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Competitive Strategy

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Business-level [Competitive] Strategy• Since we’re in the XYZ industry, how do we compete?

Profit = (Price – Cost) x Qty.

• Cost or size advantage• Differentiation or uniqueness advantage

• Marketing advantage• Innovation advantage• Bridge converging industries

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Breadth of Competitive

Scope

Source of Competitive Advantage

BroadTargetMarket

NarrowTargetMarket

Cost

LowCost

Generic Business Level StrategiesGeneric Business Level Strategies

Uniqueness

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Low-Cost Strategy - Operational Advantage

“Dell finds it hilarious that HP and Sony fund researchers to come up with new ideas.” “Steamrollered by Dell” Newsweek, February 21, 2005

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Technological Development

Human Resource Management

Firm Infrastructure

Procurement

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Mark

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Value Chain and Low Cost Strategy Value Chain and Low Cost Strategy

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Inbound LogisticsInbound Logistics

Highly Efficient Systems to Link Suppliers’ Products with the Firm’s Production Processes

Highly Efficient Systems to Link Suppliers’ Products with the Firm’s Production Processes

Located in Close Proximity with Suppliers

Located in Close Proximity with Suppliers

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Technological Development

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Relatively Few Management Layers to Reduce Overhead

Effective Training Programs to Improve Worker Efficiency and Effectiveness

Timing of Asset Purchases

Efficient Plant Scale to Minimize Manufacturing Costs

Selection of Low Cost Transport Carriers

Delivery Schedule that Reduces Costs

Products Priced to Generate Sales Volume

Small, Highly Trained Sales Force

Investments in Technology in order to Reduce Costs Associated with Manufacturing Processes

Frequent Evaluation Processes to Monitor Suppliers’ Performances

Policy Choice of Plant Technology

Organizational Learning

Efficient Order SizesO

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OperationsOperationsEfficient Plant Scale to Minimize Mfg. Costs

Efficient Plant Scale to Minimize Mfg. Costs

Timing of Asset PurchasesTiming of Asset Purchases

Policy Choice of Plant TechnologyPolicy Choice of Plant Technology

Organizational LearningOrganizational Learning

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Technological Development

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Selection of Low Cost Transport Carriers

Delivery Schedule that Reduces Costs

National Scale Advertising

Products Priced to Generate Sales Volume

Small, Highly Trained Sales Force

Effective Product Installations to Reduce Frequency and Severity of Recalls

Frequent Evaluation Processes to Monitor Suppliers’ Performances

Efficient Order Sizes

Interrelationships with Sister Units

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Outbound Logistics

Outbound Logistics

Selection of Low Cost Transport Carriers

Selection of Low Cost Transport Carriers

Delivery Schedule that Reduces Costs

Delivery Schedule that Reduces Costs

Efficient Order SizesEfficient Order Sizes

Interrelationships with Sister Units

Interrelationships with Sister Units

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Technological Development

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Global Scale AdvertisingGlobal Scale Advertising

Products Priced to Generate Sales Volume

Products Priced to Generate Sales Volume

Small, Highly Trained Sales Force

Small, Highly Trained Sales Force

Marketing & Sales

Marketing & Sales

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Technological Development

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Global Scale AdvertisingGlobal Scale Advertising

Products Priced to Generate Sales Volume

Products Priced to Generate Sales Volume

Small, Highly Trained Sales Force

Small, Highly Trained Sales Force

Marketing & Sales

Marketing & Sales

Coca-Cola

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Technological Development

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ServiceServiceEffective Product Installations to Reduce Recalls

Effective Product Installations to Reduce Recalls

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Technological Development

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Procurement

Systems and Procedures to Find the Lowest Cost Products to Purchase Raw Materials

Systems and Procedures to Find the Lowest Cost Products to Purchase Raw Materials

Frequent Evaluation Processes to Monitor Suppliers’ Performances

Frequent Evaluation Processes to Monitor Suppliers’ Performances

ProcurementProcurement

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Technological Development

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Technological DevelopmentTechnological DevelopmentEasy-to-Use Manufacturing Technologies

Easy-to-Use Manufacturing Technologies

Investments in Technology in order to Reduce Costs Associated with Manufacturing Processes

Investments in Technology in order to Reduce Costs Associated with Manufacturing Processes

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Technological Development

Human Resource Management

Firm Infrastructure

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Human Resource Management

Human Resource ManagementHuman Resource ManagementConsistent Policies to Reduce Turnover CostsConsistent Policies to Reduce Turnover Costs

Effective Training Programs to Improve Worker Efficiency and Effectiveness

Effective Training Programs to Improve Worker Efficiency and Effectiveness

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Su

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Act

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Technological Development

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Firm Infrastructure

Firm InfrastructureFirm InfrastructureCost Effective MIS SystemsCost Effective MIS Systems

Relatively Few Management Layers to Reduce Overhead

Relatively Few Management Layers to Reduce Overhead

Simplified Planning Practices to Reduce Planning Costs

Simplified Planning Practices to Reduce Planning Costs

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Breadth of Competitive

Scope

Source of Competitive Advantage

BroadTargetMarket

NarrowTargetMarket

Cost

Generic Business Level StrategiesGeneric Business Level Strategies

Uniqueness

CostLeadership Differentiation

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SOUTHWEST

Differentiation Strategy – Uniqueness Advantage

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Technological Development

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Value Chain and Differentiation Strategy Value Chain and Differentiation Strategy

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Technological Development

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Inbound LogisticsInbound Logistics

Superior handling of incoming raw materials to minimize damage and improve the quality of the final product

Superior handling of incoming raw materials to minimize damage and improve the quality of the final product

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OperationsOperations

Rapid responses to customers unique manufacturing specifications

Rapid responses to customers unique manufacturing specifications

Consistent manufacturing of attractive products

Consistent manufacturing of attractive products

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Outbound Logistics

Outbound Logistics

Accurate and responsive order processing procedures

Accurate and responsive order processing procedures

Rapid and timely product deliveries to customers

Rapid and timely product deliveries to customers

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Marketing & Sales

Marketing & Sales

Extensive personal relationships with buyers

Extensive personal relationships with buyers

Strong Coordination among functions in R&D, Marketing and Product Development

Strong Coordination among functions in R&D, Marketing and Product Development

Premium PricingPremium Pricing

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ServiceServiceComplete field stocking of replacement parts

Complete field stocking of replacement parts

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Technological Development

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ServiceServiceComplete field stocking of replacement parts

Complete field stocking of replacement parts

Caterpillar vs. Komatsu

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Technological DevelopmentTechnological DevelopmentStrong capability in basic research

Strong capability in basic research

Investments in technol-ogies to produce highly differentiated products

Investments in technol-ogies to produce highly differentiated products

Coordination among R&D, marketing and product development

Coordination among R&D, marketing and product development

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Human Resource Management

Human Resource ManagementHuman Resource ManagementCompensation programs which encourage worker creativity and productivity

Compensation programs which encourage worker creativity and productivity

Extensive use of subjective performance measures

Extensive use of subjective performance measures

Superior personnel training

Superior personnel training

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Firm Infrastructure

Firm InfrastructureFirm InfrastructureA companywide cultureemphasizing quality and innovation

A companywide cultureemphasizing quality and innovation

Highly developed Information Systems to better understand customers’ purchasing preferences

Highly developed Information Systems to better understand customers’ purchasing preferences

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Marketing Advantage

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Innovation Advantage

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Innovation Cycle Time

Slow is good, unless you’re the one driving innovationG

row

th R

ate

Timet1 t2 t3

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Differentiated Beef

Bluegrass Meadows Beef

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Still Perkin’

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Breadth of Competitive

Scope

Source of Competitive Advantage

BroadTargetMarket

NarrowTargetMarket

Cost

Generic Business Level StrategiesGeneric Business Level Strategies

Uniqueness

CostLeadership Differentiation

CostLeadership

FocusedDifferentiation

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Converging Industry Advantage

PalmtopComputing

Entertainment

WirelessTelephony

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Razor Trials and Comparisons

Try the razorsCompareEvaluate

What’s the next big thing?

Strategic Dimension 1

?

Str

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Dim

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Gillette: More is Better…?

12 Blade

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Razors• Design features of razors and shaving performance

– Do they make a difference?– Do they create [real or perceived] value?

• What are relevant “strategic dimensions” of razor industry?– What needs [real or perceived] do these dimensions fulfill?

Strategic Dimension 1

?Str

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Dim

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Pizza Strategy Canvas

Taste Delivery Am-biance

Drink Menu

Menu Breadth

Service0

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Domino's

Papa John's

Pizza Hut

Joe Bologna's

Mello Mushroom

Pazzo's

Brooklyn

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Women’s Razor Strategy Canvas

Dim 1 Dim 2 Dim 3 Dim 4 Dim 50

0.5

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Razor 1 Razor 2

Razor 3 Razor 4

Razor 5

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Men’s Razor Strategy Canvas

Dim 1 Dim 2 Dim 3 Dim 4 Dim 50

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Razor 1 Razor 2

Razor 3 Razor 4

Razor 5