The Five Generic Competitive Strategies

4396 Words Nov 24th, 2012 18 Pages
Section 6

Lecture Notes for Chapter 5

369

Chapter
Chapter Summary

5

The Five Generic Competitive Strategies
Chapter Five describes the five basic competitive strategy options – which of the five to employ is a company’s first and foremost choice in crafting overall strategy and beginning its quest for competitive advantage.

Lecture Outline
I. Introduction 1. There are several basic approaches to competing successfully and gaining a competitive advantage, but they all involve giving buyers what they perceive as superior value compared to the offerings of rival sellers. 2. This chapter describes the five basic competitive strategy option for building competitive advantage and delivering superior value to customers – which of the five to
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Option 2: maintain the present price, be content with the current market share, and use the lower-cost edge to earn higher profit margin on each unit sold 4. Concept & Connections 5.1, How Wal-Mart Managed Its Value Chain to Achieve a Huge Low-Cost advantage over Rival Supermarket Chains, describes Wal-Mart’s strategy for out-managing its rivals in efficiently performing various value chain activities to gain a lowcost leadership. A. Achieving Low-Cost Advantage 1. A low cost edge over rivals is best accomplished in two ways: a. performing essential value chain activities more cost-effectively than rivals, and

Section 6

Lecture Notes for Chapter 5

371

b. Revamping the firm’s overall value chain to eliminate or bypass some cost-producing activities altogether

Concepts & Connections 5.1, How Wal-Mart Managed Its Value Chain to Achieve a Low-Cost Advantage over Rival Supermarket Chains
Discussion Question: Which parts of the value chain does Wal-Mart target in order to achieve a low-cost advantage over its rivals? Answer: Wal-Mart has an extensive real-time information sharing network with vendors to make the supply chain much more efficient. It targets purchasing, store delivery, procurement practices that leverage the company’s relative buying power, investment in a large fleet of trucks for distribution of inventory, optimization of the product mix, use of security systems, preferred real estate rental and leasing rates, and lowering labor costs.
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