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Competitive Strategy
Page 1
Business-level [Competitive] Strategy
• Since we’re in the XYZ industry, how do we compete?
Profit = (Price – Cost) x Qty.
• Cost or size advantage
• Differentiation or uniqueness advantage
• Marketing advantage
• Innovation advantage
• Bridge converging industries
Page 2
Generic Business Level Strategies
Source of Competitive Advantage
Cost
Breadth of
Competitive
Scope
Broad
Target
Market
Uniqueness
Low
Cost
Narrow
Target
Market
Page 3
Low-Cost Strategy - Operational Advantage
“Dell finds it hilarious that HP and Sony fund
researchers to come up with new ideas.”
“Steamrollered by Dell” Newsweek, February 21, 2005
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Value Chain and Low Cost Strategy
Firm Infrastructure
Human Resource Management
Technological Development
Service
Marketing
& Sales
Outbound
Logistics
Operations
Inbound
Logistics
Procurement
Page 5
Inbound
Logistics
Inbound
Logistics
Highly Efficient
Systems to Link
Suppliers’ Products
with the Firm’s
Production
Processes
Located in Close
Proximity with
Suppliers
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Operations
Firm
Efficient Plant Scale
to Minimize Mfg.
Infrastructure
Costs
Relatively Few Management
Layers to Reduce Overhead
Effective Training Programs to
Improve Worker Efficiency and
Effectiveness
Human Resource Management
Timing of Asset
Purchases
Investments in Technology in order to
Reduce Costs Associated with
Manufacturing Processes
Technological Development
Policy Choice of
Plant
Technology
Frequent Evaluation
Processes
to Monitor
Procurement
Organizational
Small, Highly Trained
Sales Force
Learning
Products Priced to
Generate Sales
Volume
Service
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Inbound
Logistics
Suppliers’ Performances
Policy Choice of Efficient Order
Plant Technology Sizes
Organizational
Learning
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Outbound
Logistics
Firm Infrastructure
Delivery Schedule
that Reduces Costs
Human Resource ManagementSelection of Low
Technological Development
Cost Transport
Carriers
Efficient
Frequent Evaluation Processes to
Monitor Suppliers’ Performances
Sizes
Procurement
Effective Product
Interrelationships
Installations to
with
Sister
Units
Reduce
Frequency
Marketing
& Sales
Service
Outbound
Outbound
Logistics
Logistics
Delivery Schedule Small, Highly
that Reduces
Trained Sales
Costs
Force
Order
Selection of Low
Cost Transport
Carriers
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Efficient Order
Sizes
National Scale
Advertising
Interrelationships
with Sister Units
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Marketing &
Sales
Firm Infrastructure
Human Resource Management
Technological Development
Products Priced to
Generate Sales
Volume
Global Scale
Advertising
Marketing
& Sales
Marketing
& Sales
Service
Outbound
Logistics
Operations
Inbound
Logistics
Procurement
Small, Highly Trained
Sales Force
Page 9
Coca-Cola
Marketing &
Sales
Firm Infrastructure
Human Resource Management
Technological Development
Products Priced to
Generate Sales
Volume
Global Scale
Advertising
Marketing
& Sales
Marketing
& Sales
Service
Outbound
Logistics
Operations
Inbound
Logistics
Procurement
Small, Highly Trained
Sales Force
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Firm Infrastructure
Human Resource
Service
Effective
Product
Installations to
Management
Reduce
Recalls
Technological Development
Marketing
Service
& Sales
Service
Outbound
Logistics
Inbound
Logistics
Operations
Procurement
Page 11
Firm Infrastructure
Human Resource Management
Technological Development
Procurement
Systems and Procedures to Find
the Lowest Cost Products to
Purchase Raw Materials
Marketing
& Sales
Service
Outbound
Logistics
Inbound
Logistics
Operations
Procurement
Procurement
Frequent Evaluation
Processes to Monitor
Suppliers’ Performances
Page 12
Firm Infrastructure
Human Resource Management
Technological Development
Marketing
& Sales
Easy-to-Use Manufacturing
Technologies
Outbound
Logistics
Operations
Inbound
Logistics
Technological Development
Service
Procurement
Investments in Technology in order
to Reduce Costs Associated with
Manufacturing Processes
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Firm Infrastructure
Human Resource Management
Technological Development
HumanProcurement
Resource Management
Service
Marketing
& Sales
Effective Training Programs to
Improve Worker Efficiency and
Effectiveness
Outbound
Logistics
Operations
Inbound
Logistics
Consistent Policies to
Reduce Turnover Costs
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Human Resource Management
Firm Infrastructure
Technological
Development
Service
Relatively Few
Management Layers to
Reduce Overhead
Marketing
& Sales
Simplified Planning
Procurement
Practices to Reduce
Planning Costs
Outbound
Logistics
Inbound
Logistics
Cost Effective
MIS Systems
Operations
Support
Activities
Firm Infrastructure
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Generic Business Level Strategies
Source of Competitive Advantage
Breadth of
Competitive
Scope
Broad
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
Narrow
Target
Market
Page 16
Differentiation Strategy – Uniqueness Advantage
SOUTHWEST
Page 17
Value Chain and Differentiation Strategy
Firm Infrastructure
Human Resource Management
Technological Development
Service
Marketing
& Sales
Outbound
Logistics
Operations
Inbound
Logistics
Procurement
Page 18
Inbound
Logistics
Firm Infrastructure
Superior handling of
incoming raw
materials
to
Human Resource
Management
minimize damage
and improve the
Technological
Development
quality
of the final
product
Service
Outbound
Logistics
Inbound
Logistics
Inbound
Logistics
Operations
Procurement
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Operations
Firm
Consistent
manufacturing of
Infrastructure
attractive products
Human Resource Management
Technological
Rapid responses to
customers unique
Development
manufacturing
specifications
Service
Outbound
Logistics
Inbound
Logistics
Operations
Operations
Procurement
Page 20
Outbound
Logistics
Firm Infrastructure
Technological Development
Outbound
Outbound
Logistics
Logistics
Inbound
Logistics
Operations
Procurement
Rapid and timely
product deliveries to
customers
Marketing
& Sales
Service
Human Resource
Accurate and
responsive order
Managementprocessing
procedures
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Marketing &
Sales
Firm Infrastructure
Human Resource Management
Outbound
Logistics
Inbound
Logistics
Operations
Procurement
Extensive personal
relationships with
buyers
Premium
Pricing
Marketing
& Sales
Marketing
& Sales
Service
Technological Development
Strong Coordination
among functions in
R&D, Marketing and
Product Development
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Firm Infrastructure
Human Resource
Service
Complete field
stocking of
Management
replacement
parts
Technological Development
Marketing
Service
& Sales
Service
Outbound
Logistics
Inbound
Logistics
Operations
Procurement
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Caterpillar vs. Komatsu
Firm Infrastructure
Human Resource
Service
Complete field
stocking of
Management
replacement
parts
Technological Development
Marketing
Service
& Sales
Service
Outbound
Logistics
Inbound
Logistics
Operations
Procurement
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Firm Infrastructure
Human Resource Management
Technological Development
Coordination among
R&D, marketing and
product development
Outbound
Logistics
Inbound
Logistics
Operations
Technological Development
Marketing
& Sales
Service
Procurement
Investments in technol-ogies Strong
to produce highly
capability in
differentiated products
basic research
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Support
Activities
Firm Infrastructure
Human Resource Management
Technological Development
HumanProcurement
Resource Management
Marketing
& Sales
Service
Outbound
Logistics
Inbound
Logistics
Operations
Compensation programs which Extensive use of
encourage worker creativity
subjective performance
and productivity
measures
Superior
personnel
training
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Human Resource Management
Firm Infrastructure
Technological
Development
Outbound
Logistics
Inbound
Logistics
Operations
Highly developed Information
Systems to better understand
Procurement
customers’ purchasing preferences
A companywide culture
emphasizing quality and
innovation
Marketing
& Sales
Service
Support
Activities
Firm Infrastructure
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Marketing Advantage
Page 28
Innovation Advantage
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Innovation Cycle Time
Growth Rate
Slow is good, unless you’re the one driving innovation
t1
t2
t3
Time
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Differentiated Beef
Bluegrass Meadows Beef
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Still Perkin’
Page 32
Generic Business Level Strategies
Source of Competitive Advantage
Breadth of
Competitive
Scope
Broad
Target
Market
Narrow
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
Cost
Leadership
Focused
Differentiation
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Converging Industry Advantage
Entertainment
Palmtop
Computing
Wireless
Telephony
Page 38
Razor Trials and Comparisons
Try the razors
Compare
Evaluate
Page 39
Strategic Dimension 2
What’s the next big thing?
?
Strategic Dimension 1
Gillette: More is Better…?
12 Blade
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Razors
• Design features of razors and shaving performance
– Do they make a difference?
– Do they create [real or perceived] value?
• What are relevant “strategic dimensions” of razor industry?
Strategic Dimension 2
– What needs [real or perceived] do these dimensions fulfill?
?
Strategic Dimension 1
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Pizza Strategy Canvas
5
4
Domino's
Papa John's
3
Pizza Hut
Joe Bologna's
Mello Mushroom
2
Pazzo's
Brooklyn
1
0
Taste
Delivery
Ambiance Drink Menu
Menu
Breadth
Service
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Women’s Razor Strategy Canvas
5
4
Razor 1
Razor 2
Razor 3
Razor 4
3
2
Razor 5
1
0
Dim 1
Dim 2
Dim 3
Dim 4
Dim 5
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Men’s Razor Strategy Canvas
5
4
Razor 1
Razor 2
Razor 3
Razor 4
3
2
Razor 5
1
0
Dim 1
Dim 2
Dim 3
Dim 4
Dim 5
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