Qantas

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INTRODUCTION:

In the competitive market industries of category of domestic, international or global have very competitive rivalry. Cost leadership and differentiation strategies are commonly used strategic management dimensions in the literature (Dess and Davis, 1984; Nayyar, 1993). But to achieve market superiority over competitors and profitability it has to make clear choice over the strategy used in order to avoid ‘the inherent contradiction of different strategies’ (Porter, 1996, p.67) In today’s market for a company to survive, it has to create two corporate strategies 1. Lowest price without jeopardizing the quality.

2. Better quality, simple way of operation and better look that means ability to be creative and innovative.

According to Porter (1985) all generic competitive strategies have different way of cresting sustainable competitive advantage. And a company must always choose a strategy or else it will be stuck in the middle without coherent strategy (Acquaah & Yasai – Ardekani, 2006).

Many companies for example Wal – Mart and AirAsia have been implementing a single strategy very successfully. Examples of companies which has used differentiation strategy as single strategy successfully:

* Differentiation by Brand: Harley Davidson and Mercedes Benz * Differentiation by Design: Titan watches – with gold studded gems, diamonds, precious metals. * Differentiation by Positioning: Domino Pizza ‘ 30 minutes delivery’ * Differentiation by Technology: Apple Computers

* Differentiation by Innovation: 3M.

Furthermore there are successful companies which apply hybrid – strategy which implies both cost leadership & differentiation strategy at the same time. Eg: German’s Automotive, Tesco supermarket, IKEA.

Competitive Strategy:

It is the way by which firms choose to accomplish and hold their competitive advantage. Regarding competitive strategy Porter stated that “taking offence or defensive actions to create a defendable position in an industry, to cope with …………competitive forces and thereby yield a superior return for the firm”. Companies have established different approaches to competitive strategy, as per the crisis companies should apply respective strategy.

The basic of generic strategy:

Porter stated that company’s strength is divided into two attributes: cost advantage and differentiation. By applying these attributes in a broad and narrow focus, three generic strategies result: cost leadership, differentiation and focus. They do not represent any industry nor they are specific to any company.

PORTER’S GENERIC STRATEGIES:

Diagram 1: (Porter, 1980)
Normally means “pursue a quality approach”. Enables a price premium to be charged for the quality difference.

Normally means “pursue a quality approach”. Enables a price premium to be charged for the quality difference.

Aim to have lowest cost-base industry. Will facilitate favourable / cheaper pricing and thus grow market share in elastic industries particularly.

Aim to have lowest cost-base industry. Will facilitate favourable / cheaper pricing and thus grow market share in elastic industries particularly.

Competitive Advantage
Competitive Advantage

Differentiation
Differentiation
Lower Cost
Lower Cost

Broad Target
Broad Target
1. Cost Leadership| Competitive Score
Competitive Score
2. Differentiation|
Narrow Target
Narrow Target
3 A. Cost Focus| 3 B. Differentiation Focus|

Concentrate on one or a small number of market segments. Can be differentiation or cost leadership.

Concentrate on one or a small number of market segments. Can be differentiation or cost leadership.

Porter initially advised Firms to avoid attempting both Strategies - Stuck in the Middle - as out and out differentiators and cost leaders will tend to be more competitive. The success of Japanese (and other) firms with JIT, Kaizen and TQM techniques appears to...
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