List
and discuss the three competitive strategies, according to Michael Porter.
Include specific examples of companies that pursue each of the three
competitive strategies.
Answer
a. Cost leadership strategy—when an
organization sets out to be the lowest-cost producer in its industry, it’s
following a cost leadership strategy. A low-cost leader aggressively searches
out efficiencies in production, marketing, and other areas of operation.
Overhead is kept to a minimum, and the firm does everything it can to cut costs.
For example, at Wal-Mart’s headquarters in Bentonville, Arkansas, office
furnishings are sparse and drab, but functional. Although low-cost leaders
don’t place a lot of emphasis on “frills,” the product or service being sold
must be perceived as comparable in quality to that offered by rivals or at
least be acceptable to buyers. Examples of companies that have used the
low-cost leader strategy include Wal-Mart, Hyundai, and Southwest Airlines.
b. Differentiation strategy—the company that
seeks to offer unique products, which are widely valued by customers is
following a differentiation strategy. Sources of differentiation might be
exceptionally high quality, extraordinary service, innovative design,
technological capability, or an unusually positive brand image. The key to this
competitive strategy is that whatever product or service attribute is chosen
for differentiation must set the firm apart from its competitors and be
significant enough to justify a price premium that exceeds the cost of differentiation.
Practically any successful product or service can be identified as an example
of the differentiation strategy: Nordstrom (customer service), Sony (reputation
for quality and innovative design), Coach handbags (design and brand image),
and Kimberly-Clark’s Huggies Pull-Ups (product design)
.
c. Focus strategy—the aim of the focus
strategy is at a cost advantage or a differentiation advantage in a narrow
segment. That is, managers select a market segment or group of segments in an
industry and don’t attempt to serve the broad market. The goal of a focus
strategy is to exploit a narrow segment of a market. These segments can be
based on product variety, type of end buyer, distribution channel, or
geographical location of buyers. Research suggests that the focus strategy may
be the most effective choice for small businesses because they typically do not
have the economies of scale or internal resources to successfully pursue one of
the other two strategies.
Source: Management,
11e (Robbins/Coulter)
No comments:
Post a Comment