Competitive Strategy a market perspective

Lecture Session8 Generic Strategies, Strategy Clock and Strategy CanvasDr K. SankaranDirector Justice KS Hegde Management Institute Nitte, Karnataka

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Competitive strategyBusiness-level concept (not corporate level)About ways of achieving a competitive advantage in one marketCompetitive advantage: superior profitability relative to ones competitors in a given marketSustainable competitive advantage ability to maintain a competitive advantage over significant span of time (i.e. earn rent)

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(Johnson, Scholes and Whittington, 2008)

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Competitive Advantage

Product DifferentiationProduct qualityCustomer valueCustomer trustProduct innovationCost LeadershipAccess to factorsEconomies of scaleEconomies of scopeProcess innovationNiche-market Leadership/Dominance Market shareMarket dominanceChannel dominanceStandard dominance(Porter, 1975)

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PerceivedAdded Value/Benefit

PriceHigh

Average

LowLow Average High

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PerceivedAdded Value/Benefit

PriceHigh

Average

LowLow Average HighXXXXX

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PerceivedAdded Value/Benefit

PriceHigh

Average

LowLow Average HighXXXXX

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PerceivedAdded Value/Benefit

PriceHigh

Average

LowLow Average HighXXXXX

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PerceivedAdded Value/Benefit

PriceHigh

Average

LowLow Average HighXXXXX

DIFFERENTATION

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PerceivedAdded Value/Benefit

PriceHigh

Average

LowLow Average HighXXXXX

COST LEADERSHIP

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DifferentiationHybridFocusseddifferentiationLowpriceNo frillsStrategiesdestined forultimate failurePerceivedAdded value/benefitHighLowPerceived priceHighLow12345678

Ikea, Dokomo Air ArabiaBudget Rent-A-CarLG, Toyota, PanasonicBMW, Apple(Faulkner and Bowman, 1995)The strategy clock

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DifferentiationHybridFocusseddifferentiationLowpriceNo frillsStrategiesdestined forultimate failurePerceived Added value/

HighLowPerceived priceHighLow12345678

Ikea, Dokomo Air ArabiaBudget Rent-A-CarLG, Toyota, PanasonicBMW, Sony

Perceived low value (Timex?)Climbing up value chain difficult Intense pressure to cut costs (Airlines industry)Low margins (retail industry) Price wars (telecom service providers) Inadequate accumulation of assets (banking industry)

Stuck in the middle? (Gulf Air) Technology choice could be too crucial and cruelly wrong ( Android vs. Windows) Risk of assuming customer needs (Life Insurance companies) Too technology focused forgetting customer needs (Philips?)

The Risks

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The Major Challenges of Developing Competitive StrategyUnderstanding what customers value (Threshold Requirements versus Critical Success Factors)

Identifying the strategic customer (For instance, for a manufacturer is the retailer or the final customer the Strategic Customer? Or both?)

Understanding which configurations of perceived benefits distinguish between competitors.Note: The definitions of strategic customers, value, threshold value, CSF are as per J&S&W

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Managers Understanding of the Dimensions of Customers Perceived BenefitPRODUCT: luxury saloon carPRICE: 50,000 weighting (%)Styling30Performance25Comfort25Reliability15Safety5

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-4-3-2-101234 StylingPerformanceComfortReliabilitySafety

A

Our product

C

DStrategy Canvas Better thanNot as good Dimensions of perceived benefitMost importantLeast important

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But some customers actually choose on the following bases: Weighting (%) Ability to impress the opposite gender50Ability to impress friends25Lots of toys to play with 20Leg room in the back 5

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BetterThan

+3

0

-3

Not asGoodOur ProductOr Service

MostImportantLeastImportantWhat might this be for your company?

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CustomersHave you identified (groups of) customers by what they value (benefit)?Are there major similarities or differences?Can these be taken into account in formulating competitive strategy?

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Placing self vis-a-vis competitorsCompetencyCase companyCompetitor 1Competitor 2Competitor 3Competitor nC1C2C3C4Cn

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Thank you

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