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COMPETITIVE STRATEGY AND STRATEGIC DIRECTION - Coggle Diagram
COMPETITIVE STRATEGY AND STRATEGIC DIRECTION
CONCEPT
- Competitive strategy - the basic on which competition will take place
- Strategy direction - which direction for the development will be taken.
- Strategic methods - how will the development be achieved, which methods will be adopted
PORTER'S GENERIC STRATEGY
ALTERNATIVES
Differentiation
Meaning:
Creating a customer perception that a product is superior to those of competitors so that a premium price can be charged.
Strategy:
- Creating products which are superior to competitors by virtue design, technology, performance,...
- Offering superior level of service
- Having access to superior distribution channels
- Creating a strong brand name
- Distinctive or superior product promotion
Cost leadership
Meaning:
Being the lowest cost producer of a product so that above average profits are earned even though the price charged is not above average
Strategy:
- Reducing costs by copying rather than originating product design features
- Using less expensive resource inputs
- Producing products with 'no frills', reducing labor costs and increasing labor productivity
- Achieving economies of scale: advertising and promoting or allowing high fixed costs of investment in modern technology
- Using high volume purchasing
- Locating activities in areas where costs are low or government help
- Obtaining experience curve economies
- Standardizing products or resource inputs
Focus
Meaning:
Utilizing either a differentiation or cost leadership strategy in a narrow profile of a market segments
Strategy:
- Focusing on a particular group of buyers
- Specializing in particular geographic destinations
- Catering for the benefits sought by a particular group of buyers or a particular product
POON'S FRAMEWORK
Principles
- Put customers first
- Be a leader in quality
- Develop radical innovations
- Strengthen the organization's strategic position within the industry's value chain
STRATEGIC DIRECTIONS
Growth Strategies
Market penetration
(increasing market share in existing markets utilizing existing products)
Diversification
(developing new products to serve new markets)
Product development
(developing new products to serve existing markets)
Market development
(entering new markets and segments using existing products)
Stability Strategy
continuing current activities without any significant change in direction
Variants
Pause/proceed with caution - an opportunity to rest and reflect before continuing a growth or retrenchment strategy
Profit - a decision to do nothing new in a worsening environmental position but instead to act as though the organization's problems are only temporary
No change - to do nothing new, choosing to continue current operations for the foreseeable future
Retrenchment Strategies
When a firm is in a weak competitive position and the environment remains hostile for the alternative stability or growth strategies
Turnaround - emphasizes the improvement in operational efficiency
Captive company - involves giving up independence in return of security
Sell out/divestment - if an organization is in a weak competitive position it may choose to retrench through selling the entire organization
Bankruptcy/liquidation - when the organization finds itself in a very competitive position with few prospects
Strategic directions, risk and balance
Smallest when development is largely upon existing core competencies and when it takes place in existing markets
Greatest when development requires entry to unrelated markets