Competitive Strategy Submitted by,

Process of strategic management Perform External audit Develop Vision & mission Perform Internal audit Establish Long term objective Generate, Evaluate & Select strategies Implement Strategies Strategies- Markt., Fin., MIS, R&D Measure & Evaluate performance

What is a competitive strategy ? A strategy can be defined as the identification of the purpose of the organization & the plans and actions to achieve that purpose. Whereas a competitive strategy is all about achieving a competitive advantage. i.e. how a company serves customers differently from its competitors.

Types of Strategies  Integration / Dis – integration oForward oBackward oHorizontal  Intensive omarket penetration omarket development oproduct development

 Diversification oConcentric (sugar ind)‏ oHorizontal oConglomerate  Defensive oRetrenchment oDivestment oLiquidation

MICHAEL EUGENE PORTER professor – Harvard Business School Strategy is all about creating a unique position among your competitors & the industry in general. PORTER’S 5 FORCES analysis helps an organization to analyze the attractiveness of an industry.

Porter’s generic strategies Cost leadership Differentiation Focus

A Cost Leadership Strategy Open up a sustainable cost advantage over rivals, using lower- cost edge as a basis either to – Under-price rivals and reap market share gains OR – Earn higher profit margin selling at going price Objective

The Competitive Strengths of Low-Cost Leadership Better positioned than RIVAL COMPETITORS to compete offensively on basis of price Low-cost provides some protection from bargaining leverage of powerful BUYERS Low-cost provides some protection from bargaining leverage of powerful SUPPLIERS Low-cost provider’s pricing power acts as a significant barrier for POTENTIAL ENTRANTS Low cost puts a company in position to use low price as a defense against SUBSTITUTES

Pitfalls of Low-Cost Strategies Being overly aggressive in cutting price (revenue erosion of lower price is not offset by gains in sales volume--profits go down,not up) Low cost methods are easily imitated by rivals Becoming too fixated on reducing costs and ignoring – Buyer interest in additional features – Declining buyer sensitivity to price – Changes in how the product is used Technological breakthroughs open up cost reductions for rivals

Differentiation Strategies Incorporate differentiating features that cause buyers to prefer firm’s product or service over the brands of rivals Find ways to differentiate that CREATE VALUE for buyers and that are NOT EASILY MATCHED or CHEAPLY COPIED by rivals Not spending more to achieve differentiation than the price premium that can be charged Keys to Success Objective

The Appeal of Differentiation Strategies A powerful competitive approach when uniqueness can be achieved in ways that – Buyers perceive as valuable – Rivals find hard to match or copy – Can be incorporated at a cost well below the price premium that buyers will pay Which hat is unique ?

The Benefits of Successful Differentiation A product / service with unique and appealing attributes allows a firm to 4 Command a premium price and/or 4 Increase unit sales and/or 4 Build brand loyalty = Competitive Advantage

Types of Differentiation – Quality – Design is the same but better – Design - Technical differences – Service – additional customer services – Image – Brand name

The Competitive Strengths of a Differentiation Strategy Buyers develop loyalty to brand they like best-- can beat RIVAL COMPETITORS in the marketplace Mitigates bargaining power of large BUYERS since other products are less attractive Buyer loyalty acts as a barrier to POTENTIAL ENTRANTS Differentiation puts a seller in better position to fend off threats of SUBSTITUTES not having comparable features

What Can Make a Differentiation Strategy Fail Trying to differentiate on a feature buyers do not perceive as lowering their cost or enhancing their well-being Over-differentiating such that product features exceed buyers’ needs Charging a price premium that buyers perceive is too high Failing to signal value Not understanding what buyers want or prefer and differentiating on the “wrong” things

Means for achieving strategies Joint ventures Mergers & Acquisitions Outsourcing A point must be noted here that above listed terminologies are the means by which a firm could get into a strategic position & not a strategy in itself.

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