CHAPTER 5
THE FIVE GENERIC COMPETITIVE
STRATEGIES: WHICH ONE TO EMPLOY?
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Focused
Low-Cost
Focused
Differentiation
Best-Cost
Provider
FIGURE 5.1
55
CORE CONCEPT
A low-cost providers basis for competitive
advantage is lower overall costs than competitors.
Successful low-cost leaders, who have the
lowest industry costs, are exceptionally good at
finding ways to drive costs out of their businesses
and still provide a product or service that buyers
find acceptable.
A cost driver is a factor that has
a strong influence on a firms costs.
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58
Low-Cost Advantage
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CORE CONCEPT
A cost driver is a factor that has a strong
influence on a companys costs.
510
COST-EFFICIENT MANAGEMENT
OF VALUE CHAIN ACTIVITIES
Cost Driver
FIGURE 5.2
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COST-CUTTING METHODS
514
Streamline operations by eliminating low valueadded or unnecessary work steps and activities.
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518
519
521
522
523
Advantages of Differentiation:
CORE CONCEPT
Differentiation enhances profitability whenever
a companys product can command a
sufficiently higher price or produce sufficiently
greater unit sales to more than cover the
added costs of achieving the differentiation
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CORE CONCEPTS
The essence of a broad differentiation
strategy is to offer unique product attributes
that a wide range of buyers find appealing and
worth paying for.
A uniqueness driver is a factor that can have
a strong differentiating effect.
526
COST-EFFICIENT MANAGEMENT
OF VALUE CHAIN ACTIVITIES
FIGURE 5.3
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530
1.
2.
3.
4.
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532
SUCCESSFUL APPROACHES
TO SUSTAINABLE DIFFERENTIATION
Company reputation
WHEN A DIFFERENTIATION
STRATEGY WORKS BEST
Market Circumstances
Favoring Differentiation
Diversity of
buyer needs
and uses for
the product
Rapid change
in technology and
product
features
534
Focused
Low-Cost
Strategy
Focused
Market Niche
Strategy
536
537
538
540
BEST-COST PROVIDER
STRATEGIES
Differentiation:
Providing desired quality/
features/performance/
service attributes
Best-Cost Provider
Hybrid Approach
Value-Conscious Buyer
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CORE CONCEPT
Best-cost provider strategies are a hybrid of
low-cost provider and differentiation strategies
that aim at providing desired quality/features/
performance/service attributes while beating
rivals on price.
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Best-Cost
Provider
Strategy
High-End
Differentiators
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TABLE 5.1
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TABLE 5.1 Distinguishing Features of the Five Generic Competitive Strategies (contd)
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SUCCESSFUL COMPETITIVE
STRATEGIES ARE RESOURCE-BASED
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550