In: Finance
Competing in the marketplace on the basis of a competitive advantage:
a) involves either giving buyers what they perceive as superior value compared to the offerings of rival sellers or giving buyers the same value as others at a lower cost to the firm
b) provides the basis for a longer, sustainable growth
c) gives buyers an immediate preference for a company's products or services over those of competitors and enables the company to dominate its competitors.
d) deals with how management plans to maximize profits while, at the same time, operating in a socially responsible manner that keeps the company's prices as low as possible.
e) means that a company has to offer the lowest price for differentiated goods that at least match the feature and performance of higher-priced rival brands.
All the 5 cases mentioned above are about five generic competitive strategies.
THE FIVE
GENERIC
COMPETITIVE
STRATEGIES
There are countless variations in the competitive strategies that
companies employ, mainly because each company's strategic approach
entails custom-designed action to fit its own circumstances and
industry environment. The custom-tailored nature of each company's
strategy makes the chances remote that any two companies-even
companies in the same industry-will employ strategies that are
exactly alike in every detail. Managers at different companies
always have a slightly different spin on future market conditions
and how to best align their company's strategy with these
conditions; moreover, they have different notions of how they
intend to outmaneuver rivals and what strategic options make the
most sense for their particular company.
However, when one strips away the details to get at the real
substance, the biggest and most important differences among
competitive strategies boil down to (I) whether a
company's market target is broad or narrow, and (2) whether the
company is pursuin a competitive advantage linked to low costs or
product differentiation. Five distinct competitive strategy
approaches stand out:
1. A low-cost provider strategy-striving to achieve lower overall
costs than rival and appealing to a broad spectrum of customers,
usually by underpricing rivals.
2. A broad differentiation strategy-seeking to differentiate the
company's product offering from rivals' in ways that will appeal to
a broad spectrum of buyers.
3. A best-cost provider strategy-giving customers more value for
their money by incorporating good-to-excellent product attributes
at a lower cost than rivals; the target is to have the lowest
(best) costs and prices compared to rivals offering products with
comparable attributes.
4. A focused (or market niche) strategy based on low
costs--concentrating on a narrow buyer segment and outcompeting
rivals by having lower costs than rivals and thus being able to
serve niche members at a lower price.
5. A focused (or market niche) strategy based on
differentiation-concentrating on a narrow buyer segment and
outcompeting rivals by offering niche members customized attributes
that meet their tastes and requirements better than rivals'
products.