strategic mgmt hw

Low -Cost Strategy Definition :  Companies using this generic strategy will typically earn low margins but achieve high sales volumes .(Economies of scale )  Economies of scale is the cost advantage that arises with increased output of a product . C ompanies adopting Low -cost strategy: - Ikea - Hyundai - Walmart - Southwest Airlines - Lenovo - EasyJet - Kia Motors Low -Cost Strategy is an integrated set of actions taken to produce goods or services with features acceptable to customers at the lowest cost , relative to that of competitors. Low -Cost Strategy Competitive advantages In -Class Assignment : How do companies lower their operating costs ? - Choose a company from the list . - Identify the different actions/activities the company has done to reduce its costs . Differentiation Strategy Definition:

In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers .It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs .It is rewarded for its uniqueness with a premium price . Differentiation strategy is a n integrated set of actions to produce goods or services at an acceptable cost that customers perceive as different in ways that are important to them. Examples:

- Apple :  Assembling in China . - Renault, Volkswagen…. :  Manufacturing in Eastern Europe. C ompanies adopting differentiation strategy: - Saveco - Apple , Samsung - Lexus - Volkswagen , - Safat Alghanim - ….. Figure: Examples of value -creating activities associated with the differentiation strategy Superior handling of incoming raw materials Rapid responses to customers’ unique specifications Rapid and timely product deliveries to customers Extensive personal relationships with customers and suppliers -High product installations -Training programs -Highly developed information system to better understand customers’ preferences -Compensation programs intended to encourage employee creativity and productivity -Strong capability in research & development -Purchase of highest quality raw materials -Superior personnel training - Investments in acquiring key technologies (Machines, software, etc.) Firm Infrastructure Inbound Logistics Operations Outbound Logistics Marketing and Sales Service Human Resource Management Technological Development Procurement Focused Strategy Definition:

Focus Strategy consists of offering a product strongly differentiated ( in terms of cost or high quality ) that can attract a narrow segment of customers . The focus strategy has two variants: (a) In cost focus a firm seeks a cost advantage in its target segment, (b)differentiation focus a firm seeks differentiation in its target segment. Focus strategy is an integrated set of actions taken to produce goods or services that serve the needs of a particular customer segment. Focused Strategy Focused Low -cost Strategy  Difference between Low -cost strategy and Focused low -cost Strategy - “Low -cost strategy” : A strategy that consists to maintain the level of perceived value but with low price . “Focused low -cost strategy ” A strategy that is based on the simultaneous reduction of price and value . C ompanies adopting low -cost strategy : - LIDL (Supermarket ) - Ryanair - Many companies in China (1KD, 1€,1$,… .) - … .. Focused Strategy Focused differentiation strategy A focused differentiation strategy requires offering unique features that fulfill the demands of a narrow market (a few or one segment). Examples:

 Chanel, Giorgio Armani, LVMH  Creating value for superior design and high quality aware customers.  delivering all aspects of superior design and creativity to its brands.  Ferrari, Porsche, BMW ,  Very high design, comfort, security,…..  Some particular products: - Some medicines or beauty products. Online sale . Integrated low -cost/differentiation Strategy: Hybrid Strategy  The integrated low -cost/differentiation strategy : Concentrating simultaneously on two sources of competitive advantage. - Efficiency : the source of maintaining low cost - Differentiation : the source of creating better/unique value  Example : - Lexus: Acceptable price with high differentiated features.  The risk: “Stuck in the middle ”. The integrated low -cost/differentiation strategy involves engaging in primary and support activities that allow a firm to simultaneously pursue a n integrated strategy. - The cost structure is not low enough to allow it to offer attractive prices and, - The products are not differentiated enough to create value for the target market segments . Saveco ,Safat Alghanim, Is it possible to adopt integrated Strategy, and how? Focused differentiation : strategy Bad strategies (6, 7, 8) Focused low -cost strategy Low -cost Strategy Hybrid Strategy Differentiation Strategy The Strategy Clock 6 7 8 4 2 1 3 5 Price Perceived value Low Low High High The strategy clock shows the different generic competitive strategies by focusing on two elements : Price and perceived Value . END OF CHAPTER