University of Cagliari, Faculty of Economics, 2011-12
Business Strategy and Policy
A course within the II level degree in
Managerial Economics
year II, semester I, 9 credits
Lecturer:
Dr Alberto Asquer
aasquer@unica.it
Phone: 070 6753399
Introduction
0. Strategic positioning and the generic competitive strategies
1. Low-cost strategies
2. Differentiation strategies
3. Combining low-cost and differentiation: best-cost strategies
4. Focus or market niche strategies
------------5. Summary
0. Strategic positioning and the generic competitive
strategies
Broad
Differentiation
Strategy
Best-Cost
Provider
Strategy
Overall Low-Cost
Provider Strategy
Focused
Low-Cost Strategy
Focused
Differentiation
Strategy
1. Low-cost strategies
The basis for sustained competitive advantage is lower overall costs
than competitors
One way is to perform value chain activities more cost-effectively than
competitors
Another way is to reconfigure the value system in such a way as to
bypass or eliminate non-essential activities altogether
1. Low-cost strategies
Typical actions to improve cost-efficiency of the value chain:
Exploit economies of scale
Climb up the experience/learning curve
Operate at full capacity
Boost sales volumes
Improve supply chain efficiency
integration
Use low-cost materials
Use online and other IT systems
Use labour-saving methods
Leverage on your bargaining power
Use outsourcing and vertical
1. Low-cost strategies
Typical actions to reconfigure the value system:
Bypassing intermediates and directly sell to customers
Replace activities with faster and cheaper ones
Streamline operations by eliminating activities that are not needed or deliver little value
Relocate facilities to save shipping (and sometimes labour costs)
Simplify the product (no-frills)
Narrow the product line
2. Differentiation strategies
The basis for sustained competitive advantage is “being different” possibly, in a way that is difficult to imitate
Sources of differentiation are found in:
- Supply chain activities
- R&D activities
- Production and technology activities
- Distribution activities
- Marketing activities
And differentiation works by making the product
1) cheaper to use;
2) better performing;
3) better satisfy the consumer;
4) faster to reach consumer.
3. Combining low-cost and differentiation: best-cost strategies
The basis for sustained competitive advantage is the ability to
incorporate attractive or upscale attributes at a lower cost than rivals
It's a 'middle ground', or 'hybrid', strategic approach that seeks to
combine low cost and differentiation
There is the risk to be “stuck in the middle” (Porter, 1980)
4. Focus or market niche strategies
The basis for sustained competitive advantage is the specialisation to
serve the particular needs (solve the specific problems) of selected
targets within the consumers market
There are two variants:
1) Focused low-cost strategy
4. Focus or market niche strategies
The basis for sustained competitive advantage is the specialisation to
serve the particular needs (solve the specific problems) of selected
targets within the consumers group
There are two variants:
2) Focused differentiation strategy
5. Summary
Main points
The generic strategies provide broad strategic guidelines as to
formulate the strategic direction for the company
Low-cost and differentiation provide the main 'themes' of several
strategies that successful companies pursue
There is also some 'variations on a theme': best-cost, focused lowcost, and focused differentiation strategies