LOW COST STRATEGIES DIFFERENTIATIONSTRATEGIESOFFENSIVE STRATEGIES DEFENSIVESTRATEGIESVERTICALINTEGRATIONFIRST MOVERADVANTAGEStructural Drivers Value Chain 1. Initiatives to match or exceed 1. Block the avenues Types Advantages1. Scale Economies 1. Purchasing and procurement competitor strengths challengers can take in Forward * Build image and reputation2. Experience Curve 2. Product oriented R&D 2. Initiatives to capitalize on mounting an offensive Backward with buyers3. Linkages with activities in 3. Process oriented R&D competitor weakness 2. Signal challengers that Full * Early commitments to the value chain 4. Manufacturing 3. Simultaneous initiatives on there is a real threat of Partial suppliers of raw materials, 4. Shared Opportunities with 5. Outbound Logistics and distribution many fronts retaliation if attacked technologies, etc. can build other SBUs 6. Marketing, sales and customer 4. End run offensives (enter 3. Lower the profit incentive Advantages a co advantage5. Benefits of vertical service unoccupied market territory) for challengers to launch * When high volume is * First time customers remain integration vs. outsourcing 5. Guerilla offensives (hit and run) an offensive needed loyal6. Location Variables Creating Buyer Value 6. Preemptive strikes * Suppliers have high profit * Constitutes a preemptive 1. Incorporated product attributes and margins strikeExecutional Drivers user features that lower the buyers Purposes: * The item is major cost 1. First Mover Timing overall costs * Lower the risk of being component Disadvantages2. % capacity utilization 2. Incorporated features that raise the attacked * Technological skills are * Pioneering is more costly 3. Strategic choices and performance a buyer gets out of the * Weaken the impact of any easily mastered than following operating decisions product attack that occurs * Can produce a * Technological advancements 3. Incorporated features that enhance * Influence challengers to aim differentiation based are rapid to render Re-vamp the value change buyer satisfaction their efforts at other rivals competitive advantage innovations obsolete * Avoids uncertainty of * Easy market or industry Competitive Defenses Value dependency on to enterRivals: compete offensively, 1. Real, perceived or signaled suppliers * Skills and know-how easilydefend price margins 2. Long lasting when technically * Avoids uncertainty of imitated or surpassed superior, high product quality, or dependency on distributors Buyers: cannot bargain below comprehensive customer service survival level of the next 3. Leads to premium price, increased Disadvantages lowest cost competitor unit sales, brand loyalty * Stronger ties to the industry * Inhibits other investments Suppliers: only if cost * Increases business risks advantage is from internal * Locks a firm into relying on efficiency its own in-house activities and sources of supply Entrants: low cost leader can * Poses problems of balancing use price cutting to defend capacity at each stage in the market share (a barrier to entry) value chain * Full integration requires Substitutes: only when the costs radically different skills and are equal business capabilitiesEMERGING ANDRAPIDLY GROWINGMATURING HIGH VELOCITY STAGNANT ORDECLININGFRAGMENTED INTERNATIONAL INDUSTRY POSITION1. Broad or focused 1. Prune the product line 1. Invest aggressively1. Pursue a focused strategy 1. Construct and operate 1. License foreign firms Industry Leader Strategies differentiation is the best 2. Emphasize innovations in R&D to stay on by identifying, creating formula facilities to use the company's 1. Stay on the offensive chance fir early competitive 3. Focus on cost the leading edge and exploiting the growth 2. Become a low cost technology or produce (best defense is a good advantage reductions 2. Develop organizational segments (niches) operator and distribute the offense)2. Perfect the technology, 4. Increase sales to capabilities for rapid 2. Stress differentiation 3. Increase customer value company's products 2. Fortify and defend improve the product quality, present customers response based on quality through integration 2. Maintain a national (make entry hard, make it develop attractive features 5. Purchase rivals 3. Rely on strategic improvement and product 4. Specialize by product (one country) hard for rivals to gain 3. Capture first mover 6. Expand internationally alliances innovation type production base and ground) advantages with: 3. Work diligently and 5. Specialize by customer export goods to 3. Follow the leader more models, better styling, persistently to drive costs type foreign markets (encourage runner-ups experience curve, commitment down 6. Focus on a limited 3. Follow a multi-country to be content followers to dominant technology geographic area strategy vice aggressive challengers)4. Search out new customers, 4. Follow a global low geographic locations, new cost strategy Runner-ups strategies user applications 5. Follow a global focus (economies of scale exist)5. Shift marketing from product strategy 1. Increase market share awareness to increasing 6. Follow a global 2. Withdraw from the business frequency of use; create differentiation strategy (economies of scale do exist) brand loyalty 7. Follow a global 1. Vacant niche6. Use price cuts to attract best-cost strategy 2. Specialist the next layer of consumers 3. Ours-is-better-than-theirs7. Defend against new entrants 4. Content follower 5. Growth via acquisition 6. Distinctive image Weak Business Strategies 1. Offensive turnaround 2. Fortify and defend 3. Abandon 4. HarvestWHEN TO