Competitive Strategies Overview

The time required to produce a unit of product decreases as more units are produced. Improvements in individual skills and collective organizational routines lead to lower unit costs for direct labor and products.

A generalization of the learning curve effect that applies to both direct labor and other operating costs, as well as other business activities. Accumulated experience leads to lower unit costs for a company's value added.

A situation where increasing the number of inputs used in production results in a more than proportional increase in the total number of products produced.

A factor contributing to economies of scale where increases in production in certain activities do not require proportional increases in inputs.

A factor contributing to economies of scale that allows companies to reduce costs by producing large volumes due to their dominant market position.

A factor contributing to economies of scale where dividing work into smaller tasks increases individual skills, enabling mechanization and automation.

A method to achieve cost advantage by simplifying the production process, automating steps, reducing components, or minimizing materials, storage, or distribution costs.

Controlling access to raw materials, funding sources, and service and maintenance contracts can help achieve cost advantage.

A company has a differentiation advantage when it offers a product or service with unique attributes that customers perceive as valuable, making them willing to pay more than for competitors' offerings.

To achieve a differentiation advantage, a company must create more value for its customers than its competitors. This can be done by providing superior features, performance, or customer experience.

Creating more value can lead to higher profit margins if the price increase due to differentiation surpasses the cost of creating that differentiation.

For a differentiation strategy to be successful, customers must not only perceive the product to be different, but also value those differences. They should be willing to pay a premium for those unique features.

There are two main ways to create value for customers: reducing their cost and enhancing their experience.

A product can create value by reducing the cost customers are willing to pay. This means the increased price is offset by savings they achieve through using the product.

A product can create value by enhancing the customer experience. This means it provides a superior experience compared to rivals, leading to increased customer satisfaction and willingness to pay more.

Observable aspects of a product, such as size, shape, color, design, material, and technology, play a crucial role in customer decision-making.

Factors that make it difficult for competitors to copy a company's unique features, making it harder for them to compete.

A strategy where a company continually innovates and introduces new features or improvements, staying ahead of competitors.

Unique combinations of a company's capabilities, resources, and brand image that create a strong competitive advantage difficult to replicate.

Using a company's geographical location or market to offer unique features or advantages that are hard for competitors to match.

The tendency of customers to be more willing to buy a product when it is cheaper, potentially sacrificing unique features or benefits.

When the unique features or benefits of a differentiated product lose their appeal over time due to changing customer preferences or new offerings.

When competitors copy a differentiated product's features or benefits, reducing its perceived uniqueness and competitive advantage.

The illegal copying or counterfeiting of a differentiated product, eroding its perceived value and brand reputation.

Customers pay more than they perceive the product's worth, leading to dissatisfaction. This often occurs with high prices but normal or low perceived value, making customers seek competitors.

Companies holding a monopoly exploit customers by raising prices or lowering quality, earning excessive profits. Customers have limited alternatives.

A strategy focused on short-term profit by reducing customer value and maintaining high prices leads to customer dissatisfaction and market share loss.

The stages of an industry's development (introduction, growth, maturity, decline) influence competition and profitability. Companies need to adapt strategies to each stage.

The phase of an industry's life cycle where the market is established, competition is intense, and growth slows down.

Industries like food, clothing, and transportation often remain stable, satisfying fundamental customer needs. They might experience occasional declines, but not extinction.

Industries experiencing decline can regain vitality through innovation, market expansion, or new life cycles. They can enter new stages or connect to existing ones.

Each industry has a unique life cycle model with varying durations for each stage based on its nature and market conditions.

A strategy where a company focuses on a specific niche market and offers specialized products or services, aiming to achieve greater differentiation than companies covering the whole industry.

A strategy where a company aims to achieve the lowest production cost in the industry, often through economies of scale, efficient operations, and cost control.

A strategy where a company aims to distinguish itself from competitors by offering unique features, superior quality, or better customer service, enabling it to charge a premium price.

Cost refers to the internal expense of producing a product, while price refers to the external value a customer is willing to pay for it.

A cost leader doesn't necessarily have to lower prices. They can utilize the cost advantage to reinvest in improving their competitive edge.

Customers primarily consider the price they pay for a product, regardless of its production cost.

Differentiation itself doesn't guarantee a competitive advantage. If increased costs are not offset by higher customer willingness to pay, profitability can be compromised.

Differentiation doesn't always require higher prices. It can also be used to increase market share by offering higher value at the same price, potentially leading to lower unit costs through greater production.

The rules of the game in an industry: how companies compete, approach marketing, and price their products. This is shaped by factors like potential size, expected growth, dominant technology, distribution channels, and potential competitors.

Joining an emerging industry early, aiming to establish brand reputation, learn from experience, secure customer loyalty, and potentially gain cost advantages.

Joining an emerging industry later, when the market is more established and clearer, potentially benefiting from existing infrastructure, reducing risk, and leveraging established customer bases.

Essential for surviving and succeeding in volatile emerging industries. Strategies include cooperating with early adopters for market insights, maintaining strict finances to avoid debt, and staying adaptable to changing market conditions.

Keeping existing customers satisfied in a growing market. Strategies include differentiating products to stand out or offering lower prices to attract new customers.

Positioning a company within specific market segments to reduce competition and become a dominant force. This involves identifying and targeting distinct customer groups with specialized offerings.

Techniques for businesses in expanding markets, aiming to maintain or improve their competitive position as new entrants emerge. Common strategies include customer loyalty and market segmentation.

The unique strength or edge a company has over competitors, helping it succeed. This can be achieved through differentiation (offering unique value) or cost leadership (offering lower prices).