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(generic business strategies) - Coggle Diagram
generic business strategies
cost leadership
meaning
the company produces products or services that are similar to its competitors, but at a lower cost.
placing most of its emphasis on controlling costs in order to generate economic value added and profits
drivers of cost advantage
production techniques
total quality management
reducing waste
automation
product design
design for manufacturing
efficient materials use
design variety and complexity
inputs costs
location
supplier relationship/bargaining
raw material sources
capacity utilization
amortization of high fixed cost assets
filling spare capacity
scale/scope economies
large batch sizes
indivisible costs
specialization
common inputs
organizational or managerial inefficiency
bureaucracy
inertia
slow decision making
hierarchy
politics
goals
to reduce or eliminate unwanted costs that add very little or no value
approach
look at any of the cost drivers of a business in order to reducing the expense of producing the company's product or service
focused low price
differentiation advantage
meaning
the company produces products or services that are unique and different from competitors.
emphasizing value creation for customers rather than cost control and produces higher EVA and profits
common differentiation value drivers
customer services
e.g. hotel industry
customization
e.g. Starbucks customized services
product features
e.g. smartphone industry
complements
e.g. Apple iTunes store (legal music)
approach
identify customers' value drivers, which relies on market research and combine that with firm's insights about customers
Once we know what kinds of things customers value, then it is back to figuring out how to use resources, capabilities of the firm system of activities to create that value
focused differentiation
focused differentiation advantage
narrow scope and differentiation are often a natural fit
contains costs
cost leadership
promotes exclusivity that makes them more valuable to customers
they are targeted at a narrower market segment and limited distribution channel
cost