outline theme 1. porter generic strategies - wordpress.com · eleonora escalante mba-meng,...

Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services

© 2017 Eleonora Escalante-all rights reserved

Leg 4. From Melbourne to Hong Kong.

Outline Theme 1. Porter Generic Strategies

1. Porter´s Generic

Strategies Framework

2. Cost Leadership

Strategy

3. Differentiation

Strategy

1

4. Focus

Strategy

5. Summary and

Conclusions

We are here!

8-Jan-2018

https://support.office.com/es-ES/article/b89770f1-deb1-4a19-94ef-342aa15a4689




Theme 1. Porter Generic Strategies

1. Porter´s Generic

Strategies Framework

2

We are here!Cost Leadership Differentiation

Differentiation

FocusCost Focus

FOCUS

Source of Competitive Advantage

Low Cost Differentiation

Broad Target:

Industry Wide

Narrow Target:

Single SegmentCo

mp

eti

tive S

co

pe

8-Jan-2018






3

We are here!Cost Leadership Differentiation

Differentiation

FocusCost Focus

FOCUS

Source of Competitive Advantage

Low Cost Differentiation

Broad Target:

Industry Wide

Narrow Target:

Single SegmentCo

mp

eti

tive S

co

pe

3. Differentiation

Strategy

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We are here!

3. Differentiation

Strategy

8-Jan-2018

Generic Strategy Key Strategy ElementsResource and Organizational

Requirements

Cost Leadership

· Investments in scale-efficient

plant

· Design of products for ease

of manufacture

· Control of overheads

· R&D

· Avoidance of marginal

customer accounts

· Access to capital

· Process engineering skills

· Frequent Reports

· Tight Cost Control

· Structured Organization and

responsibilities

· Incentives related to

quantitative targets

Differentiation

· Emphasis on Branding

· Brand Advertising

· Design Service

· Quality

· Marketing abilities

· Product Engineering skills

· Creativity

· Innovation

· Capability in basic research

· Strong inter-functional

coordination

3a






4

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3. Differentiation

Strategy

Differentiation:

• A firm differentiates from its competitors “when it provides something unique that

is valuable to buyers beyond simply offering a low price”.

• There is no limit to a firm´s opportunities for differentiating its offering to

customers, because every firm is different, this set of differentiation opportunities

is unique to each firm.

• The range of differentiation opportunities depends only upon the type of product

or service: Automobiles or restaurants have greater potential for differentiation

than highly standardized products such as cement or commodities.

•

Nevertheless even commodities can be supplied in ways that create customer

value.

• Differentiation happens at the supply-side, and at the demand side (what creates

value for the customers)

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Drawing by Martin Lovev.






5

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3. Differentiation

Strategy

Differentiation:

• From the point of view of the supply side: The firm has to find out

which resources and capabilities can help to create uniqueness and

do it better than competitors.

• From the point of view of the demand side, the key is to have insight

into and understanding of customers and their needs and

preferences. Understanding what customers want, how they choose

the product and what their motivations are, we can identify

opportunities for profitable differentiation.

• Understanding both sides (supply and demand) is important in the

analysis of differentiation.

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6

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3. Differentiation

Strategy

Drivers of Uniqueness for differentiation from the Supply Side:

Dif

fere

nti

ati

on

of

Pro

du

cts

or

Dif

fere

nti

ati

on

of

Serv

ices

Product features and performance

Services of the firm (credit, delivery, repair)

Intensity of particular marketing activities

Content of Activities (Pre-post sales services provided)

Technology employed in performing an activity

Quality of purchased inputs

Procedures governing the conduct of particular activities- frequency of quality control

inspections, frequency of sales visits to a customer, velocity of service procedures

Skill and experience of employees in activities

Control procedures used in different activities

Location

Degree of vertical integration

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7

We are here!

3. Differentiation

Strategy

Identifying the Potential for Differentiation in the Supply Side: Using Porter´s Value Chain

Infrastructure Activities

Research Development, Design

Human Talent Development

Purchasing,

Inventory,

Materials

handling

ProductionWarehousing

and

Distribution

Sales and

Marketing

Dealer

Support

and

Customer

Service

Pri

mary

Act

ivit

ies

Su

pp

ort

Act

ivit

ies

Build Corporate Reputation.

Technology that supports innovation and responsiveness

to customer needs through close internal coordination

Unique Product

Features. Fast new

product development

Design for reliability

and serviceability

Education that supports

goals of quality and

responsiveness.

Incentives that are

consistent with

differentiation goals

Developing commitment

to customer services

Training for customers.

Fast, reliable repairs.

Availability of spare

parts. Training for

dealers. Customer

credit.

Quality and

reliability of

components

and materials.

Fast Mfg.

Defect free Mfg.

Ability to produce

to customer

specification

Fast Delivery. Efficient

Order Processing.

Sufficient inventories

to meet unexpected

orders

Advertising that

enhances brand

reputation.

Effective sales

force. Quality

sales literature8-Jan-2018






8

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3. Differentiation

Strategy

Drivers of Uniqueness for differentiation from the Demand Side:

Dif

fere

nti

ati

on

of

Pro

du

cts

or

Dif

fere

nti

ati

on

of

Serv

ices

Products attributes and positioning

Customers requirements and preferences

Social and Psychological influences of the customers

Purchase decisions are driven by the need to identity with others, to establish

individuality and to proclaim aspirations

The fit between the customers or buyers and the product

Good listening to customers: Get out from behind your desk and go to where the

customers are.

8-Jan-2018


FORMULATE

DIFFERENTIATION

STRATEGY

• Select product

positioning in relation

to choice of attributes

• Select target customer

group

• Ensure compatibility

between product

attributes and

preferences of target

customer group

• Evaluate the potential

returns from

differentiation relative

to the costs of

differentiation





9

We

are

here!

3. Differentiation

Strategy

Identifying the Potential for Differentiation on the Demand Side:

The ProductWhat needs does the product

satisfy?

Identify the principal product

attributes

The Customers

By What Criteria do customers

choose?

Identify the patterns of customer

preferences in relation to

individual attributes and

combination of attributes

Identify the Price-premiums that

individual attributes can

command?

What are the motivational and

other influences that determine

consumer behavior?

Identify the demographic

socioeconomic and

psychographic factors that

correlate with customer behavior

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10

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3. Differentiation

Strategy

Strategies of Differentiation:

Differentiation

Strategies

Quality

Design

Support

Image

Price

No basis for

differentiation

Beyond constraints the

potential in any product or

service for differentiation

is limited only by the

boundaries of human

imagination.

Differentiation is likely to

be built into the identity,

style and values of the

company.

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3. Differentiation

Strategy

Price

• Most Basic way to differentiate a product is simply to charge a

lower price or a higher price.

• If charging a lower price, the producer absorbs the lost margin, or

makes it up through a higher volume of sales.

• If charging a higher price, this usually happens with “first movers”.

• With similar products, perhaps commodities, product

differentiation maybe used.


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12

We are here!

3. Differentiation

Strategy

Image

• Marketing is used to create differentiation where it does not

otherwise exist.

• Highlighting differences and luxurious packaging are used as

techniques. But be aware, the packaging doesn´t affect the

content. Example: Yogurts, expensive face moisturizers,

perfumes or cosmetics.

• If the image is established through advertising efforts, results

must be attached in order to sustain the image over time.

• When looking for foreign direct investments or attract

tourism, the image is a key differentiation factor.


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13

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3. Differentiation

Strategy • Nowadays, any company has to establish a “customer support”

program

• Support may be linked from the moment of the buying decision

process, servicing the product with free-advisory, providing an

adjacency service alongside the basic one. Examples: Special

payment scheme or 24 hour delivery, exceptional after-sales

service, paddling lessons with the kayak or SUP you buy.

• Support is a substantial form of differentiation when there is no

other way to differentiate.


Support

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3. Differentiation

Strategy • The differentiation on the basis of design, offering something that

is truly different, that breaks away from the “dominant design” of

the industry. For example: Apple offered the iPhone when the

industry had a different “dominant design”.

• To provide unique features requires a culture of innovation and

creativity

• Countries wishing to attract investments need a team of

innovative “country brand” designers who know how to compete

with other country peers.

• Which of the social media tools have a better design? Instagram

or Snapchat?


Design

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15

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3. Differentiation

Strategy• Quality differentiation is related to features of the product that

make it better – not different, but better.

• The product performs with:

• Greater initial reliability

• Greater long term durability

• Superior performance

• An example in the retail industry: Which retailer has the best

quality products?


Quality

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16

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3. Differentiation

Strategy• To have no basis for differentiation is a strategy: Indeed by all

observation this is a common one, and in fact it is a strategy

to don´t have a differentiation strategy too.

• Some firms deliberately decide to don´t pursue

differentiation, but to copy others´ success. Example: Yaris

from Toyota has been copied by several competitors.


No basis for differentiation

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3. Differentiation

Strategy

Thank you!

8-Jan-2018


outline theme 1. porter generic strategies - wordpress.com · eleonora escalante mba-meng,...

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