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Lecture 9

BUS 446 - Lecture 9

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Business Administration
BUS 446
Lindsay Meredith

Hybrid Strategies Chart  In the Article Competitive Based Strategies (Porter 1980) The drive for competitive advantage causes a search for strategies that will forestall market threats like:  New Entrants to the Market o Solution – Create entry barriers o Economies of Scale  Decrease in Unit Price  Decrease in Price  Increase Volume  Mass Produce your product o It becomes a Long Run Equilibrium price point because everyone buys from you instead  In order to play in this type of market, you need to suck up a huge net sunk cost in the beginning + hope that you get enough market share to justify that big expenditure  Substitute Products (Direct + Indirect Substitutes) o Solution – Focus on growth markets  Look for a Niche, or a geographical area, or an application where your competitor is not present o Note: Never fight for market share if you can avoid it  Aggressive Direct Competitors o Solution – Raise buyers’ Switching Costs  Company needs to create an incentive or get rid of the negative aspect of leaving the competitor (e.g. Buying out their contract) Three Main Strategies Comprise Porter’s Typology  Cost Leadership Strategies o Produce a competitive advantage because lower production costs allow lower prices to buyers o From last week: Defenders would use this kind of strategy  Differentiation Strategies o Tactics to attract customers through better product quality, superior design features and superior service o Note: Don’t play the price card. Focus on product, have patents and trade secrets (e.g. Coca Cola has a magic secret syrup formula).  Create something hard to copy  Can sometimes be distribution  Chevron has a Convenience Store products as well; Now it needs a distribution system to supply all of that. Some don’t do it b/c of the cost issues.  Focus (Niche) Strategies o Used to attract specifically defined segments o Focus strategies can also be achieved by selectively applying cost leadership or differentiation  Analyzer  Often does Cost Leadership + Niche Strategy Relationship Marketing Strategies  Important concept  Companies form relationships with each other in order to enhance their own resources and to use those of others o This is how alliances form as well  Key resources are financial, technical, and network position (the status that a firm holds in the network of companies with which it interacts) o How good does your distribution system look like?  Marketers can simultaneously sustain multiple different kinds of interactions o You ca
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