UNIT 8 CHOOSING HOW TO COMPETE - Porters Generic Strategies Flashcards
according to porter a competitive bs startegy is about
being differnet
accoridng ot porter a comp bs startegy is about being different it involves
deliberatley choosing diff set of activities
to be able to deliver unique mix of value
relative to competitors
Value a bs offers depends on
combo of benefits relative to price paid
what are the two possible positioning approaches for a bs
Cost - Leadership Strategy
Differentiation Strategy
Cost Leadership Strategy
involves achieving lower costs than rivals in same industry
What are the 4 ways a business can cost lead
Lower Input Costs
Economies of Scale
Experience
Product/process design
Lower Input Costs - what are two ways How can bs lower costs of inputs
owning its suppliers and therefore avoiding profit margins of its suppleirs (+ develop unique products comp may not have accses to giving it some form of USP )
Bs could be located nearer supplies than comp reducing transportation costs
morrisons e.g owns many farms that supply its products
Ikea designs + develops all own products
Explain EOS in terms of cost leadership
bs may have cost advantages by being bigger than its rivals
for e.g can spread fixed costs over more units if it big enough therfore reducing unit costs
Explain how experiecne cna help with cost leadership
managers and employees may be more experienced than rivals
enabling them to source cheaper materials and make more efficient descsiosn ( this measn minimum waste and expense allowing for furhter cost ssaving lwoer unit costs and higher profit margins )
Explain how product/process desing allows for cost leadership
design of product/process used to produce it may be more cost efficient than comp
e.g budget airlines use local regional airports wehre its cheaper to take off and land than at major airports like heathrow and gatwick
Provide basic service witjout prebooking seats + w/o food and newspapers provided
By being a cost leader what can bs can charge ..
similar prices to comp and earn higher returns
or if needed by being a cost leader a bs can reduce
prices lower than competitiors can
and still make a suitable profit margin
(whilst putting pressure on comp to leave mkt or up prices which will give them moe market share )
What is differentiation startegy
when bs provides some degree of uniqueness
relaitve to its competitors
thats sufficiently valued by customers
allowing a premium price ot be charged
Give example of differentiation startegy
higher levels of customer service than rivals
bs may offer more features
how does a bs eatn higher returns than rivals thorugh differentiation startegies
charge price premium so make higher profit margins
+ gain brand loyaltyand a lower PED as ability to sub products with others is reduced
dont have to comp on price
