1 Porter’s Competitive Strategies Generic Competitive Strategies -- –Lower Cost strategy Greater efficiencies than competitors –Differentiation strategy Unique/superior value, quality, features, service

2 Porter’s Competitive Strategies Competitive Advantage -- –Determined by Competitive Scope Breadth of the target market

3 Porter’s Competitive Strategies

4 Cost Leadership -- –Low-cost competitive strategy –Broad mass market –Efficient-scale facilities –Cost reductions –Cost minimization

5 Porter’s Competitive Strategies Differentiation – –Broad mass market –Unique product/service –Premiums charged –Less price sensitivity

6 Porter’s Competitive Strategies Cost-Focus – –Low-cost competitive strategy –Focus on market segment –Niche focused –Cost advantage in market segment

7 Porter’s Competitive Strategies Differentiation Focus – –Specific group or geographic market focus –Differentiation in target market –Special needs of narrow target market

8 Porter’s Competitive Strategies Stuck in the middle – –No competitive advantage –Below-average performance

9 Risks of Generic Strategies Risks of Cost Leadership Cost leadership is not sustained: Competitors imitate. Technology changes. Other bases for cost leadership erode. Proximity in differentiation is lost. Cost focusers achieve even lower cost in segments. Risks of Differentiation Differentiation is not sustained: Competitors imitate. Bases for differentiation become less important to buyers. Cost proximity is lost. Differentiation focusers achieve even greater differentiation in segments. Risks of Focus The focus strategy is imitated: The target segment becomes structurally unattractive: Structure erodes. Demand disappears. Broadly targeted competitors overwhelm the segment: The segment’s differences from other segments narrow. The advantages of a broad line increase. New focusers subsegment the industry. Risks of Cost Leadership Cost leadership is not sustained: Competitors imitate. Technology changes. Other bases for cost leadership erode. Proximity in differentiation is lost. Cost focusers achieve even lower cost in segments. Risks of Differentiation Differentiation is not sustained: Competitors imitate. Bases for differentiation become less important to buyers. Cost proximity is lost. Differentiation focusers achieve even greater differentiation in segments. Risks of Focus The focus strategy is imitated: The target segment becomes structurally unattractive: Structure erodes. Demand disappears. Broadly targeted competitors overwhelm the segment: The segment’s differences from other segments narrow. The advantages of a broad line increase. New focusers subsegment the industry.

10 8 Dimensions of Quality

11 Competitive Strategy Industry Structure -- –Fragmented Industry –Consolidated Industry

12 Competitive Tactics Timing Tactics -- –First mover –Late movers

13 Competitive Tactics Market Location Tactics -- –Frontal Assault –Flanking Maneuver –Bypass Attack –Encirclement –Guerrilla Warfare

14 Competitive Tactics Defensive Tactics -- –Raise structural barriers –Increase expected retaliation –Lower the inducement for attack

15 Cooperative Strategies Collusion Strategic Alliances Mutual service consortia Joint ventures Licensing arrangements Value-chain partnerships