Strategic Management - Porter Flashcards
What is strategic management?
the philosophy that for a business to gain competitive advantage, they should focus on their strengths
focused on gaining competitive advantage in the market
What are the 2 competitive advantages of strategic management?
Cost advantage - reducing/altering business costs
Differentiation advantage - having different goods/services from others in the market
results in businesses being able to respond to the 5 forces better
What are the 3 generic strategies of strategic management?
Cost leadership
Differentiation
Focus
What are lower-cost strategies?
A business trying to have the lowest costs in the industry
increases profit and margin
above average performer in price of products
(LC) What does reducing direct/indirect costs mean?
reducing staff wages refinancing to reduce interest costs reducing cost of stock/supplies sourcing cheaper utilities making cheaper packaging
(LC) What does improving efficiency mean?
minimising idle stock on shelves
using assets more efficiently (QR codes, tap n’ go, tables have menus/cutlery already done)
Controlling areas of management - evaluate HR, OPS, S&M…
Introduce materials management strategies
Benefits of Low-Cost strategies
Benefits-
more profitable
prevent comp. from increasing market share
save money allowing better expansion/developments
savings can be put into differentiation
Limitations of Low-Cost strategies
Limits-
sales can fall bc customers might think its lower quality
can loose market share if comp. uses same strategies
little room to make future changes
makes it difficult to differentiate in future
What are differentiation Strategies?
The use of branding, delivery methods, and advertising to create unique identity
increases competitive advantage when done right
What are the 3 differentiation strategies?
High quality products
Multiple branding
Innovation/research and development
(DS) What does high quality products do?
creating and ensuring great quality products that are better than competitors
offering extended warranties
(DS) What does innovation/research do?
developing a unique product that no other businesses currently make
identifies a new market and provides product before competitors do
(DS) What does multiple branding do?
providing similar products with subtle differences in a market to appeal to customers
Benefits of Differentiation strategies
Benefits-
can develop customer loyalty and connect w/ customers
can make profit by charging premium price
market share is boosted by customer loyalty
Limitations of Differentiation strategies
Limits-
comp. can copy difference resulting in lost gains
differentiation has starting cost that must be more beneficial than not
time consuming
