Lecture 7 Competitive Strategies. Generic strategies of Porter Cost Leadership Differentiation Niche/focus Sources of competitive advantage Low costDifferentiation.

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Presentation transcript:

Lecture 7 Competitive Strategies

Generic strategies of Porter Cost Leadership Differentiation Niche/focus Sources of competitive advantage Low costDifferentiation Broad market Niche market Scope of competition

Cost Leadership Competitive advantage: low cost –Price strategy –profit of low cost company Context –Customer sensitive to price –Few ways to achieve differentiation –Customer not care for brands –A lot of bargaining

How to achieve low cost Scale economic and Learning curve （ experience curve ） –Scale economic: Limited by the nature of the business, products, market, and the management –Experience curve: familiarity, specialization, tacit knowledge, innovation, standard –The difference between companies in learning

Reduce transaction cost others –The design of the products and process –Take full advantage of the capacity –The site of the business –The time of entering

Cost leadership and the price war Cost leadership and the profit Disadvantages of cost leadership

Differentiation Strategy Competitive advantages: differentiation Sources of differentiations –The categories of differentiation –The differentiated products and differentiated customers Valuable differentiation –Identified by customer –Not easy to copy –Reasonable price premium

Disadvantages of differentiation strategy Can not be appreciated by the market Too high price/premium Disharmony of the value chain Easy to be copied by others Innovation and differentiation

Niche strategy Concentrated in one or several market segments Provide value for certain customers Closely cooperate with customers

Emerging industries Mature industries Scattered industries Competitive strategies and industrial features

Emerging industries Features of this kind of industries –Instability of tech –Lack of perfect cooperation system –Lack of industrial standard –Need a lot of investment, market cultivation Key points of strategies –Concentration of resources –Building industry structure, industrial standard and order –Change the entry barrier (Critical mass ） –Proper time of enter (Game theory)

Mature industries –Relative mature of tech (Microwave oven) –Large market size, usually Scattered industries –Lots of company with small scale

Disasters in competitive strategies same strategies applied by all competitors Bottle-neck in applying some strategies Assessment of the strategies local competition to international competition