Addresses the five best-known generic Competitive Strategy Options It Considers the Environments they are Most Suited: Leading and Managing Strategically Assignment, NUI, Ireland

MODULE 5: Leading And Managing Strategically

PAPER NO 3: Crafting A Strategy

CH 5: Strategies For Competitive Advantage: The Five Generic Strategies.

CH 6: Strategies For Changing The Game

Strategies For Competitive Advantage: Generic Strategies And Beyond

SECTION 3.1

INTRODUCTION

Paper 3, Section 1 addresses the five best-known generic competitive strategy options. It considers the environments they are most suited for and how to choose between them in the process of crafting a company’s strategy. The chapter also presents a variety of other generic strategy approaches and includes content on how resources and competencies underpin different sources of competitive advantage. The key debate, different views, emerging theme,s and current practice features have been included to stretch students’ thinking about strategies for competitive advantage and enable them to move beyond the basic generic strategies.

Section 2 addresses that once a company has settled on which of the five generic strategies to employ attention must turn to what other strategic actions can be taken in order to complement the choice of its basic competitive strategy. The three dimensions discussed include offensive and defensive competitive actions, competitive dynamics and the timing of strategic moves, and the breadth of a company’s activities. These are explored through seven broad categories:

(1) Whether and when to go on the offensive,

(2) Whether and when to employ defensive strategies,

(3) When to undertake strategic moves,

(4) Whether to merge or acquire another firm,

(5) Whether to integrate the value chain backward or forward,

(6) Whether to outsource certain value chain activities and

(7) Whether to enter into strategic alliances

Learning Outcomes

On completion of this paper students will be able to:

• Explain what distinguishes each of the five most common generic strategies and why some of these strategies work better in certain kinds of industry and competitive conditions than in others.

• Identify the major avenues for achieving a competitive advantage based on lower costs.
• Discuss some of the alternative generic strategy frameworks, including those that argue for competitive advantage based on price.
• Describe the major avenues to a competitive advantage based on differentiating a company’s product or service offering from the offerings of rivals

Recognize the attributes of a best-cost provider strategy and the way in which some companies use a hybrid strategy to go about building a competitive advantage and delivering superior value to customers.

• Decide whether and when to pursue offensive or defensive strategic moves to improve a company’s market position.

• Recognise when being a first mover or a fast follower or a late mover is most
advantageous.

• Explain the strategic benefits and risks of expanding a company’s horizontal scope through mergers and acquisitions.

• Discuss the advantages and disadvantages of extending the company’s scope of operations via vertical integration.

• Describe the conditions that favour farming out certain value chain activities to outside parties.

• Explain when and how strategic alliances can substitute for horizontal mergers and acquisitions or vertical integration and how they can facilitate outsourcing.

Strategies For Competitive Advantage: Generic Strategies And Beyond

Read Chapter 5: ‘The Five Generic Competitive Strategies for a more in-depth understanding of the subject.

1. By competitive strategy we mean the specifics of management’s game plan for competing successfully—how it plans to position the company in the marketplace, its specific efforts to please customers, and improve its competitive strength, and the type of competitive advantage it wants to establish.

2. A company achieves competitive advantage whenever it has some type of edge over rivals in attracting buyers and coping with competitive forces.

3. There are many routes to competitive advantage, but they all involve giving buyers what they perceive as superior value.

4. Delivering superior value—whatever form it takes—nearly always requires performing value chain activities differently than rivals and building competencies and resource capabilities that are not readily matched.

Types Of Generic Competitive Strategies

The Five Generic Competitive Strategies

1. There are countless variations in the competitive strategies that companies employ, mainly because each company’s strategic approach entails custom-designed actions to fit its own circumstances and industry environment.

2. The two factors that tend to distinguish one competitive strategy from another boil down to:

a. Whether a company’s market target is broad or narrow

b. Whether the company is pursuing a competitive advantage linked to low costs or product differentiation

3. These combine to produce five distinct competitive strategy approaches:

A. low-cost provider strategy: striving to achieve lower overall costs than rivals and appealing to a broad spectrum of customers, usually by underpricing rivals.

b. A broad differentiation strategy: seeking to differentiate the company’s product/service offering from rivals’ in ways that will appeal to a broad spectrum of buyers

c. A focused (or market niche) strategy based on lower cost: concentrating on a narrow buyer segment and outcompeting rivals by serving niche members at a lower cost than rivals

d. A focused (or market niche) strategy based on differentiation: concentrating on a narrow buyer segment and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals’ products

e. A best-cost provider strategy: giving customers more value for the money by incorporating good-to-excellent product attributes at a lower cost than rivals; the target is to have the lowest (best) costs and prices compared to rivals offering products with comparable attributes.