Strategic Management In Action

Ch 6: Competitive Strategies

Group Six:Knowl RichardsonLandon CothamDustin EgglestonMaddie RamseyAmber MorrisKaty Martin

Competitive Strategies

Competition is Present in All Organizations.

Competitive Advantage- Qualities that Set an Organization Apart.

Distinctive Capability- When an Organization Does Something that Others Can’t, or Does it Better than Others Do.

Unique Resource- An Organization Has Something that Other Competitors Don’t.

Competitive Strategies

Exploit Competitive Advantages and Current Resources.

Competition- Organizations Battle or Vie for Some Desired Object or Outcome. (Customers, Market Share)

3 Approaches to Defining Competition Industry Perspective-Focuses on

Competitors as Organizations that are Making/Selling the Same or Very Similar Products/Services.

Market Perspective- Views Competitors as Organizations that Satisfy the Same Customer Need.

3 Approaches to Defining Competition Strategic Groups Perspective- Competitors

are Groups of Firms Competing in an Industry with Similar Strategies, Resources, and Customers. This defines WHO competitors are because the

most relevant competitors are in your strategic group.

Miles and Snow’s Adaptive Strategies Based On Strategies that Organizations

Use to Adapt to their Uncertain Competitive Environments.

Four Strategic Postures: Prospector, Defender, Analyzer, and Reactor.

Prospector

Organization Innovates by Finding and Exploiting New Product/Market Opportunities.

Analyze the Changing Environment to See Future Profit-bearing Actions Now.

Competitors Don’t Know What They’re Going to do Next (MTV).

Defender

Used to Protect Current Market Share by Emphasizing Existing Products and Producing a Limited Product Line. GM reducing lines of vehicles and models

offered to lower cost and retain damaged market share.

Do Whatever it Takes to Prevent Competitors from Invading the Market.

Only works if The Product(s) Remain Competitive with Competitors’.

Analyzer

Watch For and Copy Successful Ideas of Prospectors and Their Pioneers.

Thoroughly Analyze Business Ideas Before Trying Them.

Reactor

Lack of a Coherent Strategy or Apparent Means of Competing.

React to Environmental Change Only when Forced by Environmental Pressures.

Fail to React Quickly Because They Don’t Have the Necessary Resources

NOT Recommended, Seen as a “Default” Strategy. Without Change, Reactor will Always be in a Weak Competitive Position

Porter’s Generic Competitive Strategies Appropriate Competitive Strategy Needed

Along with Five Forces Model and Value Chain.

Strategy Based on Competitive Advantage From Only Two Sources: Having lowest costs in the industry. Having significant and desirable differences

from competitors.

Porter’s Generic Competitive Strategies Generic Competitive Strategies can be

Made from Cost Leadership, Differentiation, and Focus.

Why “Generic”? These strategies can be pursued by any

type/size organization in any type/size industry.

Cost Leadership Strategy Organization Strives to Have the Lowest

Costs in its Industry and Produce Products for Broad Customer Base.

Not Necessarily Lowest Prices, but With Lowest Costs, can Potentially Charge Lowest Prices and Still Earn Profits.

Allows a Better Position if a Price War Starts.

How to be Successful in Cost Leadership Strategy Be Efficient in All Areas.

Narrow Product Lines Aimed at Average Customer.

Have Plain/Effective Establishments.

Disadvantages Of Cost Leadership Strategy Competitors Could Find Better Cost

Cutting Strategy, Taking Away Advantage. Competitor Might Imitate Cost Leader’s

Actions and Erode Advantage. Cost Leader Might Lose Sight of Changing

Customers’ Wants. It doesn’t matter how efficiently you make

products/services if no one wants them.

Differentiation Strategy

Provide Unique Products with Features that Customers Value and See as Different, so they Pay a Premium for it.

Compete by Offering Truly Unique Products in Eyes of Customers.

All Resources Concentrate on Isolating and Knowing Specific Market Segments.

Use Multiple Methods to Differentiate Themselves.

Offer Wide Product Lines.

Differentiation Strategy

Differentiate Along Many Different Dimensions to Reach All Niches of Market.

Work to Establish Brand Loyalty Brand Loyalty- When customers consistently

and repeatedly seek out, purchase, and use a particular brand.

Unique Resources and Capabilities Tend to be in Marketing and Research & Development

Disadvantages of Differentiation Strategy Can be Costly, Must Manage Costs, but Not

Too Much so You Retain Differentiation. Competitors’ Imitation Products/Services may

Affect Uniqueness. Customers Could Become More Price

Sensitive. Product Differences May Lose Their

Importance. Organization Might Find that Advantage

Based on Being Different and Unique no Longer Work.

Focus Strategy

Organization Pursues a Cost or Differentiation Advantage but Within a Narrow Customer Group/Segment.

Focus on a Specific Market Niche. Three Broad Ways to Segment Specialized

Market Niches: Geographical Type of Customer Product Line Segment

Three Niche Focuses

Geographical Niche- Region or Locality Midwest Airlines

Customer Niche- Focuses on Specific Group of Customers’ Unique Needs Christine Columbus- Female Travelers

Product Line Niche- Focus on Specific & Specialized Product Line

Advantages to Focus Strategy Focuser Knows the Market Niche Well

Stay close to customers and respond quickly to changes.

Develop Strong Brand Loyalty

Can Have Niche to Themselves if Competitors Don’t Offer Similar Products/Services

Disadvantages of Focus Strategy Focuser Often Operates on a Small

Scale Hard to lower costs significantly

Niche Customers may Change Taste or Needs Difficult for focuser to change niches

Focuser is Subject to Being “outfocused” by competition

Stuck In The Middle

Organization hasn’t developed a low cost or a differentiation competitive advantage

Costs too high to compete with low cost leader

Products and services aren’t differentiated enough to compete with differentiator

Getting Unstuck: Choosing the right competitive advantage to pursue

Contemporary Views on Competitive Strategy Provide expanded and more realistic description

of competitive strategies Integrated Low Cost-Differentiation Strategy

Simultaneously achieving low costs and high levels of differentiation

Information Systems have opened the door for competing on the basis of having low costs and being unique

Mintzberg’s Generic Competitive Strategies Six possible competitive strategies▪ Differentiation: Price, marketing image, Product design,

product quality, product support▪ Undifferentiated

Implementing Competitive Strategy The Role of Functional Strategies

determine competitive strategy through resources and capabilities

Determines how competitive strategy is implemented

A competitive advantage will not be possible without a functional strategy

Competitive Actions

Organization will be competing against other organizations through offensive and defensive moves

Offensive moves: organization's attempts to exploit and strengthen its position through attacks on competitor’s position

Defensive moves: organization’s attempts to protect its competitive advantage and market share

Evaluating and Changing Competitive Strategy Strategies must be monitored and

evaluated for performance effectiveness and efficiency

Determine what happened and why Pinpoint area of competitive weakness

If desired levels of performance haven’t been reached, changes may be necessary

Summary/Takeaways Competitive Strategies Miles and Snow’s Adaptive Strategies

Prospector Defender Analyzer Reactor

Porter’s Generic Competitive Strategies Cost Leadership Differentiation Strategy Focus Strategy

Summary/Takeaways Contemporary Views on Competitive Strategy

Integrated Low-cost Differentiation Strategy Mintzberg’s Generic Competitive Strategy

Competitive Actions Offensive Moves Defensive Moves