Question

For each of the scenarios below, choose the strategy that you believe should be pursued to achieve the best results, and provide a brief explanation of why you believe this is the best strategy.

5 Generic Strategies

Low-Cost Provider Strategy

Broad Differentiation Strategy

Focused Low-Cost Strategy

Focused Differentiation Strategy

Best-Cost Provider Strategy

Scenarios:

1. A new waterfront development project is beginning in a medium-size city. This project will include moderate to higher-end shopping, restaurants, and hotels. Some of these businesses include: Pottery Barn, Ann Taylor,an Apple Store, Sasha’s Dress Boutique, Apostrophe, Bose, Calvin Klein, Cheesecake Factory, Capital Grille,Maggiano’s, the Marriott, and the Westin. The spaces will include a mixture of national chains, and local businesses. The project and the city have been highlighted in national papers for the expected success of the project and renewed attraction to the city. The Sully Hospitality group is determining if they want to open a boutique hotel in this area. What strategy should Sully adopt to develop the type of boutique hotel would best- fit this project? Provide a brief explanation.

2. A new shopping center is being developed – the main anchors are Wal-Mart and Home Depot. The other parcels will include smaller establishments of fast-food and other convenience category businesses.McDonald’s is interested in this project but has to determine how they would approach this location. The options are:

Put a McDonald’s Express inside the Wal-Mart

Purchase an out-parcel at the front of the project with high traffic volume and build a traditional

McDonald’s

Purchase an out-parcel at the front of the project with high traffic volume and build a McCafe

Which generic strategy should be McDonald’s use to guide this decision? Based on the generic strategy that you believe is most appropriate for this scenario, which option should McDonald’s choose? Provide a brief explanation.

3. The airline industry has seen various players attempt all of the generic strategies. Given the current state of the airline industry and the main surviving airlines, if a company wanted to get into this industry right now, which strategy would promote the best chances for success? Provide a brief explanation.

4. The top five selling brands of tablets in the world are: 5. Acer, 4. Dell, 3. Sony Vaio, 2. Lenovo, and 1. Apple. A new start-up company wants to break into the tablet market; what generic strategy should they adopt? Provide a brief explanation.

Answer 1

1. For the new waterfront development, it would be best to follow a Focused Differentiation Strategy as the plan is to open boutique hotel which will have a service customized to the tastes of its customers. Since this project will include moderate to high end restaurants and hotels, a cost based strategy is not likely to work. Also since there is a lot of offerings in the place, so a focused differentiation has better chance of success than a broad differentiation, which would seem a “me too” policy.

2. McDonald’s should opt for a Best Cost provider strategy by ensuring that customers get the most value in a McDonald’s outlet as compared to other fast food establishments. It should strive for lower costs and prices as compared to its competitors and ensure comparable or better quality. So the preferred option is to go for out-parcel at the front of the project with high traffic volume and build a traditional McDonald’s. This will ensure that customers perceive greater quality which comes from McDonald’s brand and at lesser price due to economies of scale.

3. A low cost provider strategy would seem fit for a new entrant in the airline business. This would involve emulating the strategy of successful incumbents such as South West Airlines by keeping overall costs low and appealing to a wide range of customers.

4. In the tablet industry, the sales of the product would increase based on the network effect. That is the new entrant has to quickly get the attention of a critical customer base and as such has to apply to a large segment of potential customers. It should follow a broad differentiation policy by keeping a tangible difference in the tablet design or product specifications to appeal to a large range of customers.