LECTURER Week 5 (8/10/2013)

Chapter 5: The Five Generic Competitive Strategies: Which One To Employ?

          Low-Cost Provider

A company must do a better job than rivals of cost-effectively managing value chain activities or it must find innovative ways to eliminate cost-producing activities. Low-cost provider strategies work particularly well when the products of rival sellers are virtually identical or very weakly differentiated and supplies are readily available from eager sellers. Air Asia is among one of company that use low-cost provider strategy. How Air Asia could manage to offer the cheaper airfares? It is because Air Asia not provided with luggage, potter and a passenger cannot choose seat. Air Asia has reduced the cost to pay for workers with provides the online check in and booking.

          Broad Differentiation

Seek to produce a competitive edge by incorporating attributes and features that set a company product or service offering apart from rivals in ways that buyers consider valuable and worth paying for. Successful differentiation allows a firm to command a premium price for its product, increase unit sales and gain buyer loyalty to its brand. For example, Apple’s company is a one that uses a broad differentiation strategy by targeting a range of customers from sophisticated power users to in experienced new users. The firm differentiates is on exceptional design, consistent quality, and outstanding customer service. Apple’s goal is to provide customers with the best personal computing and experience.

          Best-Cost Provider

Combine a strategic emphasis on low cost with a strategic emphasis on more than minimal quality, service, features, or performance. The aim is to create competitive advantage by giving buyers more value for the money. It is an approach that entails matching close rivals on key quality, service, features, performance attributes and beating them on the costs of incorporating such attributes into the product or service. 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.

         Focused Low-Cost And Focused Differentiation

A focus strategy delivers competitive advantage either by achieving lower costs than rivals in serving buyers comprising the target market niche or by developing specialized ability to offer niche buyers an appealingly differentiated offering than meets their needs better than rival brands. A focused strategy based on either low cost or differentiation becomes increasingly attractive when the target market is big enough to be profitable and offers good growth potential.

Deciding which generic strategy to employ is perhaps the most important strategic commitment a company makes. It tends to drive the rest of the strategic actions a company decides to undertake and it sets the whole tone for the pursuit of a competitive advantage over rivals.