need a summary on these two pages

just need a summary on these two pages only

Competitive Strategies In finding its competing within the five forces, l'orter suggests that a com pany can adopt the state diferentiation cost leadership, or focus. The unguzaboral duratteristics typically cute voitheach strategy are summarized in Ex Differentiation. The differentiation strategy Involves an attempt to distinguish the firm's products is from others in the industry. The organization may Hercutive advertising, distinctive product features, exceptional service, or new technology to achiew product perceived as unique. Examples of products that have benetted from a differentiation strategy include Harley Davidson motor cycle Snapper lawn equipment and Gore-Texabrics, all of which are perceived as distinctise in their marken Service companies such as Starbucks, Whole Foods Market, and IKEA use a differentiation strategy A differentiation strategy can reduce rivaley with competitors if buyers are loyal to a company brand. Successful differentiation can also reduce the bar Saining power of large buyers because other products are less attractive, which also helps the firm fight off threats of substitute products. In addition, differen tiation erects entry barriers in the form of customer loyalty that a new entrant into the market would have difficulty overcoming . Cost leadership. With a cost leadership strategy, the organization aggressively seks etficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitors. A low-cost position means that the company can undercut compitors prices and still ofter comparable quality and amasonable profit. For example Comfort Inn and Motel 6 ore low-priced alteratives to Four Seasons or Marriott differentiation cost leadership EXHIBIT 7.6 Organizational Characteristics of Portes Competitive Strategies Strategy Differentiation Organizational Characteristics Able only with strong coordination among departments bacards Created this out of the bot" Con leadership wan for quality or technologcal leadership cost controls os procedures echnologies and Sabonem oyee empower OT policies decedut particular strategic target Focus maring customer loyalty th customer contact haiele Latements lat the war god. LOTS MOTOR Being a low-cost producer provides a successful strategy to defend against the five competitive forces LETS SHOW THE WORLD WHAT MAKES US DIFFERENT. in Exhibit 7.5. The most efficient, low-cost company is in the best position to succeed in a price war while still making a profit. Likewise, the low-cost producer is protected from powerful customers and suppli- ers, because customers cannot find lower prices elsewhere, and other buyers would have less slack for price negotiation with suppliers. If substitute products or potential new entrants occur, the low- cost producer is better positioned than higher-cost rivals to prevent loss of market share. The low price acts as a barrier against new entrants and substitute products, Focus. With a focus strategy, the organization concen trates on a specific regional market or buyer group West The company will use either a differentiation or cost MINI COC leadership approach, but only for a narrow target mar- ket. Save-A-Lot described earlier, uses a focused cost leadership strategy, putting stores in low-income areas Edward Jones Investments, a St. Louis-based brokerage house, uses a focused differentiation strategy, building G its business in rural and small town America and pro viding clients with cservative, long-term investment advice Management scholar and consultant Peter Drucker once said the safety-first orientation means Edward Jones delivers a product that no Wall Street house has ever sold before peace of mind." Concept Connection The Ministrademarked Whiptastic Handling one of the ways the company Managers should think carefully about which strat distinguishes in the automobile industry MINI, egy will provide their company with its competitive of BMW of North Aparica, thriving with its differentiation advantage. Gibson Guitar Corporation, famous in the strategy. The company trademarked the Whiprastie name to music world for its innovative, high-quality products, emphasize that driving a MINI Cooper is unlike anything else found that switching to a low-cost strategy to compete Cutomer seem to agre, sales are coming against Japanese rivals such as Yamaha and Ibanez actus ally hurt the company. When managers realized people wanted Gibson products because of their reputation, not their price, they went back to a differentiation strategy and invested in new technology and market- ing. In his studies, Porter found that some businesses did not consciously adopt one of these three strategies and were stuck with no strategic advantage Without a strategic advantage, businesses eamed below-average profits compared with those that used differentiation, cost leadership, or focus strategies. Similarly, a five-year study of management practices in hundreds of businesses, referred to as the Evergreen Project, found that a clear strategic direction was a key factor that distinguished winners from losers. CONSORTERBO New TRENDS IN STRATEGY Organizations have been in a mergerand acquisition frenzy in recent years. IP Morgan Chase and Bank One merged, AT&T bought Cingular Wireless, and Disney merged with ABC Some companies still seek to gain or keep a competitive edge by acquiring new capabilities via mergers and acquisitions. Yet today, a decided shift has occurred toward enhancing the organization's existing capabilities as the primary means of growing and innovating. Another current trend is using strategic partnerships as an alternative to mergers and acquisitions fiscus type of company alty that has concetto che tonalitet or Competitive Strategies In finding its competitive edge within these five forces, Porter suggests that a com- pany can adopt one of three strategies differentiation, cost leadership, or focus. The organizational characteristics typically associated with each strategy are summarized in Exhibit 7.6 Differentiation. The differentiation strategy involves an attempt to distinguish the firm's products or services from others in the industry. The organization may use creative advertising, distinctive product features, exceptional service, or new technology to achieve a product perceived as unique. Examples of products that have benefited from a differentiation strategy include Harley-Davidson motor- cycles, Snapper lawn equipment, and Gore-Tex fabrics, all of which are perceived as distinctive in their markets. Service companies such as Starbucks, Whole Foods Market, and IKEA also use a differentiation strategy A differentiation strategy can reduce rivalry with competitors if buyers are loyal to a company's brand. Successful differentiation can also reduce the bar- gaining power of large buyers because other products are less attractive, which also helps the firm fight off threats of substitute products. In addition, differen- tiation erects entry barriers in the form of customer loyalty that a new entrant into the market would have difficulty overcoming Cost leadership. With a cost leadership strategy, the organization aggressively seeks efficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitors. A low-cost position means that the company can undercut competitors' prices and still offer comparable quality and earn a reasonable profit. For example, Comfort Inn and Motel 6 are low-priced alternatives to Four Seasons or Marriott differentiation Atype of competitive strategy with which the organisations to distinguish its products that competitors cost leadership A type of competitive strategy with which the organization assively seeks efficient facilities, cuts costs and employs tight cost controls to be more efficient than competitors EXHIBIT 7.6 Organizational Characteristics of Porter's Competitive Strategies Strategy Organizational Characteristics Differentiation Acts in a flexible, loosely knit way, with strong coordination among departments Strong capability in basic rewards Creative flair, thinks "out of the box Strong marketing abilities Rewards employee innovation Corporate reputation for quality or technological leadership Cost Leadership Strong central authority, tight cost controls Maintains standard operating procedures Easy-to-use manufacturing technologies Highly efficient procurement and distribution systems Close supervision, finite employee empowerment Focus Frequent, detailed control reports May use combination of above policies directed at particular strategic target Values and rewards flebility and customer intimacy Measures cost of providing service and maintaining customer loyalty Pushes empowerment to employees with customer contact SOURCES. Based on Michael Porter, Competent Analysis and Competitor New York. The free Press 1980. Michal and Fred Wieruma. "How Market leaders KeepTheir pr." Freebruary 6, 1995) 88-98 and Michael A. It Dan Island and Rubers Eve St Paul, MN West, 1995). 100-112 Being a low-cost producer provides a successful strategy to defend against the five competitive forces LET'S SHOW THE WORLD WHAT MAKES US DIFFERENT in Exhibit 7.5. The most efficient, low-cost company Lattaa is in the best position to succeed in a price war while still making a profit. Likewise, the low-cost producer is protected from powerful customers and suppli- ers, because customers cannot find lower prices elsewhere, and other buyers would have less slack for price negotiation with suppliers. If substitute products or potential new entrants occur, the low- cost producer is better positioned than higher-cost rivals to prevent loss of market share. The low price acts as a barrier against new entrants and substitute products Focus. With a focus strategy, the organization concen trates on a specific regional market or buyer group The company will use either a differentiation or cost MINI COO leadership approach, but only for a narrow target mar- ket. Save-A-Lot described earlier, uses a focused cost leadership strategy, putting stores in low-income areas. Edward Jones Investments, a St. Louis-based brokerage house, uses a focused differentiation strategy, building its business in rural and small town America and pro- viding clients with conservative long-term investment advice Management scholar and consultant Peter Drucker once said the safety-first orientation means Edward Jones delivers a product that no Wall Street house has ever sold before peace of mind." Concept Connection The MINI trademarked tem "Whiptastic Handling is one of the ways the company Managers should think carefully about which strat- distinguishes in the automobile industry. MINI, a on egy will provide their company with its competitive of MW of North Amenca, a thriving with its differentiation advantage Gibson Guitar Corporation, famous in the strategy The company trademarked the Whiptastic name to music world for its innovative, high-quality products, emphasize that driving a MINI Cooper is like anything else Customers to per sales are coming found that switching to a low-cost strategy to compete against Japanese rivals such as Yamaha and Ibanez actu. ally hurt the company. When managers realized people wanted Gibson products because of their reputation, not their price, they went back to a differentiation strategy and invested in new technology and market- ing. In his studies, Porter found that some businesses did not consciously adopt one of these three strategies and were stuck with no strategic advantage. Without a strategic advantage, businesses earned below-average profits compared with those that used differentiation, cost leadership, or focus strategies. Similarly, a five-year study of management practices in hundreds of businesses, referred to as the Evergreen Project, found that a clear strategic direction was a key factor that distinguished winners from losers. OUTSOFCSPORT SOUBY m Planning NEW TRENDS IN STRATEGY Organizations have been in a merger and acquisition frenzy in recent years. J.P. Morgan Chase and Bank One merged, AT&T bought Cingular Wireless, and Disney merged with ABC. Some companies still seek to gain or keep a competitive edge by acquiring new capabilities via mergers and acquisitions. Yet today, a decided shift has occurred toward enhancing the organization's existing capabilities as the primary means of growing and innovating. Another current trend is using strategic partnerships as an alternative to mergers and acquisitions. fucus A type of competitive states that emphasizes concentration on a specific wonal market over roup