Sustainable competitive advantages for
culture&arts institutions
Jurica Pavicic, University
of Zagreb, Faculty of
Economics & Business
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Generic Strategies: Mini-lecture
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Generic strategies
1. Cost leadership (advantages)
2. Differentiation
3. Focusing
• Used for achieving sustainable competitive advantage!
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“Competitive advantage cannot be understood
by looking at a firm as a whole. Advantage
stems from the many discrete activities an
organization performs – designing, producing,
marketing, delivering, and supporting
products/services. Each of these activities can
contribute to a firm’s relative cost position
and create a basis for differentiation.”
Michael E. Porter 1
PUBLIC LIBRARIES???
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“Competitive strategy is about being different. It means
deliberately choosing to perform activities differently or
to perform different activities than rivals to deliver a
unique mix of value.”
Michael E. Porter 2
PUBLIC PERFORMERS???
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Generic strategies
Strategic advantage
Mass
Narrow
Specific elements
perceived by
consumers/clients
Low cost position
Differentiation
Cost leadership
Focus
NATIONAL HERITAGE???
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Generic strategies
Competitive advantage
Total market
Differentiation
Cost leadership
Differentiation
Market niche
Competitive arena
Low(er) costs
Focusing on lower
costs
Focusing on
differentiation
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Generic strategies CONCERT HALLS???
Forces influencing
industry
Cost leadership
Differentiation
Focus
Entrance barriers
Price cutting
Loyalty
Being difficult to
immitate
Power of consumers
Lower prices for key
consumers
(Big) consumers are
not so strong
Consumers have less
power
Power of suppliers
Better
isolation/safety
triggers against
strong suppliers
Better position in
case of higher prices
Supplier’s price could
be consideres as
irrelevant
Threats from
substitutes
Lower prices - in
order to survive
Consumers are loyal
Specific
characteristics/skills
Competitors
Better (price)
competitiveness
Brand loyalty
Competitors could
not differentiate
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1. COST LEADERSHIP
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1. COST LEADERSHIP STRATEGY
Sources of cost cutting….. MUSEUMS???
Economies of scale
Experience curve
Stock/reserve control
Avoiding of marginal consumers/customers
Cost minimisation
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COST LEADERSHIP STRATEGY (AGAIN  )
Can lower costs lead to sustainable competitive advantage?
YES!
How?
Suppliers’
power reduced!
Consumers’
power –
reduced!
Substitues –
less
attractive!
Rivalry –
reduced!
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COST LEADERSHIP STRATEGY  - What lessons
could be learned for the benefit of destinations
(and their culture & arts institutions) – if we use
belowmentioned examples?
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COST LEADERSHIP STRATEGY 
(destinations again)!
Potential risks
1
• New competitors
2
• Flexibility issues and unpredictable costs
3
• Technology issues
4
• Market issues
5
• Costs inflation
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COST LEADERSHIP STRATEGY….. !
Lower costs – lower prices!
Lower costs – previous prices!
• Profits could be skyrocketed!
• Less profit per unit
• Large total profit (quantities &
market share)
• Being a leader
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2. DIFFERENTIATION STRATEGY
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DIFFERENTIATION STRATEGY
“Be Distinct or Be Extinct”
Tom Peters
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DIFFERENTIATION STRATEGY
Key sources of differentiation (MUSICIANS???)
Differences in „inputs”
Differences in technology („Grdovic syndrome”)
Differences in activities
Differences in distribution (channels)
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DIFFERENTIATION STRATEGY
Additional sources of differentiation
Differences in scope
Advantage in „product lines”
Flexibility in terms of environment(s)
Easy to use (for consumers)
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DIFFERENTIATION STRATEGY
Differentiation leads to something better compared with competitors
(higher prices, higher profits…..)
Consumers are provided with
added value and their needs
are satisfied in a better way
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DIFFERENTIATION STRATEGY ZADAR SUMMER
SCHOOL(S) 
Successful strategy is based upon few basic pillars…..
1. It should generate value for users/consumers
2. It should provide adequate value perception
3. It should be difficult to imitate (sustainable as long as possible)
4. It should be „implementable”
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DIFFERENTIATION STRATEGY
Risks
1
2
3
• Loyalty could be expensive
• Market for differentiated market offers is shrinking (in
certain contexts)
• Competitors are coming to join the market!
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DIFFERENTIATION STRATEGY
• Symbols,
media,
atmosphere,
events…..
• performance,
style,
characteristics
……
Image
differentiation
Product
differentiation
Staff
differentiation
Services
differentiation
• Delivery,
education for
consumers,
advices…..
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POSSIBLE LESSONS LEARNED FOR
SMITHSONIAN
INSTITUTION – SEE AND USE BELOWMENTIONED EXAMPLES?!
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3. FOCUSING STRATEGY
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FOCUSING STRATEGY
• Previous two strategies combined, or?
• The difference is in the SIZE of the targeted market
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FOCUSING STRATEGY GALLERIES???
Characteristics
Low market share
Differentiation according to market segment
Low prices for certain segments
Overlapping of segmentation and differentiation
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FOCUSING STRATEGY MOVIES FOR KIDS???
FOCUS ON COSTS
• Goal: cost leadership in
certain market segment
FOCUS ON
DIFFERENTIATION
• Goal: „product”
differentiation within the
targeted segment
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FOCUSING STRATEGY POETRY BOOKS???
Risks:
1
2
• Attractive for new competitors
• Dependence on certain (specific) segment
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IMPLEMENTATION PROBLEMS!
1. Using more than one strategy
2. Using one strategy
3. Co-ordination
4. Sustainability
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What if none of Porter’s generic
strategies is chosen?
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….They are „stuck in the middle”!
Competitive advantage
Total market
Narrow market
segment
Competitive arena
Lower costs
Differentiation
Cost leadership
Differentiation
Stuck in
the middle
Focusing on lower
costs
Focusing on
differentiation
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„Stuck in the middle” situation…..
• Characteristics:
• They do not have any particular
competitive advantage
• Their profitability is low
• They are losing their
consumers/customers
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“Finally, strategy must have continuity. It can’t
be constantly reinvented.”
Michael E. Porter
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