5. Five basic competitive strategy options
Terms in this set (28)
What do all basic strategies involve?
strive to deliver superior value to customers compared to the offerings of rival seller
How do you deliver superior value?
perform value chain activities differently than ricals and build competencies and resource capabilities that ricals cannot readily match
what is a competitive strategy?
specifics of managements game plan for competing successfully, please customers, offensive and defensive moves to counter the maneuvers of rivals, responses to shifting matket conditions, and initiatives to strengthen the copanys market position and achieve a particular kind of competitve advantage
what are the two biggest factors that distinguish one competitve strategy fromanother?
1. a companys market target is broad or narrow
2. the company is pursuing a competitve advantage linked to lower costs or differentiation
what are the five competitve strategy options from staking our amarket position, operating the business, and delivering superior value to buyers?
1. a low costs provider strategy
2. broad differentiation strategy
3. focused (niche) strategy based on low costs
4. focused strategy based on differentiation
5. best cost provider strategy
What is a low cost provider strategy?
striving to achieve lower overall costs than ricals and then using the low cost advantage to attrat a broad spectrum of buyers with a lower priced product offering
what is a broad differentiation strategy?
seeking to differentiate the companys product offering from rivals in wwats that will appeal to a broad spectrum of buyers
what is a focused strategy based on low costs?
concentrating on a narrow buyer segment and outcompeting rivals by having lower costs and this being in position to win buyer favor by means of a lower priced product offering
what is a focused strategy based on differentiation?
concentrating on a narrow buyer segment and outcompeting rivals with a product offering that meets hte specific tastes and requirements of nice members better than the rivals (products)
what is abest cost provider strategy?
striving to achieve a competitive advantage over rivals by developing the capability to incorporate upscale product attributes at a lower cost than rvals, it allos a compay to give customers more value for their money by underpricing rivals whose products have similar upscale attributes, its a hybrid strategy that blends elements of all previous strategies in a unique and efective way
when is a low cost provider psoition powerful?
in markets with many price sensitive buyers
how do you achieve low cost leadership?
when it becomes the industrys lowest cost provider rather than just being one of perhaps several competitors with comparatively low costs
how to you achieve maximum effectiveness from low cost leadership?
pursue cost saving approaches and have cost reducing capabiliteis that are difficult for rivals to compy
How do you translate low cost advantage over rivals into attractive profit perofrmance?
1. buy using lower cost edge to underprice competitors and attract price sensitive buyers in great enough numbers to increase total profits
2. by refraing from using price custs to steal sales and market share away from rivals, and charging a price roughly equal to those of other low priced competetion, which enables the company to earn a bigger profit margin per unit sold
how can low cost strategy back fire?
If the competitiion responds with price cuts of their own
How to you achieve a low cost edge over rivals?
1. do a better job than rivals of performing value chain activities more cost effectively
2. revamp the firm;s overall value chain to eliminate or bypass some cost producing actvities
How can a company do a more cost efficient job of managing its value chain than rivals?
1. striving to capture all avaiable economies of scale
2. taking full advantage of experience and learning curve effects
3. trying to operate facilities at full capacity
4. pursuing efforts to boost sales volumes and this spread outlays for R&D, advertising, and general administration out over more units
5. Improving supply chain efficiency
6. substituting the use of low cost for high raw materials or component parts whenever there;s kittle or no sacfirice in product quality or product performance
7. improving product deign and employing cost saving production techniques
8. Using online systems and sophisticated software to achieve operating effciencies
9. pursuing ways to reduce workforce size and lower overall compensation costs
10. using the company's bargaining power via suppliers to gain concession
11. being alert to cost advantges of outsourcing and vertical integration
How do you capture all economies of scale?
stem froman ability to lower unit costs by increasing teh svale of operation, use common partsand components in different models and or by curring back on the number of models offered, then scheduling longer production runs for fewer models. In global industries sell a standard product world wide
How do you take full advantage of experience and learning curve effects?
debugging and mastering newly introduce technologies, using the experiences and suggestions of workers to install more efficient plany layouts and asembly procedures, and the added speed and effectiveness that accrues from repeatedly picking sites for and building new plants, retail outlets, or distribution centers
How do you operate facilities at full capacity?
the more capital intensive the business or the higher the percentage of fixed costs as a percentage of total costs the greater the unit costs penalty for operting at less than full capacity
How do you pursue efforts to boost sales volumes and this spread ourlays for R&D , advertising, and general administration out over more units?
the more units a company sells teh more it lowers cost perunits for such expenses as new product development, sales promotion campaigns, and administrative support activities
How do you improve supply chain efficiency?
partner with suppliers to reduce inventory carrying costs via JIT inventory practices, to economize on shippong and materials handeling, and to ferret out other cost sabing opportunities
how do you substitute the use of low cost for high cost raw materials with out sacrificing performance?
swith to lower cost items, or desing them inhouse
how do you improve product design and employ cost saving production techniques?
search for ways to redisgn parts and components, utilize design for manufacture procedures and computer assisted design (CAD) techniques that enable more integrated and efficient production methods. Use total qualirt management systems, business process reengineering, six sigma methodology, business process management techniques
How do you use online systems and software to achieve operating efficiencies?
share data and production schedules with suppliers, couple with the use of enterprise resource planning (ERP) and manufacturing execution ststem (MES) software, can reduce parts inventories, trim production times, and lower labor requirements
How do you pursue ways to reduce workforce size and lower overall compensation costs?
install labor saving technology, shifting production from geographic areas where pay scales are high to geographic areas where tehy are lo, use incentive compensation ststems avoid the use of union labor where possible
How do you use the companys barganing power via suppliers to gain concessions?
get barganing power
How can you be alert to the cost advantages of outsourcing and vertical integration?
Needs to be much lower cost, integrate into the activities of either suppliers or distribution channel allies
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