...The Discipline of Market Leaders Customer Value Model (Porter’s generic strategies with particular reference to Apple Inc) Table of contents Introduction…………………………………………………………………………………………………. Porter’s three Generic Competitive Strategies…………………………………………………………. Cost Leadership…………………………………………………………………………………………… Differentiation………………………………………………………………………………………………. Focus or Niche strategy…………………………………………………………………………………... Apple Inc……………………………………………………………………………………………………. Identification and Critical Evaluation of the Company’s Existing Strategies………………………… Apple Inc Cost leadership Strategy……………………………………………………………………… Apple Inc Differentiation Strategy………………………………………………………………………... Apple Inc Focus or Niche Strategy………………………………………………………………………. Conclusion………………………………………………………………………………………………….. References…………………………………………………………………………………………………. 1.0 Introduction A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost or differentiation. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership...
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...CHAPTER 5 THE FIVE GENERIC COMPETITIVE STRATEGIES - Which One to Employ? Copyright ®2012 The McGraw-Hill Companies, Inc. McGraw-Hill/Irwin 1. 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. 2. Gain command of the major avenues for achieving a competitive advantage based on lower costs. 3. Learn the major avenues to a competitive advantage based on differentiating a company’s product or service offering from the offerings of rivals. 4. Recognize the attributes of a best-cost provider strategy and the way in which some firms use a hybrid strategy to go about building a competitive advantage and delivering superior value to customers. 5–2 Why Do Strategies Differ? Is the firm’s market target broad or narrow? Key factors that distinguish one strategy from another Is the competitive advantage pursued linked to low costs or product differentiation? 5–3 THE FIVE GENERIC COMPETITIVE STRATEGIES Low-Cost Provider Broad Differentiation Focused Low-Cost Focused Differentiation Best-Cost Provider Striving to achieve lower overall costs than rivals on products that attract a broad spectrum of buyers. Differentiating the firm’s product offering from rivals’ with attributes that appeal to a broad spectrum of buyers. Concentrating on a narrow price-sensitive buyer segment and on costs to offer a lower-priced product. Concentrating on a narrow buyer...
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...“Outline Porter’s three generic strategies and discuss whether generic strategies can lead to sustainable competitive advantage” With many views and variations on strategy and a company’s ability to sustain competitive advantage, it seems to be generally acknowledged that Porter’s three generic strategies i.e. Low Cost, Differentiation and Focus strategies, are the most widely accepted. In my following essay I will outline these three generic strategies and discus whether or not generic strategies can lead to sustainable competitive advantage. Cost-leadership strategy, or low cost strategy allows the firm to gain competitive advantage and market share by appealing to cost-conscious consumers. They can either use a no frills approach strategy which combines an inferior product with a low price, or a low-priced strategy where they would produce a product of similar quality but sell it at a lower price. (Johnson et. al, 2009). Pursuing low product cost alone however will not sustain competitive advantage. Managers must attempt to reduce costs in other areas of the firm, such as manufacturing and distribution in order to stay ahead of their competitors. Differentiation strategies involve trying to incorporate unique features to your product or service that will allow consumers to differentiate you from your competitors. This type of strategy can be particularly useful in markets which are saturated or where consumers aren’t particularly price-sensitive. One example of...
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...2013), PP 11-17 www.iosrjournals.org Porter’s Generic Competitive Strategies Ritika Tanwar Assistant Professor Department of Commerce Dyal Singh College (M) Delhi University Abstract Generic Competitive Strategy: Basically, strategy is about two things: deciding where you want your business to go, and deciding how to get there. A more complete definition is based on competitive advantage, the object of most corporate strategy: “Competitive advantage grows out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage: cost leadership and differentiation.” Michael Porter Competitive strategies involve taking offensive or defensive actions to create a defendable position in the industry. Generic strategies can help the organization to cope with the five competitive forces in the industry and do better than other organization in the industry. Generic strategies include ‘overall cost leadership’, ‘differentiation’, and ‘focus’. Generally firms pursue only one of the above generic strategies. However some firms make an effort to pursue only one of the above generic strategies. However some firms make an effort to pursue more than one strategy at a time by bringing out a differentiated product...
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...Activity Generic e-business sell-side strategies For each of the six generic sell-side strategies, identify a good example of a company that has successfully adopted that strategy and identify examples of each strategy that have failed. Generic e-business sell-side strategies Chaffey (2009) Chapter 5, Activity 5.3 lists six generic strategies, originally coined by IDC Research. 1) Attack e-tailing. As Chaffey describes this is an aggressive competitive approach that involves frequent comparison with competitors’ prices and then matching or bettering them. The more people use price comparison sites such as ShopSmart (www.shopsmart.com) the more is it important that companies ensure their price positioning is favourable. Good examples include shopping sites such as Buy.com (www.buy.com) and Evenbetter.com (www.evenbetter.com). In those stores people can now find the prices of all comparable items in a category but also guarantee that they will beat the lowest price of any competing product. These sites have implemented real- time adjustments in prices with small increments based on price policy algorithms that are simply not possible in traditional retailing. An other example might be Lowestfare.com which is a leading provider of discount travel products and services for the leisure travel market or Sunelec.com has the lowest prices in the industry Solar & Wind Energy Distributors, Dealers, & Wholesalers. 2) Defend e-tailing This is a strategic approach...
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...The five generic competitive strategies that any industry uses are basically based on cost and product differentiation or a mix of both with a broader or focused implementation. In Cost Leadership strategy the industry focuses on producing low cost products in the existing market and tries to attract larger section of consumers by keeping relatively low price of products. On the other hand, differentiation strategy involves creating an edge over the competition by making the products and services different in a better way from that of the competitors. When we focus these any of these two strategies for a segment of product, market or consumer section it becomes the other two types of competitive strategy. The fifth category can be seen as a mix of all these strategies that is used wherever possible to get the maximum benefits for the industry, but it can be a little complex to implement effectively. When we look at the strategies that have been used by Chipotle Mexican Grill throughout, it mostly comes close to the differentiation approach. Chipotle is also a fast food chain that serves fast food that is freshly cooked for the customers shortly after the order being placed. There are many other big and small players in this category in the same market, such as McDonalds and Qdoba Mexican Grills etc., but Chipotle still remains the first choice among Mexican fast food lovers because Chipotles menu and food in that is different than that offered by the others. Chipotle strives to...
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...Cost Leadership Adopting an Effective Cost Leadership Strategy Agenda • What is Cost Leadership? • Businesses Reaping the Benefits • Examples of Successful Initiatives • New ways of Looking at Costs • Seeking Opportunity 2 What is Cost Leadership? Michael Porter identifies three generic business strategies: 3 What is Cost Leadership? Cost Leadership, is based on being the lowest cost producer in an industry, for a certain quality of product. To achieve it companies must: • • • • Improve process efficiencies Gain unique access to a source of lower cost materials Outsource appropriate functions Avoid certain costs altogether 4 Businesses Reaping the Benefits 60 of the FTSE 100 companies saw their share price increase over the past six months. Top 10 FTSE 100 Risers Share price increase over 6mths (%) 100 90 80 70 60 50 40 30 20 10 0 FTSE 100 Companies 5 Businesses Reaping the Benefits By offering relatively inexpensive food and hotel prices, Whitbread has managed to continue its expansion and saw its share value rise by more than a quarter in the past year. • Whitbread has focused on improving procurement practices, menu management and labour scheduling. • Andy Harrison, CEO at Whitbread, has championed the appointment of dedicated management teams, both centrally and at site level, to improve operational and cost efficiencies. • An example of approach is the company’s use of e-auctions to minimise the impact of rising commodity...
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...Porter’s Generic Strategies Porter’s notion on “stuck in the middle” or “hole in the wall” is debatable, it being mutually exclusive. It might be true in some cases but not all the time. Even beyond Porter’s generic strategies, Toyota has been operating and already proven that it’s possible to be a low cost producer of a differentiated product. It was able to achieve leadership in North America, surpassing General Motors. They continuously find ways to reduce production costs and at the same optimize its process so that it could introduce new models faster than its competitors. They’re known for their Toyota Production System (TPS) which other vehicular companies were trying to mimic. This TPS is the main reason why there’s Just-In-Time (JIT) and Lean Manufacturing system in the manufacturing industry today. Toyota used these two manufacturing methods to gain competitive advantage over competitors. In JIT, Toyota build vehicles based on immediate market demands rather than anticipation on future market demands. There’s no overstocking. This strategy results in efficiency and quality. It is mentioned above that cost leadership gains competitive advantage through efficiency while differentiation gains its competitive advantage through quality. This is a proof that cost leadership and differentiation are not mutually exclusive. And so is true with Lean Manufacturing. Its concept is eliminating those processes that will not add value (differentiation) to the product that a customer...
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...0 Critical Factors to Building Profitable Customer Loyalty … and why you have to do it, even (or especially) if the economy sucks by Sallie Burnett, Customer Insight Group So the economy is bad. You still have choices. You could slash your marketing budget across the board, cutting both profitable and unprofitable programs by an equal amount. Yes, it cuts costs - but it also makes a smaller company. Or you could stop marketing entirely - a survival technique that's the business equivalent of lying down on I-70 waiting for the next semi. Or - smart you! - you could decide to take action and stack the odds in your favor. You could decide to focus your newly limited resources on the area of greatest opportunity: your existing customers, specifically those who have high growth potential. The result is lower marketing costs and increased sales - not too shabby an outcome in any economy. If you choose to go this route, common sense, experience and statistics are on your side. According to the Customer Service Institute, it costs five times as much to attract a new customer as it does to keep an existing one satisfied. A study by Marketing Metrics found the average company has a 60-70% probability of selling again to existing customers, a 20-40% probability of successfully selling to lapsed customers - but only a 5-20% chance of selling to a prospect. Losing a customer? That's where it gets really expensive. According to studies by the Technical Assistance Research...
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...Analysis Of Porter's Generic Strategies Strategic Themes Provide product that is on-trend, differentiated, distinctive and inspired by select popular fashion trends and pop culture for all of our target customers, but with a primary focus on expressive women and expressive moms. Improve brand marketing effectiveness by implementing a “house of brands” architecture that covers all of our major customer segments and builds distinctiveness and focus in our product assortment. Provide a great shopping experience through improved customer engagement, and leveraging our real estate to support new store formats consistent with the repositioning of our brand. Maintain efficient operations by building greater speed and flexibility into the supply chain to deliver the right product to the right store at the right time in the appropriate proportions across the approximately 4,600 store network. On-Trend Targeted Product We identifies fashion trends timely and integrates these insights into on-trend product in our stores. Generic Strategy - Porter Porter’s generic strategies: low cost, differentiation, specialization. Key stakeholders & their influence. PEST model, macro environment. – Five Forces model, micro/industry environment. Porter's Five Forces Model And Three Generic Strategies Porter's Five Forces Model Porter's Five Competitive Forces model is a framework made by Michael Porter that is used by businesses when thinking about business strategy and the impact of...
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... Effectiveness of generic strategies The study of strategic management is quite stimulating. It gives a person insight in a lot of leadership and managerial roles. One such aspect I have come across is that of generic strategies. This has been quite stimulating to me as it relates to some questions I have had in the past. The question related to the effectiveness of applying human resources systems and strategies across many companies in various continents. After a long time of studying such a scenario, I concluded that having human resources systems that are used the world over would not be effective because of the diverse cultures that are found in the world. But in some field such as accounting there are standards that are applied world over. So what about generic strategies? Can these really be effective across industries, across continents and in varying business sizes and scope? This essay will answer these questions in a very simple way. The first thing to understand is what a generic strategy is. Generic strategy refers to the use of predetermined strategy, based on some basic principles and assumptions, that if applied would lead to business success. A generic strategy is an outline of what a firm must or can do so as to be successful, disrespectful of the industry or nature of business of that firm. The question is could all industries and firms be able to use prescriptions of a generic strategy and be successful. Examples of generic strategies include those that...
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...Service…………………………………………. | 5 | Buyer Power…………………………………………………………………………. | 6 | Supplier Power………………………………………………………………………. | 7 | Rivalry Among Existing Competitors………………………………………………. | 7 | The Threat of New Entrants………………………………………………………… | 8 | Cost Leadership Generic Strategy…………………………………………………… | 8 | Differential Generic Strategy………………………………………………………… | 9 | Focus Generic Theory……………………………………………………………….. | 9 | Ebusiness……………………………………………………………………………………. | 10 | Conclusion…………………………………………………………………………………... | 11 | References…………………………………………………………………………………… | 12 | Abstract The purpose of this paper is to discuss business decisions and business strategies to gain competitive advantage based on Michael Porter’s Five Force Model and Porter’s Three Generic Strategies. The Five Force Model are buyer power, supplier power, threat of new entrants, threats of substitutes of products and services and rivalry among existing competitors. Further discussion includes determining which Porter’s Three Generic Strategies to use to rebuild a failing eatery located downtown called Broadway Café. The Three Generic Strategies are Cost Leadership Generic Strategy, Differential Generic Strategy and Focus Generic Strategy. I will also discuss how ebusiness can help the Broadway Café achieve a competitive advantage. Focus of ebusiness will be marketing, finance, accounting, sales, customer service and human resources....
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...Michael Porter Michael Eugene Porter who was born on May 23 in 1947. He comes from Michigan. He is the Professor of Bishop William Lawrence University at The Institute for Strategy and Competitiveness, based inside Harvard Business School. He is a leading authority on competitive strategy and the competitiveness. Michael Porter's work is recognized in many governments, corporations and academic circles globally. Michael Porter's core field is competition and company strategy. He is mainly recognized as one of the intellectual leaders in his modern strategy field and his ideologies and theories are taught in practically every business school throughout the world. His work has also re-defined thinking about concepts such as competitiveness, economic development, economically distressed urban communities, environmental policy, and the role of corporations in society. His main academic objectives focus on how a firm or a region can build a competitive advantage and develop competitive strategy; the competitiveness of nations, regions and cities; and solutions to social problems. Porter has his 3 Generic strategies, which describe how a company pursues competitive advantage across a chosen market scope. These three generic strategies are, either lower cost, differentiated, or focus. Cost leadership, product differentiation, and focus are based on choices regarding competitive scope and competitive advantage. Firms position themselves by leveraging their strengths. Michael...
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...clinic and achievement of this objective will require an analysis of alternatives including value disciplines, generic strategy and grand strategy. At the close of the evaluation, a recommendation will be made pertaining to the strategy the organization should implement. Value Discipline Value disciplines are an alternative to generic strategies which is based on the notion that market leaders have realized their top position by focusing on one of three core disciplines: operational excellence, customer intimacy, and product differentiation (Pearce & Robinson, 2011). RIA Endovascular excels at customer intimacy. Each patient receives personalized services, treatment planning, and follow-up care according to their condition and expected results. Customer intimacy is more than just good customer service; it is an emotional connection with the customers or patients. RIA can also use this value discipline more consistently with all of the clinic customers, including the referring physicians. Implementing this level of service with referring physicians will lead to opportunities to cross-sell other clinic procedures. Physicians that already refer patients for treatment of venous disease will appreciate the level of care provided to their patients and will refer patients for other conditions that can be treated in the clinic versus a competitor. Generic Strategies Achieving a competitive advantage in the region will involve...
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...Chapter # 5 Building Competitive Advantage Through Business-Level Strategy Business Level Strategy Is the objective of developing a firm specific business model that will allow a company to gain a competitive advantage over its rivals in a market or industry. The way that strategic managers define their company’s business is the first step in crafting business level strategy. Customer Needs and Product Differentiation Customer needs are desired, wants or cravings that can be satisfied by means of the attributes or characteristics of a product a good or service. Two factors determine which product a customer chooses to satisfy these needs: The price of the product and the way a product is diffetentiated from other products of its type. Product differentiation is the process of designing products to satisfy customers needs. A company obtains a competitive advantage when it creates, designs, and supplies a product in a way that better satisfies customer needs than its rivals do and chooses the correct pricing option the one that results in the level of demand that optimizes profitability. Customer Groups and Market Segmentation Market Segmentation is the way a company decides to group customers, based on important differences in their needs or preferences, in order to gain a competitive advantage. One principal way of grouping customers and segmenting the market is by what customers are able and willing to pay for a particular product, the other principal method of segmenting...
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