Competitive strategy

Question 1

Different strategies to gain competetive advantage

Answer 1

No frills, low-price, hybrid, differentiation, focused differentiation, and high price / same price.

Question 2

What is no frills

Answer 2

• Low price combined with low perceived product benefits focusing on price-sensitive market segments (easy jet)
  – Commodity markets
  – Price-sensitive customers
  – High power, low switching costs among buyers – Opportunity to avoid major competitors

Question 3

what is Low Price

Answer 3

• Lower price than competitors is in the long term profitable only if accompanied by expansion; if there are barriers to entry and imitation; and we can capitalize on economies of scale.
• Risks
• Competitors might follow suit (risk of imitation)
• Customers associate low price with low benefits – no frills becomes low price
• Cost reductions may result in inability to pursue differentiation strategy
  – By reducing cost you may eliminate functions and vital knowledge
  – Margin reductions or even loss
  – Inability to reinvest

Question 4

What is hybrid

Answer 4

• Seeks to simultaneously achieve differentiation and low price relative to competitors
• Advantageous when
  – Greater volumes can be achieved (i.e. works when achievable economies of scale outweigh lost margins)
  – Cost reductions outside differentiated activities are available
  – Commonly used as an entry strategy

Question 5

What is differentiation

Answer 5

• Seeks to provide products that offer benefits that differ from those offered by competitors
• Dependent upon:
  – Identifying and understanding strategic customer needs (who is your
  customer and what does he need?)

– Identifying key competitors’ strategies (who is in your strategic group? How do your competitors differentiate themselves?)

Question 6

Hvad is focused differentiation

Answer 6

• Sometimes called a “niche strategy”
• Seeks to provide high perceived product benefits, justifying price premiums, for a specific target group
• The Holy Grail of competitive positions?
• Key issues
  – Choice between focus strategy and broad differentiation
• it may be hard to choose between focus and mass-market (route 4).
  – Tensions between focus strategy and other strategies * Particularly in case of multiple products positioned
  differently
  – Limits to growth
• Focusing on one segment may limit long-term growth
  – Market changes
• Segments change over time

Question 7

What is High price / same price strategies?

Answer 7

Destined for failure. These strategies will either have no differentiation, worse product or same price worse product.

Question 8

What is a strategic gap?

Answer 8

A strategic gap is an opportunity in the competitive environment that is not being fully exploited by competitors.