Competitive Strategies and Business Tactics

Posted on Mar 2, 2025 in Business Administration and Management (BAM)

Chapter 5: Generic Competitive Strategies

Types of Generic Strategies

  • Broad Low-Cost Strategy: Aiming to achieve lower overall costs than rivals by underpricing or maintaining similar prices with higher margins.
  • Broad Differentiation Strategy: Offering unique product attributes that appeal to a wide range of customers.
  • Focused Low-Cost Strategy: Targeting a narrow segment and offering lower prices than competitors.
  • Focused Differentiation Strategy: Offering niche products tailored to specific buyer needs better than competitors.
  • Best-Cost Strategy: Combining upscale product attributes with lower costs, offering more value for money.

Cost-Efficient Value Chain Management

  • Cost drivers influence overall costs, such as low-cost inputs, limited product lines, and efficient distribution.
  • Risks of Low-Cost Strategy: Overly aggressive price cuts, unsustainable cost advantages, and reducing quality too much.

Broad Differentiation Strategy

  • Success comes from studying buyer behaviors, creating appealing product features, and commanding premium prices.
  • Risks include overspending on differentiation efforts, trivial improvements, and high price premiums.

Chapter 6: Maximizing the Power of Strategy

Strategic Offensives

  • When and how to go on the offensive (choosing to attack competitors’ weaknesses).
  • Examples include product innovation, lower prices, and preemptive strikes.

Defensive Strategies

  • Protecting market position and competitive advantage.
  • Examples include blocking competitors or signaling strong retaliation.

Mergers and Acquisitions

  • Horizontal mergers combine firms in the same industry.
  • Acquisitions absorb one firm’s operations into another.
  • Risks include failure to achieve expected synergies, culture clashes, and losing key employees.

Vertical Integration

  • Expanding backward into supply or forward into distribution.
  • Risks include high capital investment, inflexibility, and difficulty in managing internal production levels.

Strategic Alliances and Joint Ventures

  • Alliances involve cooperation without combining businesses.
  • Joint ventures create a separate business entity.

Chapter 7: Competing Internationally

Reasons for Entering Foreign Markets

  • Access to new customers, lower costs, and gaining resources or capabilities.

Challenges of International Strategy

  • Differences in government policies, tax rates, currency risks, and consumer preferences.

Modes of Entry

  • Exporting, licensing, franchising, establishing subsidiaries, and strategic alliances.

Global, Local, and Transnational Strategies

  • Global strategy standardizes products across all markets.
  • Local strategy adapts to each market individually.
  • Transnational strategy balances global efficiency with local responsiveness.

Chapter 8: Corporate Diversification Strategy

When to Diversify

  • Diversification is considered when the current market is maturing, or industry conditions are shifting.

Types of Diversification

  • Related diversification leverages cross-business synergies.
  • Unrelated diversification involves businesses with no strategic fit.

The Three Tests for Diversification

  • Industry attractiveness, cost of entry, and whether diversification will create a synergy that makes the business better off.

Chapter 9: Business Ethics and Corporate Social Responsibility (CSR)

Ethical Standards

  • Ethical universalism applies global standards, while ethical relativism varies by local customs.
  • Integrative social contracts theory blends universal ethical standards with local variations.

Drivers of Unethical Behavior

  • Faulty oversight, short-term pressures, and a culture focused on profit over ethics.

Costs of Unethical Behavior

  • Visible costs (fines, lawsuits), internal costs (legal expenses, retraining), and intangible costs (loss of reputation, lower morale).

Corporate Social Responsibility (CSR)

  • CSR includes ethical business practices, environmental sustainability, and community involvement.
  • The “triple bottom line” includes financial, social, and environmental performance.