chapter 5 : GENERiC STRATEGiES

assalamualaikum w.b.t :D
long time no post.hehe..i'm so sorry for the late entry for this chapter.

5 generic strategies are consist of:

1)LOW-COST PROVIDER 

2)BROAD DIFFERENTIATION

3)FOCUSED LOW-COST 

4)FOCUSED DIFFERENTIATION 

5)BEST-COST PROVIDER 

LOW-COST PROVIDER

- striving to achieve lower overall costs than rivals on product that attract a broad spectrum of buyers.

Low-cost leader can be said as successful when he/she has the lowest industry costs, good at finding ways to drive costs out of his/her business and still provide a product that buyers find acceptable.

how to gain it??

1) perform value chain activities more cost-effectively than rivals.

2) revamp the firm's overall value chain to eliminate or bypass cost-producing activities.

COST DRIVER is a factor with a string influence on a firm's costs and it can be asset or activity-based.

the ways to secure a cost advantage:

• use lower-cost inputs and hold minimal assets.
• offer only "essential" product features or services.
• offer only limited product lines.
• use low-cost distribution channels.
• use the most economical delivery methods.

the keys to being a successful low-cost provider:

• spending aggressively on resources and capabilities that promise to drive costs out of the business.
• carefully estimating the cost savings of new technologies before investing in them.
• constantly reviewing cost-saving resources to ensure they remain competitively superior.

when a low-cost provider strategy works best:

• price competition among rival sellers is vigorous.
• identical products are available from many sellers.
• there are few ways to differentiate industry products.
• most buyers use the product in the same ways.
• buyers incur low costs in switching among sellers.

example:

BROAD DIFFERENTIATION 

 - differentiating the firm's product offering from rivals' with attributes that appeal to a broad spectrum of buyers. It will enhances profitability whenever a company's product can command a sufficiently higher price or produce sufficiently greater unit sales to more than cover the added cost of achieving the differentiation. This strategy is to offer unique product attributes that a wide range of buyers find appealing and worth paying for.

Effective approaches:

• carefully study buyer needs and behaviors,values and willingness to pay for a unique product or service.
• incorporate features that both appeal to buyers and create a sustainably distinctive product offering.
• use higher prices to recoup differentiation costs.

Advantages:

• command premium prices for the firm's products.
• increased unit sales due to attractive differentiation.
• brand loyalty that bonds buyers to the firm's products.

"offering customers something that rivals cannot"
(delivering superior value)

1. incorporate product attributes and user features that lower the buyer's overall costs of using the firm's product.
2. incorporate tangible features (e.g;styling) that increase customer satisfaction with the product.
3. incorporate intangible features (e.g;buyer image) that enhance buyer satisfaction in noneconomic ways.
4. signal the value of the firm's product (e.g; price, packaging,advertisement) offering to buyers.

successful approaches to sustainable differentiation:

difficult for rivals to duplicate or imitate:

• company reputation
• long-standing relationships with buyers.
• unique product or service image.

creates switching costs that lock in buyers:

• patent-protected product innovation.
• relationship-based customer service

example:

FOCUS(NICHE)  STRATEGY

1. FOCUSED LOW-COST - concentrating on a narrow price-sensitive buyer segment and on costs to offer a lower-priced product.
2. FOCUSED DIFFERENTIATION - concentrating on a narrow buyer segment by meeting specific tastes and requirements of niche members.

These strategies are attractive when:

• the target niche is big enough to be profitable and offers good growth potential.
• industry leaders chose not to compete in the niche- focusers avoid competing against strong competitors.
• the industry has many different niches and segments.
• rivals have little or no interest in the target segment.

The risks:

• competitors will find ways to match the focused firm's capabilities in serving the target niche.
• the specialized preferences and needs of niche members to shift over time toward the product attributes desired by the majority of buyers.
• as attractiveness of the segment increases, it draws in more competitors, intensifying rivalry and splintering segment profits.

example:

BEST-COST PROVIDER

- giving customers more value for the money by offering upscale product attributes at a lower cost than rivals.This strategy also is a hybrid of low-cost provider and differentiation strategies that aim at providing desired quality/ features/ performance/ service attributes while beating rivals on price.

This strategy works best when:

• product differentiation is the market norm.
• there are a large number of value-conscious buyers who prefer midrange products.
• there is competitive space near the middle of the market for a competitor with either a medium-quality product at a below-average price or high-quality product at an average or slightly higher price.
• economic conditions have caused more buyers to become value-conscious.

summary:

1. positions the firm differently in its market.
2. establishes a central theme for how the firm intends to outcompete rivals.
3. creates boundaries or guidelines for strategic change as market circumstances unfold.
4. entails different ways and means of maintaining the basic strategy.

"if you cannot get it easily because you find it difficult,

then use the difficult way to find out how to make it easy for you to get it"

see you for the next entry. salam and smile for you:)