Chapter 2.docx

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Management Studies
MGST 391
Ahmad Ali Sohrabi

Chapter 2 Strategy formulation/choice 1. How to gain competitive advantage?(question of survival) i. Porter’s Generic Strategies (5 forces) 2. Which Direction to go i. Growth direction a. Organic growth  Ansoff’s Product-Market Matrix b. Joint development ii. Defensive/Non growth strategies a. Capital Restructure Scheme b. Downsizing c. Divestment Porter’s Generic Competitive Strategies (to achieve competitive advantage): Competitive position is the market share, costs, prices, quality and accumulated experiences of an organization/product relative to competition. Competitive strategy is taking offensive or defensive action to create a defendable position in an industry, and to cope with competitive forces yielding superior ROI. Competitive advantage is anything which gives one organization an edge over competitors. There are following Competitive Strategies for companies to achieve Competitive Advantage. Lower Cost Differentiation Broad Target Cost Leadership Differentiation Cost Focus Differentiation Focus Niche Focus (for luxury goods) Differentiation is “creating value through uniqueness”. It could be at following levels of product i.e. 1.Actual Product a). Features. b). Quality level. c). Design. d).Brand name e). Packaging. 2. Augmented Product i. Delivery and credit ii. Warranty iii. Installation iv. After sale service Cost Leadership is “having lowest cost of producing”. It could be achieved by:  Mass Production (economies of scale)  Latest Technologies  Favorable access to raw materials  Automation  Minimizing overhead by exploiting bargaining power  Constantly improving efficiency and economy e.g. through value chain analysis Focus involves a restriction of activities to only part of the market (a segment) through  Providing goods/services at lower cost (Cost focus)  Providing a differentiated product/service (Differentiation focus) Advantages/Comparison of Competitive Strategies: Competitive Force Cost Leadership strategy
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