Chapter 5 - The five generic competitive strategies: Which one to employ? In this chapter you will learn: Understand what distinguishes each of the five generic strategies and why some of these strategies work better in certain kinds of industry and competitive conditions than in others, gain command of the major avenues for achieving a competitive advantage based on lower costs, learn the major avenues to a competitive advantage based on differentiating a company's product or service offering from the offerings of rivals. | CHAPTER 5 THE FIVE GENERIC COMPETITIVE STRATEGIES: WHICH ONE TO EMPLOY? STUDENT VERSION THE FIVE GENERIC COMPETITIVE STRATEGIES Low-Cost Provider Striving to achieve lower overall costs than rivals on products that attract a broad spectrum of buyers. Broad Differentiation Differentiating the firm’s product offering from rivals’ with attributes that appeal to a broad spectrum of buyers. Focused Low-Cost Concentrating on a narrow price-sensitive buyer segment and on costs to offer a lower-priced product. Focused Differentiation Concentrating on a narrow buyer segment by meeting specific tastes and requirements of niche members Best-Cost Provider Giving customers more value for the money by offering upscale product attributes at a lower cost than rivals LOW-COST PROVIDER STRATEGIES Effective Low-Cost Approaches: Pursue cost-savings that are difficult imitate. Avoid reducing product quality to unacceptable levels. Competitive Advantages and Risks: Greater total profits and increased market share gained from underpricing competitors. Larger profit margins when selling products at prices comparable to and competitive with rivals. Low pricing does not attract enough new buyers. Rival’s retaliatory price cutting set off a price war. 5–3 COST-EFFICIENT MANAGEMENT OF VALUE CHAIN ACTIVITIES Cost Driver Is a factor with a strong influence on a firm’s costs. Can be asset- or activity-based. Securing a Cost Advantage: Use lower-cost inputs and hold minimal assets Offer only “essential” product features or services Offer only limited product lines Use low-cost distribution channels Use the most economical delivery methods 5–4 THE KEYS TO BEING A SUCCESSFUL LOW-COST PROVIDER Success in achieving a low-cost edge over rivals comes from out-managing rivals in finding ways to perform value chain activities faster, more accurately, and more cost-effectively by: Spending aggressively on resources and capabilities that promise to drive costs out of the business. Carefully estimating . | CHAPTER 5 THE FIVE GENERIC COMPETITIVE STRATEGIES: WHICH ONE TO EMPLOY? STUDENT VERSION THE FIVE GENERIC COMPETITIVE STRATEGIES Low-Cost Provider Striving to achieve lower overall costs than rivals on products that attract a broad spectrum of buyers. Broad Differentiation Differentiating the firm’s product offering from rivals’ with attributes that appeal to a broad spectrum of buyers. Focused Low-Cost Concentrating on a narrow price-sensitive buyer segment and on costs to offer a lower-priced product. Focused Differentiation Concentrating on a narrow buyer segment by meeting specific tastes and requirements of niche members Best-Cost Provider Giving customers more value for the money by offering upscale product attributes at a lower cost than rivals LOW-COST PROVIDER STRATEGIES Effective Low-Cost Approaches: Pursue cost-savings that are difficult imitate. Avoid reducing product quality to unacceptable levels. Competitive Advantages and Risks: Greater total profits and increased .
