Week 5 : Strategic Management

For this week lecture,we have been learnt to 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.Competitive strategy relates to all the different strategies a company may do to which are gain a competitive advantage, retain existing market  share, capture new market share, identify and access new market opportunities, satisfy wants and needs, provide superior value in a product or service, position and differentiate the product, optimize manipulation of the marketing mix and also achieve its goals in the competitive market place.Broad factors that distinguish one competitive strategy from another by two factors which are whether a company’s target market is broad or narrow, and also whether the company is pursuing a competitive advantage linked to low costs of product differentiation.

The five generic competitive strategies are low-cost provider, broad differentiation, focused low-cost, focused differentiation, and best-cost provider. As we know, a cost driver driver is a factor that has a strong influence on a firm’s costs including input cost, economies of scales, bargaining power, capacity utilization and many more. First and foremost, low-cost provider strategy targeting such as price sensitive market price...conscious buyers, segments with limited incomes, price sensitive customers in greater numbers thereby increasing profits (although thin profit margins) , extreme price competitive markets, products are essentially the same besides where brand differences are inconsequential to the consumer and when substitutes are readily available,lastly good strategy for new entrants. Example for the company are Wal-Mart, Family Dollar and Mydin.

Secondly, broad differentiation strategy are targeting diverse needs and preferences among target markets, a broad range of buyers, value conscious consumers, products and services stand apart in consumers’ minds, customers looking for a unique value proposition, premium price products and buyers loyal to the brand (value the unique differentiation). Rolex, Microsoft, Gucci are company that use this strategy.

Next is market focused strategy… which include cost and niche*. For the strategy this market are targeting price conscious customers (similar to low cost provider strategy),  well defined segments, appealing to cultures and geographical preferences, brand loyal customers, appeal to broad market segments (low cost), wants and needs of narrow and unique market segment (niche). For the niche, it must have two criteria :
*Good way to discourage entry of industry leaders
*Another differentiation and positioning strategy

Example company use this strategy are Community Coffee (niche) ,Grand Ole Opry (niche) and Krispy Kreme Doughnuts (niche, cost – now broad).

Last but not least, best cost provider strategy…* are focused and targeting low cost, differentiation markets (a hybrid), broad markets and market niches (middle ground), value conscious buyers, those who shy away from cheap, low-end products and expensive high-end products, willing to pay a fair price for functionality and performance and lastly more for the money.
*Balances low-cost against emphasis on differentiation and positioning.

Example of company are Lexus (by Toyota) and Goodyear.

For conclusion, the differences between the classic five generic competitive strategies is somewhat subtle to the untrained eye. Admittedly, there is some degree of overlap. However, they are significant in strategic planning as they relate to the ability of the organization to gain a competitive advantage. They offer product and brand distinction in terms of price, value, quality, and performance, which not only positions the product uniquely, but the brand, itself. Thus, the competitive strategy may indeed set the tone for the mission of the organization, because the entire organization must function jointly to provide the level of quality and performance in the market place, that is consistent with the organization’s overall business level strategy.