interactions? ▪ Resulting coping behaviors may distance
margins that enable loyalty and hence less ▪ What happens when extrinsic motivators are used? employees from customers, creating
the firm to deal with threat from ▪ Have YOU ever been told you have to be nice to dissatisfaction on both sides
supplier power substitutes customers, no matter what? How did that make ▪ So how to create customer loyalty through
you feel? genuine behaviors?
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
3
11.4.2019
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
▪ A focus strategy is based on the choice of ▪ A focus strategy has two variants: An overall focus strategy
a narrow competitive scope within an ▪ Cost focus An overall focus strategy
industry. ▪ Creates a cost advantage in its target segment ▪ Creates higher entry ▪ Reduces buyer power
▪ A firm selects a segment or group of ▪ Exploits differences in cost behavior barriers due to cost because the firm
segments (or niche) and tailors its strategy ▪ Differentiation focus leadership or provides specialized
to serve them ▪ Differentiates itself in its target market differentiation or both products or services
▪ A firm achieves competitive advantages by ▪ Exploits the special needs of buyers ▪ Can provide higher ▪ Focused niches are
dedicating itself to these segments margins that enable less vulnerable to
exclusively the firm to deal with substitutes
supplier power
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
▪ Erosion of cost advantages within the narrow ▪ Highly focused products and services are still ▪ Integration of low-cost and differentiation
segment subject to competition from new entrants & strategies makes it difficult for competitors to
from imitation duplicate or imitate strategy
For example, Dell’s pioneering direct-selling model in
the personal computer industry has been eroded by ▪ Focusers can become too focused to satisfy ▪ The goal of a combination strategy is to
rivals such as Hewlett Packard as they gain buyer needs provide unique value in an efficient manner
experience with Dell’s distribution method. Similarly, Hardware chains such as Ace and True Value are losing
other firms have seen their profit margins drop as market share to rivals such as Lowe’s and Home Depot
competitors enter their product segment. that offer a full line of home and garden equipment and
accessories.
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
4
11.4.2019
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Strategies in the
Strategies in the Growth Stage Strategies in the Maturity Stage
Introduction Stage
5-43 5-44 5-45
5
11.4.2019
C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. C opyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.