MGNT314 Question of Strategy and
Competitive Advantage
Key factors that distinguish one strategy from another - ANSWER − Is the
firm's target market broad or narrow?
− Is the competitive advantage pursued linked to low costs or product
differentiation?
The Five Generic Strategies - ANSWER − Low-Cost Provider: Striving to
achieve lower overall costs than rivals on products that attract a broad
spectrum of buyers.
− Broad Differentiation: Differentiating the firm's product offering from
rivals' with attributes that appeal to a broad spectrum of buyers.
− Focused Low-Cost: Concentrating on a narrow buyer segment and on costs
to offer a lower-priced product.
− Focused Differentiation: Concentrating on a narrow buyer segment by
meeting specific tastes and requirements of niche members.
− Best-Cost Provider: Giving customers more value for their money by
offering upscale product attributes at a lower cost than rivals.
Low-cost Provider - Effective Approaches - ANSWER − Pursue cost-savings
that are difficult to imitate.
, − Avoid reducing product quality to unacceptable levels.
Competitive Advantages and Risks - ANSWER − Greater total profits and
increased market share gained from underpricing competitors.
− Larger profit margins when selling products at prices comparable to and
competitive with rivals.
− Low pricing does not attract enough new buyers.
− Rival's retaliatory price-cutting set off a price war.
Low-Cost Provider - ANSWER − A low-cost provider's basis for competitive
advantage is lower overall costs than competitors.
− Successful low-cost leaders, who have the lowest industry costs, are
exceptionally good at finding ways to drive costs out of their businesses and
still provide a product or service that buyers find acceptable. Their capability
is the ability to identify and reduce or eliminate unnecessary costs.
Cost driver - ANSWER A cost driver is a factor that has a strong influence on
a firm's costs. This includes:
o Economies of scale
o Learning and experience
o Capacity utilization
o Supply chain efficiencies
Competitive Advantage
Key factors that distinguish one strategy from another - ANSWER − Is the
firm's target market broad or narrow?
− Is the competitive advantage pursued linked to low costs or product
differentiation?
The Five Generic Strategies - ANSWER − Low-Cost Provider: Striving to
achieve lower overall costs than rivals on products that attract a broad
spectrum of buyers.
− Broad Differentiation: Differentiating the firm's product offering from
rivals' with attributes that appeal to a broad spectrum of buyers.
− Focused Low-Cost: Concentrating on a narrow buyer segment and on costs
to offer a lower-priced product.
− Focused Differentiation: Concentrating on a narrow buyer segment by
meeting specific tastes and requirements of niche members.
− Best-Cost Provider: Giving customers more value for their money by
offering upscale product attributes at a lower cost than rivals.
Low-cost Provider - Effective Approaches - ANSWER − Pursue cost-savings
that are difficult to imitate.
, − Avoid reducing product quality to unacceptable levels.
Competitive Advantages and Risks - ANSWER − Greater total profits and
increased market share gained from underpricing competitors.
− Larger profit margins when selling products at prices comparable to and
competitive with rivals.
− Low pricing does not attract enough new buyers.
− Rival's retaliatory price-cutting set off a price war.
Low-Cost Provider - ANSWER − A low-cost provider's basis for competitive
advantage is lower overall costs than competitors.
− Successful low-cost leaders, who have the lowest industry costs, are
exceptionally good at finding ways to drive costs out of their businesses and
still provide a product or service that buyers find acceptable. Their capability
is the ability to identify and reduce or eliminate unnecessary costs.
Cost driver - ANSWER A cost driver is a factor that has a strong influence on
a firm's costs. This includes:
o Economies of scale
o Learning and experience
o Capacity utilization
o Supply chain efficiencies
