Generic (industry-unspecific) Bases of Competition - Michael E. Porter

“Generic” Strategies Michael Porter  How and Where to compete  Ways of competing – Low Cost, Differentiation, Focus  “Where’s” of competing – Variety-, Needs-, Access-based positions

“Cost Leadership” way of competing  Striving for lower operating costs (than the competition) – For example, the real Canadian Superstore, Wal*Mart

Superstore savings  What are some of the things the real Canadian Superstore may be doing in order to lower its operating costs?  What tradeoffs does it make by so doing?

(Experience Curve)  Overall costs decline in a predictable way as cumulative volume increases – X% decline as cumulative volume doubles  Implication, build volume (even by pricing at minimal or negative margins!) to drive down long-term costs

“Differentiation” way of competing  Striving to be different (than the competition) in ways for which the market is willing to pay a premium. – For example, Canada Safeway, Sobey’s

Safeway’s / Sobeys differentiation  What are some of the things Safeway (and / or Sobey’s) may be doing in order to differentiate themselves in ways for which the customer will pay?  What tradeoffs do they make by so doing?

“Stretching the profit”

“Focus” way of competing  Consciously limiting the scope of the enterprise by choice, not by necessity, to achieve a specific excellence (not necessarily defined in relation to competition). – For example, De Luca’s Specialty Foods, La Grotta Mediterranean Market

Tradeoffs  Does a Low Cost producer care about differentiation?  Does a Differentiator care about reducing costs?  What is the tradeoff of Focus as a way of competing?

“Stuck in the Middle”  What was Eaton’s basis of competition? – Certainly not a cost leader over Wal*Mart – As a department store, not at all focused Sold food, clothing, electronics, books, furniture, appliances, stationery, etc., etc., etc. – Differentiation from Sears and The Bay not obvious

Variety-based positioning “where” of competing  position based primarily on the choice of products to offer – for example, Toys- a -Us What neat new toys can we source?

Needs-based positioning “where” of competing  position based primarily on the choice of customer needs to serve – for example, financial planning service What financial needs do our customers have?

Access-based positioning “where” of Competing  position based primarily on the choice of means of access to customers – for example, Amazon.com, Mary Kay Cosmetics We reach our customers in a specific way

Generic Strategies  Where to compete?  In what way to compete?  Make choices consistently over time and throughout the organization to build internal and external understanding