Strategic positioning : Cost Advantage and Benefit Advantage
Generic Strategies
Competitive advantage cannot be reduced to a formula or an algorithm. Even if such formulas or algorithms could be concocted, describing them in a textbook such as this would make them valueless because they would be accessible to everyone. But although there is.no single formula for success, we can discern broad commonalities across industries in the different ways that firms position themselves to compete. For example, in sporting goods retailing, Sports Authority is a broad-based competitor whereas 2nd Wind Fitness specializes in" exercise equipment. To take another example, Dell computer serves a wide array of customers, including business, govern¬ment, and individual' buyers," whereas Alienware specializes in HigK-end computers for hard-core gamers.
The Strategic Logic of Cost Leadership
A firm that follows a strategy of cost leadership creates more value (i.e., B — C) than its competitors by offering products that have a lower C than those of its rivals. This can happen in three qualitatively different ways. First, the cost leader can achieve benefit parity by making products with the same B but at a lower C than its rivals. The competitive advantage achieved by low-cost producers in com¬modity markets (e.g., Mittal Steel in the global steel industry) is an example of this. Second, die cost leader can achieve benefit proximity, which involves offering a B that is not much less than those of competitors. This could occur if the low- cost firm automates processes that are better performed by hand, hires fewer skilled workers, purchases less expensive components, or maintains lower stan¬dards of quality control. Yamaha's cost advantage over traditional piano produc¬ers, such as Steinway, is a good example of this. Finally, a cost leader may offer a product that is qualitatively