1. Chapter 4 Crafting a Strategy Screen graphics created by: Jana F. Kuzmicki, PhD Troy University - Florida and Western Region

2. Quote . . . “Successful business strategy is about actively shaping the game you play, not just playing the game you find.” Adam M. Brandenburger and Barry J. Nalebuff

3. Fig. 4.1: A Company’s Menu of Strategy Options

4. BCG MATRIX – BUSINESS PORTFOLIO

5. What Is “Competitive Strategy”? • Deals exclusively with a company’sbusinessplans to compete successfully • Specific efforts to please customers • Offensive and defensive movesto counter maneuversof rivals • Responses to prevailing market conditions • Initiativesto strengthen its market position • Narrower in scope than business strategy

6. Fig. 4.2: The Five Generic Competitive Strategies

7. Low-Cost Provider Strategies Keys to Success • Make achievement of meaningful lower costs than rivals the theme of firm’s strategy • Include features and services in product offering that buyers consider essential • Find approaches to achieve a cost advantage in ways difficult for rivals to copy or match Low-cost leadership meanslow overall costs,not just low manufacturing or production costs!

8. Keys to Success inAchieving Low-Cost Leadership • Scrutinize each value chain activity toidentify what factors drive the costs of performing the activity • Use knowledge about cost drivers tomanage costs of each activity down year after year • Find ways to restructure value chain to eliminate nonessential work steps and low-value activities • Aggressively pursue investments in resources and capabilities that promise to drive costs out of the business

9. Characteristics of aLow-Cost Provider • Cost conscious corporate culture • Broad employee participation in cost-control efforts • Ongoing efforts to benchmark costs • Intensive scrutiny of budget requests • Programs promoting continuous cost improvement Successful low-cost producers champion frugality but wisely and aggressively invest in cost-saving improvements !

10. Differentiation Strategies Objective • Incorporate differentiating features that cause buyers to prefer firm’s product or service over brands of rivals • Finding ways to differentiate that create valuefor buyers and that are not easily matchedorcheaply copiedby rivals • Not spending more to achieve differentiation than the price premium that customers are willing to pay for all the differentiating extras Keys to Success

11. Whichhat is unique? Benefits of Successful Differentiation • A product / service with unique, appealing attributes allows a firm to • Command a premium priceand/or • Increase unit sales and/or • Buildbrand loyalty • = Competitive Advantage

12. How to Achieve aDifferentiation-Based Advantage Approach 1 Incorporate product features/attributes that lowerbuyer’s overall costs of using product Approach 2 Incorporate features/attributesthat raise product performance Approach 3 Incorporate features/attributes that enhance buyer satisfaction in non-economic or intangible ways Approach 4 Develop superior competencies and competitive capabilities that rivals don’t have and can’t match

13. Best-Cost Provider Strategies • Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation • Make an upscale product at a lower cost • Give customers more value for the money • Deliver superior value by meeting or exceeding buyer expectations on product attributes and beating their expectations on what price they will have to pay • Be the low-cost provider of a product with good-to-excellent product attributes, then use cost advantage to underprice comparable brands Objectives

14. Competitive Strength of a Best-Cost Provider Strategy • A best-cost provider’s competitive advantagecomes from matching close rivals on key product attributes and beating them on price • Success depends on having the skills and capabilities to provide attractive performance and features at a lower cost than rivals • A best-cost producer can often out-compete both a low-cost provider and a differentiator when • Standardized features/attributes won’t meet diverse needs of buyers • Many buyers are price and value sensitive

15. Focus / Niche Strategies • Involve concentrated attention on a narrow pieceof the total market • Serve needs of niche buyers better than rivals • Choose a market niche where buyers have distinctive preferences, special requirements, or unique needs • Develop unique capabilities and product attributes to serve needs of target buyer segment Objective Keys to Success

16. Approaches to Defining a Market Niche • Geographic uniqueness • Specialized requirements inusing product/service • Special product attributes appealing only to niche buyers

17. Examples of Focus Strategies • eBay • Online auctions • Porsche • Sports cars • Jiffy Lube International • Quick maintenance for motor vehicles • Pottery Barn Kids • Children’s furniture and accessories • Bandag • Specialist in truck tire recapping