STRATEGIC MANAGEMENT Unit 4
Cost Leadership
Source: Barney, J.& Hesterly, W. (2011). Strategic management and competitive advantage. Chp 4. 7th ed. Prentice Hall.
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall.
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Cost Leadership Cost Leadership
The Strategic Management Process
External Analysis Strategic Choice Strategy Implementation Competitive Advantage
Mission
Objectives
Internal Analysis
Business Level Strategy How to Position a Business in the Market?
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall.
Corporate Level Strategy Which Businesses to Enter?
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Cost Leadership Cost Leadership
Business Level Strategies
Two Generic Business Level Strategies
Cost Leadership: • generate economic value by having lower costs than competitors Example: Wal-Mart Product Differentiation: • generate economic value by offering a product that customers prefer over competitors’ product Example: Harley-Davidson
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall.
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Cost Leadership Cost Leadership
Differentiation Strategy – Harley Davidson
FOCUSED DIFFERENTIATION
TANGIBLE DIFFERENTATION • Observable product characteristics: • size, color, materials, etc. • performance INTANGIBLE DIFFERENTATION •Unobservable and subjective •characteristics relating to: •image, status, identity
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall.
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Cost Leadership Cost Leadership
Why Cost Leadership Matters
Competitive Market ATCind ATCff P D
Above Normal Economic Returns
Q
Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall.
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Cost Leadership Cost Leadership
Understanding Cost Advantage
Managers need to understand who has the cost advantage in their market
• it could be the focal firm • develop a strategy to exploit the advantage • it could be a competitor • develop a strategy to either capture the...