http://www.academia.

edu/7367341/googles_strategy_2012
Business Strategies
Generic Strategies

Cost Leadership

Objective: become the lowest-cost producer in the industry.

The traditional method to achieve this objective is to produce on a large scale which enables the
business to exploit economies of scale.

The strategy is usually associated with large-scale businesses offering “standard” products with
relatively little differentiation that are readily acceptable to the majority of customers. Occasionally,
a low-cost leader will also discount its product to maximize sales, particularly if it has a significant
cost advantage over the competition and, in doing so, it can further increase its market share.

A strategy of costs leadership requires close cooperation between all the functional areas of a
business.

The firm is likely to use several of the following:

- High levels of productivity

- High capacity utilization
- Use of bargaining power to negotiate the lowest prices for production inputs
- Lean production methods (e.g. JIT)
- Effective use of technology in the production process
- Access to the most effective distribution channels
- Economies of scale / Economies of scope
- The learning curve: the longer time you produce the product, the more efficient it will be
( you will spend much less time + less defect)
- The experience curve: the more “experience” you have making a product, the faster and
cheaper it is to make.

Examples: Wal-Mart, McDonald’s, Ikea

*** You need to be best in all activities in order to last longer

Skills and Resources Requirements + Organizational Requirements:

- Process engineering skills – need to find the most efficient ways

- Intense supervision of labor
- Automatic / Computerized processes can create cost efficient
- Lean Production + Lean Marketing
- Tight cost control
- Continuous improvement and benchmarking orientation
- Incentive based + usually quantitative targets

Differentiation

Objective: Provide products that are clearly different from the competitors.

This strategy is usually associated with changing a premium price for the product – often to reflect
the higher production cost and extra value-added features provided for the consumer.

The methods include:

- Superior product quality (features, benefits, durability, reliability)

- Branding (strong customer recognition & desire, brand loyalty)
- Industry-wide distribution across all major channels (i.e. the product or brand is an essential
item to be stocked by retailers.
- Consistent promotional support – often dominate by advertising, sponsorship etc

Example: Ikea, Mercidez

*** Can be only 1 activities and differentiate it!

Typical process: R&D  Production  Marketing

Skills and Resources Requirements + Organizational Requirements:

- Strong marketing abilities – need to communicate and convince customers that your product
is superior than the competitor’s
- Product engineering
- Creativity and Innovation – consistently improve your product
- Building strong brand reputation
- Subjective measurements
- Require highly skilled labor and scientists

BUT! You can’t be in the middle. It’s impossible to offer luxury product with lower price (you end up
getting low return + cause confusion to customers)

“So, pick 1 strategy and follow through”

DUO Strategies: Starts with low cost  gain revenue  then start differentiation

Speed Differentiation

“Automation” is the key success factor

Skills and Resources Requirements + Organizational Requirements:

- Process engineering skills – you need most efficient process to be the quickest
- Excellence inbound and outbound logistics – warehouse close to distribution sites
- Strong delegation – you have to trust your people, not much room for discussion with top
management

Example: Zara  speed in terms of clothing lines, every 2-3 weeks they offer new clothes