When answering the question of: What Basis?, we can use the concept of Generic Strategies (M. E. Porter), that includes the following options: • Cost leadership: consists of producing items or services more cheaply than other companies. But this idea does not mean that low cost implies low prices (If you have a higher margin you fit your prices, and in a low prices war you have a wider range to fit low prices). An example of a company that is following this strategy is LADA. • Differentiation strategy: requires that an organisation create a product or service that is recognised as being unique, thus allowing the company to charge higher price. Alfa Romeo uses this strategy. 1
• Focus Strategy: Involves concentrating on a certain group of customers, geographic markets, or products line segments in order to serve a well−defined but narrow market better than competitors who serve a broader market. An obviously example is Rolls Royce. Focus: niche market activities Cost Differentation If a company is situated in the middle of the triangle you can be in trouble because you have not a real clear objective or strategy. I can show this idea using the Generic Strategies for Competitive Advantage Matrix (M. Porter) and displaying some examples in each box. Competitive advantage Lower cost Differentiation Broad Competitive target Scope Narrow target The 1st category includes the lowest models of each company like Citroën Saxo, Renault Clio and Ford Fiesta, as an example. Models or brands belonging to the 2nd category can be Ford Puma and Cougar, off−road vehicles The 3rd Category includes low cost and narrow target; therefore we can include inside LADA, Skoda and the firsts Japanese cars that came to Europe. Finally, in the 4th category we can include different companies like the following: Mercedes, Lotus, Ferrari, Porsche Alternatively, we can also use The Strategy Clock: Bowman´s competitive strategy options, because Porter´s model is a little bit antiquated. Therefore, we can use the strategy clock as a more real and updated version. Differentiation Hybrid Focused Differentiation Low Increase Price Price Standard Value
No Frills Increased Price Low Value Low Value / Standard Price • No Frills, likely to be segment specific...