CHAPTER 5 : THE FIVE GENERIC COMPETITIVE STRATEGIES

·        There are two factors that  give rise to five competitive strategy options:

                                i.            A low-cost provider strategy

                              ii.            A broad differentiation strategy

                            iii.            A focused low-cost strategy

                           iv.            A focused differentiation strategy

                             v.            A best-cost provider strategy

-   - A low cost provider’s basis for competitiveness advantage is lower overall costs than competitors.Successful low-costs leaders, who have the lowest industry costs, are exceptionally good at finding ways to drive costs out of their business and still provide a product or services that buyers find acceptable.

·     -    A low cost advantages over rivals can translate into better profitabillity than rivals attain

·     -    A costs driver is a factor that has a strong influence on a company’s costs.

·       -  The keys to driving down company costs :

1.         i.            Incentive system and culture
2.       ii.            Economies of scale
3.     iii.            Learning experience
4.    iv.            Capacity  utilization
5.      v.            Supply chain efficiency
6.    vi.            Input costs
7.  vii.            Production technology and design
8. viii.            Communication systems and information technology
9.     ix.            Bargaining power
10.       x.            Outsourcing vertical integration

·       -  A low-costs provider is in the best position to win the business of price-sensitive buyers, set the floor on market place, and still earn the profit

·       -  Reducing price does not lead to higher total profits unless the added gains in units sales are large enough to bring in a bigger total profit despite lower margins per unit sold.

·       -  A low-cost provider’s product offering must always contain enough attributes to be attractive to prospective buyers-low price , by itself , is not always appealing to buyers.

·     -    A uniqueness driver is a factor that can have a strong differentiating effect

·     -    Differentiation can be based on tangible or intangible attributes

·     -    Easy-to-copy differentiating features cannot produce sustainable competitive advantages

·      -   Any differentiating feature that works well is a magnet for imitators

·      -   Over differentiating  and over changing are fatal strategy mistakes

·       -  Best costs provider strategies are hybrid of low-costs provider and differentiation strategies that aim at providing desired quality/features/performance/service attributes while beating rivals on price

·        - A company’s competitive strategy should be well-matched to its internal situation and predicted on leveraging its collection of competitively valuable resources and capabilities.

CHAPTER 4 : EVALUATING A COMPANY’S RESOURCES, CAPABILITIES, AND COMPETITIVENESS

    The three best indicators of how well a company’s  strategy is working are :

                                i.            Whether the company is achieving its stated a financial and strategic objectives

                              ii.            Whether its financial performance is above the industry average.

                            iii.            Whether its gaining customers and increasing market share.

    Do the company’s resources and capabilities have sufficient competitive power to give it a suitanable advantage over competitors?

Ø By conduct the 4 test of a resources’s competitive power – the VRIN test.

Ø The firm have a competitive advantages over market rivals when its has resources and capabilities that are competitively valuable and rare.

    How the company be able to seize market oppurtunities and overcome the external threats to its future well-being ?

Ø By perform a SWOT analysis . SWOT analysis have two most important part which is : 1) drawing conclusion about strengths, weakness, oppurtunities and threats. 2) acting on conclusion to better match the company.s strategy to its internal strengths and market oppurtunities, to correct the important internal weakness, and to defend against external threats.

    The higher company’s costs the above those of close rivals, the more competitively vulnareable it becomes.

    The greater the amount of customer value that a company can offer profitability relative to close rivals, the less competitively vulnerable it becomes.

    A company value chain identifies the primary activities and related support activities that create customer value.

    A company’s costs competitiveness depends not only on the costs of internally performed activities but also on costs in the value chains of its suppliers and distribution channel allies

    Benchmarking is a potent tool for improving a company’s own internal activities that is based on learning how other companies perform them and borrowing their ‘ best practices ‘

    Benchmarking also the costs of companies activities against rivals provides hard avidence of whether a company is cost competitive.

    Performing   value-chain activities with capabilities that permit the company to either outmatch rivals on differentiation or beat them on costs will give the company a competitive advantages.

    Height-weighted competitive strength ratings signal  a strong competitive position and possession of competitive advantages; low ratings signal a weak position and competitive disadvantages.

    A company competitive strength scores pinpoint its strengths and weakness against rivals and point directly to the kinds of offensive/defensive actions it can use to exploit its competitive strengths and reduce its competitive vulnerabilities

    Zeroing in on the strategic issues a company faces and compiling a list of problems and roadblocks creates a strategic agenda of problems that merit prompt managerial attention.

    A good strategies must contain way to deal  with all the strategic issues and obstacles that stand in the way of the company’s financial and competitive success in the years ahead.

CHAPTER 3 : EVALUATING A COMPANY’S EXTERNAL EVALUATION

    The macro-environment encompasses the broad environmental context in which a company’s industry is situated

•         There are some strategically relevant factor in the micro-environment. To understanding how a company situated in its external environment we must first doing this first step which is  identifying which of the factors is strategically relevant.
•     PESTEL analysis is one of the tool that provides a framework for approaching this issue systemically. PESTEL analysis focused on the six principal components of strategic significancein the macro-environment. There are political, Economic,Social,Technological,Environmental and Legal forces.

    How strong are the industry’s competitive forces ?

•        There are 5 competitive forces that we must know which is :

                                                        i.            Competition from rival sellers

                                                      ii.            Competition from potential new entries

                                                    iii.            Competiton from producers of substitute products

                                                   iv.            Supplier bargaining power

                                                     v.            Customer bargaining power

•    The nature and the strength of the competitive pressure have to be examined forces by force, and their collective strength must be evaluated.One strong force however, can be sufficient to keep average industry profitability low. Working through the 5 model aids strategy makers in assessing how to insulate the company from the strongest forces, identify attractive arenas for expansion, or alter the competitive conditions so that they offer more favorable prospects for profitiablity.

    Factos that driving changes in industry :

                                i.            Changes in the longterm industry growth rate

                              ii.            Increasing globalization

                            iii.            Internet –related developments

                           iv.            Changing buyer behavior

                             v.            Technological changing

                           vi.            Manufacturing process innovation, product and marketing innovation

                         vii.            Entry or exit of major firms

                       viii.            Diffusion of know-how

                            ix.            Efficiency improvements in adjacent markets

                              x.            Reductions in uncertainty and business risk

                            xi.            Regulatory and government policy changes

                          xii.            Changing societal factors.

    The key factors for competitive success :

                                i.            Particular strategy elements

                              ii.            Product attributes

                            iii.            Operational approaches

                           iv.            Resources

                             v.            Competitive capabilities that all members must have

•         For any industries , however they can be deduced by answering three basic questions :

Ø  On what basis do buyers of the industry’s product choose between the competing brands of seller

Ø  What resources must a company have to be competitively successful

Ø  What shortcomings are almost certain to put a company at a significant competitive advantages

    In conclusion, diagnosis of a company’s external situation is an essential first step in crafting strategies that are well matched to industry and competitive conditions. Managers should know what questions need to pose and what analytical tool to use in answering these questions.