Lecture Essentials of strategic management: The quest for competitive advantage (4e) - Chapter 5

Chapter 5 - The five generic competitive strategies. The main goals of this chapter are to: 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, learn the major avenues for achieving a competitive advantage based on lower costs,. | Student Version 1 Competitive Strategies and Market Positioning Competitive Strategy Deals exclusively with management’s game plan for competing successfully and securing a competitive advantage over rivals Represents the firm’s specific efforts to provide superior value to customers by offering: An equally good product at a lower price A superior product with unique features perceived as worth paying more for An attractive overall mix of price, features, quality, service, and other appealing attributes 2 The Five Generic Competitive Strategies Low-cost provider Striving to achieve lower overall costs than rivals and appealing to a broad spectrum of customers, usually by underpricing rivals Broad differentiation Seeking to differentiate the firm’s product or service from rivals’ in ways that will appeal to a broad spectrum of buyers Focused low-cost Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs than rivals and thus being able to serve niche members at a lower price Focused differentiation Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals’ products Best-cost provider Giving customers more value for the money by satisfying buyers’ expectations on key quality/features/performance/service attributes while beating their price expectations Low-Cost Provider Strategies A powerful competitive approach with price-sensitive buyers when a firm’s offering: Has a lower cost than rivals—but not necessarily the absolutely lowest possible cost. Includes features and services that buyers consider essential. Is viewed by buyers as offering equivalent or higher value even if priced lower than competing products. 4 4 Translating a Low Cost Strategy Into Attractive Profit Performance Option 1 Use a lower-cost edge to underprice competitors and attract price-sensitive buyers in great | Student Version 1 Competitive Strategies and Market Positioning Competitive Strategy Deals exclusively with management’s game plan for competing successfully and securing a competitive advantage over rivals Represents the firm’s specific efforts to provide superior value to customers by offering: An equally good product at a lower price A superior product with unique features perceived as worth paying more for An attractive overall mix of price, features, quality, service, and other appealing attributes 2 The Five Generic Competitive Strategies Low-cost provider Striving to achieve lower overall costs than rivals and appealing to a broad spectrum of customers, usually by underpricing rivals Broad differentiation Seeking to differentiate the firm’s product or service from rivals’ in ways that will appeal to a broad spectrum of buyers Focused low-cost Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs than rivals and thus being

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