Chapter 6 : Strengthening A Company's Competitive Position

Learning Objectives :

1) Learn whether and when pursue offensive or defensive strategic moves to improve a company's market position .

2) Recognize when being a first mover or a fast follower or a late mover is most advantageous .

3) Become aware of the strategic benefits and risks of expanding a company's horizontal scope through mergers and acquisitions.

4) Learn the advantages and disadvantages of extending the company's scope of operations via vertical integration.

5) Become aware of the conditions that favor farming out certain value chain activities to outside parties .

6) Understand when and how strategies alliances can substitute for horizontal mergers and acquisitions or vertical integration and how they can facilitate outsourcing.

The principal offensive strategy options include the following :

1) Offering an equally good or better product at a lower price .

2) Leapfrogging competitors  by being first to market with the next-generation products.

3) Pursuing continuous product innovation to draw sales and market share away from less innovative rivals.

4) Adopting and improving on the good ideas of other companies.

5) Using hit-and-run or guerrilla warfare tactics to grab market share from complacent or distracted rivals .

6) Launching a preemptive strike to secure an advantageous position that rivals are prevented or discouraged from duplicating . 

BLUE OCEAN STRATEGY 

-offers growth in revenues and profits by discovering or inventing new industry segments that create altogether new demand.

Strengthening A Company's Market Position Via Its Scope Of Operations . 

Horizontal Scope

-the range of product and service segments that a firm serves within its focal market .

Vertical Scope

-the extent to which a firm's internal activities encompass one,some,many,or all of the activities that make up an industry's entire value chain system,ranging from raw-material production to final sales and service activities . 

Backward integration

-involves entry into activities previously performed by suppliers or other enterprises positioned along earlier stages of the industry value chain system.

Forward integration

-involves entry into value chain system activities closer to the end user.

OUTSOURCING

-involves contracting out certain value chain activities to outside vendors .

-outsourcing certain value chain activities makes strategic sense whenever : an activity can be performed better or more cheaply by outside specialists,the activity is not crucial to the firm's ability to achieve sustainable competitive advantage,it improves organizational flexibility and speeds time to market,it reduces the company's risk exposure to changing technology or buyer preferences,it allows a company to assemble diverse kinds of expertise speedily and efficiently,it allows a company to concentrate on its core business,leverage its key resources, and do even better what it already does best.

STRATEGIC ALLIANCES

-is a formal agreement between two or more separate companies in which they agree to work cooperatively toward some common objective.

-the benefits of strategic alliances : picking a good partner,being sensitive to cultural differences,recognizing that the alliances must benefit both sides,ensuring that both parties live up to their commitments,structuring the decision-making process so that actions can be taken swiftly when needed,managing the learning process and then adjusting the alliance agreement over time to fit new circumstances.

Chapter 5 : The Five Generic Competitive Strategies

Learning Objectives : 

1) Understand what distinguishes each of the five generic strategies and why some of these strategies work better in certain kinds of industry and competitive conditions than in others.

2) Gain command of the major avenues for achieving a competitive advantage based on lower costs.

3) Learn the major avenues to a competitive advantage based on differentiating a company's product or service offering from the offerings of rivals.

4) Recognize the attributes of a best-cost provider strategy-a hybrid of low-cost provider and differentiation strategies.

THE FIVE GENERIC COMPETITIVE STRATEGIES .

First : Low-Cost Provider Strategy

Striving to achieve lower overall costs than rivals on comparable products that attract a broad spectrum of buyers. (Mydin)

Second : Broad Differentiation Strategy

Seeking to differentiate the company's product offering from rivals' with superior attributes that will appeal to a broad spectrum of buyers. (Honda)

Third : Focused Low-Cost Strategy

Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals on costs, thus being able to serve niche members at a lower price.(Hari-hari)

Forth : Focused Differentiation Strategy

Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals with a product offering that meets the specific tastes and requirements of niche members better than the product offering of rivals.

Fifth : Best-Cost Provider Strategy

Giving customers more value for their money by satisfying buyers' expectations on key quality/features/performance/service attributes while beating their price expectations. (Adidas)

Chapter 4 Evaluating A Company's Resources , Capabilities , and Competitiveness.

Learning Objectives : 

1)Learn how to access how well a company's strategy is working.

2)Understand why a company's resources and capabilities are central to its strategic approach and how to evaluate their potential for giving the company a competitive edge over rivals.

3)Discover how to assess the company's strengths and weaknesses in light of market opportunities and external threats.

4)Grasp how a company's value chain activities can affect the company's cost structure and customer value proposition.

5)Understand how a comprehensive evaluation of a company's competitive situation can assist managers in making critical decisions about their next strategic moves . 

The Components of a Single-Business Company's Strategy

 In this chapter we are dealing with some questions which are how well is the firm's present strategy working,what are the firm's competitively important resources and capabilities,Is the firm able to take advantage of market opportunities and overcome external threats to its external well-being,are the firm's prices and costs competitive with those of key rivals,and does it have an appealing customer value proposition,is the firm competitively stronger or weaker than key rivals,what strategic issues and problems merit front-burner managerial attention.

When dealing with the first questions,the firms present a good strategy when it's achieving its stated financial and strategic objectives and it's an above industry performer. The answer for the second questions is based on the competitive assets,the firm's resources and capabilities,the determinants of its competitiveness and ability to succeed in the marketplace and the firm's strategy depending on what factors to develop sustainable competitive advantage over its rivals. 

Types of Company Resource

Dealing with the third question , the key question is whether the company is in a position to pursue attractive market opportunities and defend against external threats to its future well-being. SWOT analysis is the best solution in order to answer the third question . Based on the question 4 , the higher a company's costs are above those of close rivals,the more competitively vulnerable it becomes. The answer for the fifth question is based on how the company rank relative to competitors on each of the important factors that determine market success and does the company have a net competitive advantage or disadvantage versus major competitors . Last but not least , in answering the last question , the company need to get a clear fix on exactly what strategic and competitive challenges confront the company , which of the company's competitive shortcomings need fixing, and what specific problems merit front-burner attention by company managers .