This document discusses sources of competitive advantage and strategies for different types of industries. The main sources of competitive advantage are cost leadership, differentiation, speed, and market focus. Cost leadership requires low production costs, while differentiation means creating unique value for customers. Industries evolve over time from emerging to growth to mature to declining. Different strategies are most effective depending on the industry's stage, such as emphasizing innovation in growth industries but cost reduction in mature ones. The document also examines strategies for fragmented, global, and other specialized industry types.

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Business Strategy
Name-VidhiName-Vidhi
DuaDua
Section-BSection-B

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Prominent Sources of Competitive AdvantageProminent Sources of Competitive Advantage
22
Sources ofSources of
competitivecompetitive
advantageadvantage
Cost leadershipCost leadership
DifferentiationDifferentiation
SpeedSpeed
Market focusMarket focus

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Evaluating and Choosing Business Strategies:Evaluating and Choosing Business Strategies:
Seeking Sustained Competitive AdvantageSeeking Sustained Competitive Advantage
 The two most prominent sources of competitive
advantage can be found in the business’s cost
structure and its ability to differentiate the
business from competitors.
 Businesses that have one or more
sources/capabilities that let them operate at a
lower cost will consistently outperform their
rivals that don’t.

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Evaluating Cost Leadership OpportunitiesEvaluating Cost Leadership Opportunities
 Business success built on cost leadership
requires the business to be able to provide
its product or service at a cost below what
its competitors can achieve.

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Evaluating a Business’s Cost Leadership OpportunitiesEvaluating a Business’s Cost Leadership Opportunities

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Sustainable Low-Cost ActivitiesSustainable Low-Cost Activities
1. Some low-cost advantages reduce the likelihood of
buyers’ pricing pressure.
2. Truly sustained low-cost advantages may push rivals into
other areas.
3. New entrants competing on price must face an
entrenched cost leader.
4. Low-cost advantages should lessen the attractiveness of
substitute products.
5. Higher margins allow low-cost producers to withstand
supplier cost increases.

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Risks of a Cost Leadership StrategyRisks of a Cost Leadership Strategy
1. Many cost-saving activities are easily duplicated.
2. Exclusive cost leadership can be a trap.
3. Obsessive cost cutting can shrink other
competitive advantages.
4. Cost differences often decline over time.

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Evaluating DifferentiationEvaluating Differentiation
 Differentiation requires that the business have
sustainable advantages that allow it to provide
buyers with something uniquely valuable to them.
 Differentiation usually arises from one or more
activities in the value chain that create a unique
value important to buyers.
 Strategists use benchmarking and consider the 5
forces in considering differentiation.

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Evaluating a Business’s Differentiation OpportunitiesEvaluating a Business’s Differentiation Opportunities

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Evaluating Speed as a Competitive AdvantageEvaluating Speed as a Competitive Advantage
 Speed-based strategies, or rapid response
to customer requests or market and
technological changes, have become a
major source of competitive advantage for
numerous firms in today’s intensely
competitive global economy.

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Evaluating a Business’s Rapid Response (Speed)Evaluating a Business’s Rapid Response (Speed)
OpportunitiesOpportunities

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Speed can be created by:Speed can be created by:
 Customer responsiveness
 Product development cycles
 Product or service improvements
 Speed in delivery or distribution
 Information Sharing and Technology

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Risks of Speed-based Strategy
 Speeding up activities that haven’t been
conducted in a fashion that prioritizes rapid
response should only be done after considerable
attention to training, reorganization, and/or
reengineering.
 Some industries may not offer much advantage to
the firm that introduces some forms of rapid
response.
 Customers in such settings may prefer the slower
pace or the lower costs currently available, or they
may have long time frames in purchasing.

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Evaluating Market Focus as a Way to Competitive AdvantageEvaluating Market Focus as a Way to Competitive Advantage
 Market focus: the extent to which a business
concentrates on a narrowly defined market.
 Small companies, at least the better ones,
usually thrive because they serve narrow market
niches.
 Market focus allows some businesses to
compete on the basis of low cost,
differentiation, and rapid response against much
larger businesses with greater resources.

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Risks of Market FocusRisks of Market Focus
 The risk of focus is that you attract major competitors who
have waited for your business to “prove” the market.
 Publicly traded companies built around focus strategies
become takeover targets for large firms seeking to fill out a
product portfolio.
 Slipping into the illusion that it is focus itself, and not low
cost, etc. that is creating the business’s success.

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Stages of Industry Evolution and Business StrategyStages of Industry Evolution and Business Strategy
ChoicesChoices
 The requirements for success in industry segments
change over time.
 Strategists can use these changing requirements,
which are associated with different stages of
industry evolution, as a way to isolate key
competitive advantages and shape strategic choices
around them.

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Emerging IndustriesEmerging Industries
 Emerging industries are newly formed or
re-formed industries that typically are
created by technological innovation,
newly emerging customer needs, or other
economic or sociological changes
 There are no “rules of the game”

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Business Strategies in Emerging IndustriesBusiness Strategies in Emerging Industries
 Technologies that are most proprietary to the pioneering
firms and technological uncertainty will unfold.
 Competitor uncertainty because of inadequate
information about competitors, buyers, and the timing of
demand.
 High initial costs but steep cost declines
 Few entry barriers
 First-time buyers requiring initial inducement to purchase
 Inability to obtain raw materials and components until
suppliers gear up to meet the industry’s needs
 Need for high-risk capital because of the industry’s
uncertain prospects

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Competitive Advantages and Strategic Choices in GrowingCompetitive Advantages and Strategic Choices in Growing
IndustriesIndustries
 Rapid growth brings new competitors into the
industry
 At this stage, growth industry strategies that
emphasize brand recognition, product differentiation,
and the financial resources to support both heavy
marketing expenses and the effect of price
competition on cash flow can be key strengths

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Growth IndustriesGrowth Industries
 For success in this industry setting, business strategies
require one or more of the following features:
 Strong brand recognition
 The ability and resources
 Strong product design skills
 The ability to differentiate the firm’s product[s] from competitors
 R&D resources and skills
 The ability to build repeat buying from established customers
 Strong capabilities in sales and marketing

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Competitive Advantages and Strategic Choices inCompetitive Advantages and Strategic Choices in
Mature IndustriesMature Industries
 As an industry evolves, its rate of growth eventually
declines
 Firms working with the mature industry strategies
sell increasingly to experienced, repeat buyers who
are now making choices among known alternatives
 Competition becomes more oriented to cost and
service as knowledgeable buyers expect similar
price and features

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Mature Industries
Strategy elements of successful firms in maturing
industries often include the following:
 Product line pricing
 Emphasis on process innovation that permits low-cost
product design, manufacturing methods
 Emphasis on cost reduction
 Horizontal integration to acquire rival firms whose
weaknesses can be used to gain a bargain price
 International expansion to markets where attractive growth
and limited competition still exist

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Competitive Advantages and Strategic Choices in DecliningCompetitive Advantages and Strategic Choices in Declining
IndustriesIndustries
 Declining industries are those that make
products or services for which demand is growing
slower than demand in the economy as a whole
or is actually declining.
 Focus on higher growth or a higher return
 Emphasize product innovation and quality
improvement
 Emphasize production and distribution efficiency
 Gradually harvest the business

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Competitive Advantage in Fragmented IndustriesCompetitive Advantage in Fragmented Industries
 A fragmented industry is one in which no firm
has a significant market share and can strongly
influence industry outcomes.
 Tightly managed decentralization
 “Formula” facilities
 Increased value added
 Specialization
 Bare bones/no frills

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Competitive Advantage in Global IndustriesCompetitive Advantage in Global Industries
 A global industry is one that comprises firms
whose competitive positions in major geographic
or national markets are fundamentally affected
by their overall global competitive positions.
 License foreign firms to produce and distribute
the firm’s products
 Maintain a domestic production base and
export products to foreign countries
 Establish foreign-based plants and distribution
to compete directly in the markets of one or
more foreign countries

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Four Generic Global Competitive
Strategies:
 Broad-line global competition
 Global focus strategy
 National focus strategy
 Protected niche strategy

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Grand Strategy Selection MatrixGrand Strategy Selection Matrix

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Model of Grand Strategy ClustersModel of Grand Strategy Clusters

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