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Caselet-1: Nordstrom Inc Caselet-2: A Vision of Industry DominanceNike Caselet-3: Leveraging TechnologyReinventing Amazon.com
Routes to Building Competitive Advantage Low-Cost Leadership Strategies Differentiation Strategies Focus Strategies Strategy and Competitive Advantage over the life cycle
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SUPPORT ACTIVITIES
Technology Development
Perpetual inventory
Procurement
PRIMARY ACTIVITIES
Inbound Logistics
Operations
Outbound Logistics
Marketing/ Sales
Service
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Strategy
An integrated and coordinated set of actions taken to exploit core competencies and gain competitive advantage
Business-level Strategy
Providing value to customers and gaining competitive advantage by exploiting core competencies in individual product markets
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All Customers
Consumer Markets Industrial Markets
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TABLE
4.1
Consumer Markets Demographic factors (age, income, sex, etc.) Socioeconomic factors (social class, stage in the family life cycle) Geographic factors (cultural, regional, and national differences) Psychological factors (lifestyle, personality traits) Consumption patterns (heavy, moderate, and light users) Perceptual factors (benefit segmentation, perceptual mapping)
Industrial Markets
End-use segments (identified by SIC code) Product segments (based on technological differences or production economics) Geographic segments (defined by boundaries between countries or by regional differences within them) Common buying factor segments (cut across product market and geographic segments) Customer size segments
Source: Adapted from S. C. Jain, 2000, Marketing Planning and Strategy, Cincinnati: South-Western College Publishing, 120. 49
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Possessing the capability to differentiate the firms product or service and command a premium price
Performing different (more highly valued) activities.
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Competitive Scope
Broad Scope
The firm competes in many customer segments.
Narrow Scope
The firm selects a segment or group of segments in the industry and tailors its strategy to serving them at the exclusion of others.
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Broad Target
Cost Leadership
Differentiation
Competitive Scope
Narrow Target
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FIGURE
4.2
Source: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance, by Michael E. Porter, 12. Copyright 1985, 1998 by Michael E. Porter. 416
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Differentiation Strategy
An integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.
Focus is on nonstandardized products
Appropriate when customers value differentiated features more than they value low cost.
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if needed
Lower buyers costs Raise performance of product or service Create sustainability through: Customer perceptions of uniqueness Customer reluctance to switch to nonunique product or service
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Order-processing procedures
Customer credit Personal relationships
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Defends against competitors because brand loyalty to differentiated product offsets price competition.
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Can mitigate buyers power because well differentiated products reduce customer sensitivity to price increases.
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Differentiation ceases to provide value for which customers are willing to pay.
Experience narrows customers perceptions of the value of differentiated features. Counterfeit goods replicate differentiated features of the firms products.
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Focus Strategies
An integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment.
Particular buyer groupyouths or senior citizens Different segment of a product lineprofessional craftsmen versus do-it-yourselfers Different geographic marketsEast coast versus West coast
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Focusing allows the firm to direct its resources to certain value chain activities to build competitive advantage.
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Introductory
Limited focus on Comp; product is centre of attention Pioneering forms define industry Emerging, no dominant design General purpose tools
Growth
Firms take out key positions in market Large scale entry by Firms seeking profits Competing designs hope to set standard Growing investment in specialised tools Building brand awareness, prices begin to decline Massive expenditure reinforce position Move to high profits
Mature
Firms try to survive shakeout, many exit or fail Growth slows and entry less attractive Dominant design for industry Emphasis on efficiency Promote to as many segments, prices stable De-emphasis on adding new capacity Peak profits, cash high
Decline
Remaining firms seek to reduce intensity of comp Few, if any entrants
Product Technology
No real product change Processes do not change, may become exit barrier Marketing emphasis changes to preserving Begin gradual exit and even divest activities Profits decline, cash flow too decline
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Process Technology
Marketing emphasis
Investment intensity
Profitability levels