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UNIT 8 chapter 10 (Porters strategy (Cost leadership strategy involves…
UNIT 8 chapter 10
Porters strategy
Michael Porter suggested that the value of a business depends on the combination of benefits relative to the price paid
He identified two possible positioning approaches for a business
- Cost leadership strategy
- Differentiation strategy
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He highlighted that a low cost or differentiation strategy could be aimed at the market as a whole or a small part (focus strategy). Broad scope= whole market narrow scope= niche market
Bowman's strategic clock
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Example of a competitive strategy=A restaurant may offer a basic menu, limited customer service and self service. Provided the price is low enough, this may be regarded as good value for money and the business remains competitive
Example of a noncompetitive strategy= offering basic service at a high price is uncompetitive and customers will turn to rivals
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Competitive advantage occurs when a business creates value for its customers that is both greater than the costs of supplying the benefits it offers and is superior to that of other businesses.
To protect a competitive advantage a business might:
- Use legal protection (patents and laws)
- Controlling resources by owning different stage of the supply chain
- The culture of the business- it is hard to copy as it requires the workforce to believe in the business
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9-12 o'clock is hybrid strategies and these occur where there are relatively high benefits but low prices can be used to enter markets and build position quickly.
Unlike Porter the strategic clock model by Bowman focuses on the prices to customers rather than the costs of the organisation and it shows a full range of options
Three main sources of competitive advantage:
- Innovation
- Architecture
- Reputation