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.