The Five Generic Competitive Strategies

Assalamualaikum ^_

hello.. its already week 5.. time goes without we realize it.. time is like a sword, in case you do not cut it, surely it cut you.. hope we do not belong to dispose of their time, insya Allah :)

ok, in this week we learn about generic competitive strategies. We have asked to give an example for every subtopics. The interesting in this week is we try a new things.. But.. It cost a little.hehe..

There are three strategies which is cost leadership, differentiation, focus (market segmentation) and under focus has cost focus and differntiation focus. I will insert an example for every subtopics.. ^_

The cost leadership strategy

A firm tries to reduce its overall production and distribution costs. It wins market share by appealing to cost-conscious customers. It sets the lowest prices in the target market segment, or at least the lowest price to value ratio.

Three ways to achieve it was economies of scale, low direct and indict operating cost and control over the supply chain.

Achieved market share by keeping low inventories and only building computers to order, procurement advantages from preferential access to raw materials or backward integration.

Differentiation

A company concentrates on differentiating the products in some way in order to compete successfully. In order words, making their products or services different from and more attractive than their competitors. Large organizations pursuing a differentiation strategy need to stay agile with their new product development processes. Otherwise, they risk attack on several fronts by competitors pursuing Focus Differentiation strategies in different market segments.

Differentiated through brand power

Focus (Market Segmentation)

The firm focuses its marketing effort on serving a defined, focused market segments with a narrow scope by tailoring its marketing mix to these specialized markets, it can better meet the needs of that target market. The firm typically looks to gain a competitive advantage through product innovation and/or brand marketing rather than efficiency.

It is most suitable for relatively small firms but can be used by any company. A focused strategy should target market segments that are less vulnerable to substitutes or where a competition is weakest to earn above-average return on investment.

Serve highest end of wristwatch market (premium pricing and image)

The focus strategy has two variants, which is

1.   Cost Focus

A firm seeks a cost advantage in its target segment, it exploits differences in cost behavior in some segments.

Focus on the lower cost

2.   Differentiation Focus

A firm seeks differentiation in its target segment. It exploits the special needs of buyers in certain segments.

Ferrari, targets high performance sports car segment and due to differentiation based on design, high performance grand prix records which allows it to charge a premium price.

ok, that all for this time..