CRAFTING BUSINESS STRATEGY (VIII)
The Five general competitive strategies
Now is time to describe the basic competitive strategies which the company can follow in order to gain competitive advantage over rivals. In past articles we’ve introduced the different analytical tools that we can use to acknowledge our company status. Now is time to explain which is the best general strategy for a certain company to follow. In my opinion it is also possible to choose a combination of those strategies if suits our company profile. Anyway is important to keep focus and not mix strategic actions without understand our company’s nature. This mix can confuse us and then we will walk through a leafy forest and we wont see the path to follow and our trip end point.
The five generic strategies are low cost provider, broad differentiation, best cost provider and differentiation strategy. One common point among strategies is to overpass rivals by doing a better job, reduce costs and satisfy buyers needs and preferences.
Low cost provider strategy
This strategy focus on lower overall costs than competitors. The most successful low-cost leader are really good finding ways to drive costs out through cost efficient management of value chain activities and eliminate unnecessary activities. This strategy is suitable when business is made of price-sensitive buyers. Examples of low cost provoder leaders are wal-mart in U.S, DIA, Ryanair, etc.
Broad differentiation strategy
The essence of broad differentiation strategy is to make your product or service unique to a wider range of customers. The company must study buyers needs and what they are willing to pay for. The idea is to add desired attributes in your product. For example Rolex offer prestige and Fedex superior service. One important point is that our attributes should not be easy to copy otherwise we won’t gain competitive advantage.
Best-cost provider strategy
When a company has the resource strengths and competitive capabilities to lower cost than rivals and in the same time incorporate upscale features in order to offer an attactive upscale product then its clear the strategy to follow is best-cost provider. This strategy is kind of risky cause most of the times is difficult for a company to lower costs and offer better attributes on products. Typical best-cost provider strategy companies invest a lot in research and development.
Read the older articles about Crafting Business Strategy here: