Ahsan Ahmad Baba

Courses of action adopted by an organization for each of its businesses separately to serve identified CG and provide value to customers by satisfaction of their needs

In selecting business Strategy the firms determine

» Who it will Serve?

» What customer needs it will satisfy?

» How those needs will be satisfied?

Cost Leadership Differentiation

Focused Cost leadership Focused Differentiation

Integrated cost leadership/

differentiation

Competitive Advantage

Co

mp

eti

tiv

e S

co

pe

An integrated set of actions designed to produce or deliver goods or services at the lowest cost, relative to competitors with features that are acceptable to customers.

Tightly controlling production costs and overhead

Minimizing costs of sales, R&D and service

Building efficient manufacturing facilities

Monitoring costs of activities provided by outsiders

Simplifying production processes

DIFFERENTIATION STRATEGY

Value is provided to customers through unique features and characteristics of an organization's products rather than by the lowest price. This is done through high quality, features, high customer service, rapid product innovation, advanced technological features, image management, etc

Developing new systems and processes

Shaping perceptions through advertising

Quality focus

Capability in R&D

Maximize human resource contributions through low turnover and high motivation

In focused cost leadership organizations not only compete on price, but also select a small segment of the market to provide goods and services. In focused cost leadership target is narrow.

For example a company that sells only to the U.S. government.

Companies following focused differentiation strategies produce customised products for small market segments. They can be successful when either the quantities involved are too small for industry-wide competitors to handle economically, or when the extent of customisation (or differentiation) requested is beyond the capabilities of the industry-wide differentiator.

This new strategy may become more popular as global competition increases. Firms that use this strategy may see improvement in their ability to:

Adaptability to environmental changes.

Learn new skills and technologies

More effectively leverage core competencies across business units and products lines which should enable the firm to produce produces with differentiated features at lower costs.

Thus the customer realizes value based both on product features and a low price