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COMPETITIVE STRATEGIES
5
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Unit-5 Page-80
Bangladesh Open University
The capability of
The capability of competitors to imitate a companys distinctive
competitors to imitate competency need to be given due consideration. If the competitors are
a companys distinc- strongly committed to doing business in a particular way, they will not
tive competency need suddenly imitate a companys innovation. In such a situation, its
to be given due distinctive competency will be sustainable for longer. The third factor of
consideration.
sustainability of distinctive competency that is, industry dynamism is
also an important determinant of competitive advantages. Frequent
product innovation makes an industry environment dynamic. For
example, software industry, electronics industry and PC industry are
highly dynamic because of high rate of innovation. In such industries,
competitive advantages are short-lived.
How to sustain competitive advantage?
Since achieving and maintaining competitive advantage is the primary
aim of competitive strategies, managers should undertake measures to
sustain competitive advantage once they are achieved. Managers can
build sustainable competitive advantage by adopting following
measures.2
Focusing on building blocks of competitive advantages
Managers can build Developing distinctive competencies
sustainable competi-
tive advantage by
Creating an environment of organizational learning
adopting six Instituting continuous improvement mechanism
measures.
Instituting best practices
Overcoming barriers to change
Unit-5 Page-82
Bangladesh Open University
Distinctive Competency:
An Essential Requirement for Achieving Competitive Advantage
A business organization must have distinctive competency in one or
Distinctive more areas of its activities in order to be competitive in the marketplace.
competencies refer to Distinctive competencies refer to those strengths of the organization that
those strengths of the allow it to attain competitive advantage in the market. These strengths
organization that are unique for the organization and they help it achieve superior
allow it to attain
competitive advan-
efficiency, quality, innovation and customer responsiveness. It can be
tage in the market. argued that Partex has distinctive competencies in the case of
manufacturing bottled drinking water MUM. Distinctive competencies
have helped Partex achieve lower costs and make product differentiation
better than its competitors. Thus, distinctive competencies have been
helpful in attaining distinctive advantages through achievement of
superior efficiency and quality.
Unique organizational resources and capabilities constitute an
organizations distinctive competencies. However, the resources of the
organization must be unique (i.e., no other companies have these
resources) to be regarded as distinctive competencies. The resources
comprise physical, human, financial, informational, and technological
resources. An organizations capabilities are the skills necessary to
exploit the resources for productive use. Capabilities are intangible. It
may be noted that an organization may not need unique resources to
establish a distinctive competence as long as no other competitors
possess such resources. An organization can create distinctive
competencies only when it simultaneously has unique resources and has
the capabilities to use those resources effectively. Successful strategies
often either build on a companys existing competitive competencies or
help a company develop new ones.
Competitive Strategy Versus Business Strategy
Business strategy has a wider scope than competitive strategy. Business
strategy encompasses all the actions and approaches for competing
Business strategy
consists of plans of against the competitors and the ways management addresses various
action that strategic strategic issues. As Hill and Jones have remarked, business strategy
managers adopt to consists of plans of action that strategic managers adopt to use a
use a companys
resources and companys resources and distinctive competencies to gain a competitive
distinctive advantage over its rivals in a market. In doing business, companies
competencies to gain
a competitive confront a lot of strategic issues. Management has to address all these
advantage over its issues effectively to survive in the marketplace. Business strategy deals
rivals in a market. with these issues, in addition to how to compete. The competitive
strategy, on the other hand, deals with managements action plan for
competing successfully and providing superior value to customers.
Unit-5 Page-84
Bangladesh Open University
Review Questions
1. What is meant by competitive strategy? What are the actions is it
concerned with?
2. What is competitive advantage? Why is it considered as the ultimate
goal of competitive strategy?
3. As a manager of an organization, what measures would you
undertake to ensure sustenance of competitive advantage?
4. Distinctive competencies have been helpful in attaining distinctive
advantages through achievement of superior efficiency and quality.
Explain the statement.
5. Explain what you mean by distinctive competency. How does
distinctive competency help in achieving competitive advantages?
6. What are the differences between competitive strategy and business
strategy?
1. Low-cost strategy
2. Differentiation strategy
3. Best-cost strategy
4. Market-niche or focus strategy.
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Bangladesh Open University
Unit-5 Page-88
Bangladesh Open University
Review Questions
1. What are the generic strategies as identified by Michael Porter?
2. Explain the meaning of low-cost strategy.
3. Discuss the benefits of low-cost strategy to the business
organizations.
4. Discuss the market situations favorable for low-cost strategy.
5. When does the low-cost strategy work best in a business
organization dealing with consumer products?
6. Low-cost strategy does not work well in some situations. Do you
agree with this view? Give arguments in support of your answers.
7. When does a low-cost strategy may fail.
Unit-5 Page-90
Bangladesh Open University
The differentiation
Making a companys product different from those of the competitors is
must be sustainable. not enough to survive competition in the marketplace. The differentiation
must be sustainable. In order to sustain product differentiation for a
longer period of time, a company needs to address the following issues:
1. The company must try to adopt those differentiation approaches that
would be hard or expensive for the competitors to copy (or
duplicate). However, strong competitors might be able to clone any
feature of a product over a period of time.
2. Differentiation has to be linked to core competencies, unique
competitive capabilities, and superior management of value chain
activities. The basis for a companys product differentiation would
be sustainable if the competitors cannot readily match their
competencies with those of the company. Sustainability can also be
achieved if competitors cannot manage the value chain activities as
uniquely as the company itself.
3. A company may ensure sustainability of differentiation when it can
base its differentiation on new product innovation, technological
superiority, quality, reliability, unique competitive capabilities and
superior as well as comprehensive customer service.
4. The differentiation attributes must be of value to customers.
How to Achieve a Differentiation-Based Competitive Advantage?
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Bangladesh Open University
A company has to create unique attributes for product differentiation so A company has to
that customers consider them valuable. It can do it if it adopts any of the create unique
attributes for product
following approaches: differentiation so that
customers consider
1. It may incorporate in its products such attributes or features that will them valuable.
lower the customers costs of using the product. Product becomes
economical to a customer when the company is able to reduce
wastage of raw materials, deliver the products just-in-time for
reducing customers stock/inventory, provide regular repair and
maintenance service and provide free technical support, etc.
2. The company may incorporate performance-raising features in the
product. Several features/attributes can enhance product
performance. Michael E. Porter suggested seven such features:
Provide buyers greater reliability, durability, convenience, or
ease of use.
Make the companys product or service cleaner, safer, quieter, or
more maintenance-free than rival brands.
Exceed environmental or regulatory standards.
Meet the buyers needs and requirements more completely,
compared to competitors offerings.
Give buyers the option to add on or to upgrade later as new
product versions come on the market.
Give buyers more flexibility to tailor their own products to the
needs of their customers.
Do a better job of meeting the buyers future growth and
expansion requirements.6
3. The company may incorporate buyers satisfaction-raising features in
intangible ways. Intangible ways may differ from product-to-product
but generally they may include safety, design, superior
craftsmanship, upscale fashion, buyers desire for status, image and
prestige, unconditional guarantee, long-time warranty, refund for a
purchased product if returned within a specified time, replacing a
purchased product, refunding purchasing price for a defective
product, and so on.
4. The company may compete on the basis of capabilities that
competitors are lacking. A companys all of the capabilities may not
have differentiating competitive value. Only those capabilities have
such value which the competitors cannot afford to match. Thus, the
company must be able to develop capabilities that have
differentiating competitive value. As an example, Microsoft
Corporation has stronger capabilities than its competitors to develop
and sell software products much faster. Microsofts differentiating
competitive capabilities are its unique operating system (Windows),
very strong and large project teams consisting of highly qualified
programmers, marketing know-how and efficiency, and unparallel
financial strength.
Unit-5 Page-94
Bangladesh Open University
Review Questions
1. Define differentiation strategy.
2. What are different ways for achieving product differentiation?
3. Make a list of the themes for the differentiation of various products.
4. A product can be differentiated in different ways. Also, the themes
are not same for all types of products. Discuss at least five themes
for differentiation five different types of products.
5. Discuss the issues that need to be addressed for achieving
sustainability of differentiation strategy.
6. How can a company achieve a differentiation-based competitive
advantage?
7. State the shortcomings of differentiation strategy.
Unit-5 Page-96
Bangladesh Open University
Broad
Low-Cost Differentiation
Strategy Strategy
Best-Cost Strategy
Focused Focused
Low-Cost Differentiation
Strategy Strategy
Unit-5 Page-98
Bangladesh Open University
Review Questions
1. Clarify the meaning of market-niche strategy or focus strategy.
2. What are the common requirements for successful implementation of
niche strategy?
3. When is the niche strategy most useful? Explain.
4. What are the different types of niche strategy? Discuss are the risks
associated with a niche strategy.
5. If a company wants to follow a combination of low-cost strategy,
differentiation strategy and focus strategy for a particular product,
what should ideally be the characteristics of the product and also of
the market segment?
Unit-5 Page-100
Bangladesh Open University
Unit-5 Page-102
Bangladesh Open University
Review Questions
1. What do you mean by best-cost strategy?
2. Give two examples of best-cost strategy in the context of
Bangladesh.
3. What are the preconditions for a company to become a best-cost
provider?
4. Discuss the market situations where the best-cost strategy works
best.
5. Explain the nature of best-cost strategy. Is it always pragmatic to
follow the best-cost strategy? Why?
NOTES
1. Hills and Jones, op.cit. p. 127.
2. This section draws on Hill and Jones, op.cit., pp. 134-135.
3. Apple Computer lost its competitive advantage subsequently.
Compaq and Dell two giants in computer business enjoyed
competitive advantage in certain years but both had been at a
competitive disadvantage at some other years.
4. Philip Kotler, Marketing Management (New Jersey: Prentice-Hall,
1999), p 287.
5. These have been suggested by Hill and Jones, op. cit. pp. 134-135.
6. For details, see Michael E. Porter, Competitive Advantage (New
York: Free Press, 1985). pp. 135-138.
7. Michel A. Hitt, R. Duane Ireland and Robert E. Hoiskisson, Strategic
Management: Competitiveness and Globalization (Australia: South-
Western, 2001), p. 168.
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