GBA 490 Exam 2 Essay Section

Low cost provider (Walmart)
Target market: broad
Basis of competitive strategy: lower overall costs than rivals
Product line: basic products
Production emphasis: continuous search for cost reductions
Marketing emphasis: low price
Resources and capabilities: driving costs out of the value chain system (large scale plants, efficiency oriented culture)
Keys to maintaining the strategy: manage costs down year after year
Broad differentiation
Target market: broad
Basis of competitive strategy: offer buyers something attractively different than rivals
Product line: wide selection, variations
Production emphasis: strive for product superiority
Marketing emphasis: charge a premium price and communicate why the superior features are worth it
Resources and capabilities: quality, design, innovation (marketing, R&D teams, technology)
Keys to maintaining the strategy: constantly innovating to stay ahead of imitators
Focused low cost provider
Target market: narrow
Basis of competitive strategy: lower overall costs than rivals
Product line: feature tailored to tastes of the niche
Production emphasis: continuous search for cost reductions
Marketing emphasis: budget-priced, communicate how the product fits niche expectations
Resources and capabilities: lowering costs (find lower cost inputs, batch production)
Keys to maintaining the strategy: stay committed to serving the niche
Focused differentiation (Vera Bradley)
Target market: narrow
Basis of competitive strategy: have attributes that appeal specifically to the niche
Product line: tailored to specific tastes of the niche
Production emphasis: small scale production or custom made products
Marketing emphasis: communicate how the product fits the niche expectations and is superior
Resources and capabilities: meeting the highly specific needs of the niche (custom production, close customer relations)
Keys to maintaining the strategy: stay committed to serving the niche
Best cost provider (Target)
Target market: value conscious buyers (middle market)
Basis of competitive strategy: offer better goods at attractive prices
Product line: better quality and appealing features but not the best
Production emphasis: build in features and quality at lower costs than rivals
Marketing emphasis: communicate best value for your money to customers
Resources and capabilities: able to simultaneously deliver higher quality at a lower costs (TQM, mass customization)
Keys to maintaining the strategy: expertise in managing costs down while incorporating upscale features
Low cost provider (Walmart)
This strategy works best when:
• Price competition among rival sellers is vigorous
• The products of rival sellers are essentially identical and readily available from many eager sellers
• It is difficult to achieve product differentiation in ways that have value to buyers
• Most buyers use the product in the same ways
• Buyers incur low costs in switching their purchases from one seller to another
Broad differentiation (Apple)
This strategy works best when:
• Buyer needs and uses of the product are diverse
• There are many ways to differentiate the product or service that have value to buyers
• Few rival firms are following a similar differentiation approach
• Technological change is fast paced and competition revolves around rapidly evolving product features (next-generation products)
Focused low cost and focused differentiation
This strategy works best when:
• The target market niche is big enough to be profitable and offers good growth potential
• Industry leaders have chosen not the compete in the niche
• It is costly or difficult for multi-segment competitors to meet the specialized needs of niche buyers and at the same time satisfy the expectations of their mainstream customers
• The industry has many different niches and segments, there by allowing a focuser to pick the niche best suited to its resources and capabilities
• Few if any rivals are attempting to specialize in the same target market segment—reduced risk of segment overcrowding
Best cost provider
This strategy works best when:
• Product differentiation approach is the norm for the market
• A large number of value-conscious buyers can be induced to purchase midrange products rather than cheap, basic products or top of the line expensive products
• Works well in recessionary times