What Are the Key Problems Involved in Maintaining the Competitive Advantage in a Growing Industry or Environment.
The Three pure generic competitive strategies are cost leadership, differentiation and focus. Each factor has its own advantages and disadvantages. A company should balance these factors in order to be successful. For growing industries, there are several other sub factors like chaining, franchising, etc. Our article will focus primarily on the generic factors as they are applicable to most of the industries and the challenges that the companies face with these strategies
The cost leadership is the most discussed competitive strategy, a company would adopt. By being a cost leader, a company would try to outperform its competitors by offering products and services at a lower cost. The cost leader is expected to withstand the pressure from the increasing competition and achieving economies of scale. For example, WalMart corporation is a good example of cost leader and the cost leadership approach itself act as a barrier to entry, as the new entrant may not have economies of scale. However, the low cost leadership position may be affected by the macroeconomic and global changes. For example, IBM was the cost leader for software and services until recently. But, the globalization and outsourcing wave has brought in low cost providers like Infosys and Tata consultancy services from India. The new entrants have challenged IBM 's position in services industry and IBM has responded very well to this threat. Even though IBM has survived this wave from low cost countries, there are several other low cost leaders in software services industry, who had lost their position due to this competition. For example, steel industry, Garment industries have moved to Asia and Central American countries. Macroeconomic changes like recession, inflation are perceived to be threats to low cost leaders. In recent times, several imitators have flooded the market in the name of low-cost alternatives. This is prevalent in auto-spare parts industry. Low cost spare parts are being challenged by
The cost leadership is the most discussed competitive strategy, a company would adopt. By being a cost leader, a company would try to outperform its competitors by offering products and services at a lower cost. The cost leader is expected to withstand the pressure from the increasing competition and achieving economies of scale. For example, WalMart corporation is a good example of cost leader and the cost leadership approach itself act as a barrier to entry, as the new entrant may not have economies of scale. However, the low cost leadership position may be affected by the macroeconomic and global changes. For example, IBM was the cost leader for software and services until recently. But, the globalization and outsourcing wave has brought in low cost providers like Infosys and Tata consultancy services from India. The new entrants have challenged IBM 's position in services industry and IBM has responded very well to this threat. Even though IBM has survived this wave from low cost countries, there are several other low cost leaders in software services industry, who had lost their position due to this competition. For example, steel industry, Garment industries have moved to Asia and Central American countries. Macroeconomic changes like recession, inflation are perceived to be threats to low cost leaders. In recent times, several imitators have flooded the market in the name of low-cost alternatives. This is prevalent in auto-spare parts industry. Low cost spare parts are being challenged by
References: 1. Charles W. L. Hill and Gareth R. Jones, Essentials of Strategic Management, Chapter 4. 2. http://www.wumart.com 3. http://en.wikipedia.org/wiki/Porsche