Customer Social Responsibility
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- Date Submitted: 09/21/2011 07:42 AM
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Porter’s model identifies the forces that influence competitive advantage in the marketplace. Of greater interest to most managers is the development of a strategy aimed at establishing a profitable and sustainable position against these five forces. To establish such a position, a company needs to develop a strategy of performing activities differently from a competitor.
Porter (1985) proposed cost leadership, differentiation, and niche strategies. Additional strategies have been proposed by other strategic-management authors(e.g., Neumann, 1994; Wiseman, 1988; Frenzel, 1996). We cite strategies for competitive advantage here.
Cost leadership strategy:
Produce products and/or services at the lowest cost in the industry. A firm achieves cost leadership in its industry by thrifty buying practices, efficient business processes, forcing up the prices paid by competitors, and helping customers or suppliers reduce their costs. A cost leadership example is the Wal-Mart automatic inventory replenishment system. This system enables Wal-Mart to reduce storage requirements so that Wal-Mart stores have one of the highest ratios of sales floor space in the industry. Essentially Wal-Mart is using floor space to sell products, not storethem, and it does not have to tie up capital in inventory. Savings from thissystem and others allows Wal-Mart to provide low-priced products to itscustomers and still earn high profits.
Differentiation strategy:
Offer different products, services, or product features. By offering different, “better” products companies can charge higher prices, sell more products, or both. Southwest Airlines has differentiated itself as a low-cost, short-haul, express airline, and that has proven to be a winning strategy for competing in the highly competitive airline industry. Dell has differentiated itself in the personal computer market through its mass-customization strategy.
3. Niche strategy:
Select a...
Porter (1985) proposed cost leadership, differentiation, and niche strategies. Additional strategies have been proposed by other strategic-management authors(e.g., Neumann, 1994; Wiseman, 1988; Frenzel, 1996). We cite strategies for competitive advantage here.
Cost leadership strategy:
Produce products and/or services at the lowest cost in the industry. A firm achieves cost leadership in its industry by thrifty buying practices, efficient business processes, forcing up the prices paid by competitors, and helping customers or suppliers reduce their costs. A cost leadership example is the Wal-Mart automatic inventory replenishment system. This system enables Wal-Mart to reduce storage requirements so that Wal-Mart stores have one of the highest ratios of sales floor space in the industry. Essentially Wal-Mart is using floor space to sell products, not storethem, and it does not have to tie up capital in inventory. Savings from thissystem and others allows Wal-Mart to provide low-priced products to itscustomers and still earn high profits.
Differentiation strategy:
Offer different products, services, or product features. By offering different, “better” products companies can charge higher prices, sell more products, or both. Southwest Airlines has differentiated itself as a low-cost, short-haul, express airline, and that has proven to be a winning strategy for competing in the highly competitive airline industry. Dell has differentiated itself in the personal computer market through its mass-customization strategy.
3. Niche strategy:
Select a...