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chapter 5 The Five Generic Competitive Strategy Options: Which One to Employ

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Arthur A. Thompson The University of Alabama

An e-book published and distributed by McGraw Hill Education

Sixth Edition of Strategy: Core Concepts and Analytical Approaches (2020-2021). Arthur A. Thompson, The University of Alabama. Published and distributed by McGraw Hill Education. Image of globe comprised of puzzle pieces with several pieces dislodged and scattered below the globe. Chapter 5 The Five Generic Competitive Strategy Options: Which One to Employ

“Competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver a unique mix of value.”

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Michael E. Porter Professor, Harvard Business School

“Strategy is all about combining choices of what to do and what not to do into a system that creates the requisite fit between what the environment needs and what the company does.”

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Costas Markides

“The essence of strategy lies in creating tomorrow’s competitive advantages faster than competitors mimic the ones you possess today.”

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Gary Hamel and C. K. Prahalad

Understand what distinguishes each of the five generic competitive strategies and the type of competitive advantage each can produce.

Gain command of why each of the five competitive strategies works better in certain market situations than in others.

Learn the major avenues for achieving a competitive advantage based on lower costs.

Learn the major avenues for achieving a competitive advantage based on differentiating a firm’s product or service offering from the offerings of rivals.

Understand the attributes of a best-cost provider strategy.

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Learning Objectives

Chapter 5 Roadmap

The Five Generic Competitive Strategies

Low-Cost Provider Strategies

Broad Differentiation Strategies

Focused Low-Cost Strategies

Focused Differentiation Strategies

Best-Cost Provider Strategies

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What Does the Term “Competitive Strategy” Refer To?

A company’s “competitive strategy” deals exclusively with the specifics of management’s game plan for competing successfully:

Actions and approaches to please customers

Offensive and defensive moves to counter maneuvers of rivals

Responses to shifting market conditions

Initiatives to strengthen the firm’s market position and achieve a particular kind of competitive advantage.

Competitive strategy is narrower in scope than business strategy

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Managers at different firms have different views on:

How to deal with competitive pressures and industry driving forces, given the particulars of their company’s situation

What future market conditions will be like

What strategy specifics makes the most sense in light of

Their company’s particular resources and capabilities (especially those that have the greatest competitive power in the marketplace)

Their company’s resource weaknesses and competitive deficiencies

Their company’s most attractive market opportunities

Their company’s vulnerability to external threats

Their company’s specific competitive strengths and weaknesses vis-à-vis rivals

The strategic vision, mission, core values, and performance targets that company managers have established

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Why Do Competitive Strategies Differ Among Firms in the Same Industry?

Factors that distinguish one firm’s competitive strategy from another

Whether a firm’s market target is broad or narrow

Whether a firm is pursuing a competitive advantage linked to lower costs or differentiation

These two factors give rise to five competitive strategy options for staking out a market position, operating the business, and delivering superior value to buyers

A low-cost provider strategy

A broad differentiation strategy

A focused low-cost strategy

A focused differentiation strategy

A best-cost provider strategy

The Factors that Distinguish One Competitive Strategy from Another

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FIGURE 5.1 The Five Generic Competitive Strategy Options

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A low-cost provider’s strategic target is lower overall costs than rivals—but not necessarily the lowest possible costs.

In striving for a low-cost advantage over rivals, it is first necessary to incorporate features and services that buyers consider essential, then go all out to provide these at a lower cost than rivals.

A product offering that is too frills-free sabotages the attractiveness of the firm’s product even if it is cheaper-priced.

Keys to Success

Having good cost-reduction skills and capabilities

Pursuing long-term cost-saving approaches and capabilities that are difficult for rivals to copy or match

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Low-Cost Provider Strategies

Core Concept

A low-cost leader’s basis for competitive advantage is lower overall costs than rivals with similar product offerings. A low-cost advantage over rivals can translate into better profitability than rivals.

Successful low-cost leaders are exceptionally good at finding ways to drive costs out of their businesses and using their low-cost advantage over rivals to achieve better profitability than rivals.

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Translating a Low-Cost Advantage into Higher Profits

Option 1:

Use the lower-cost edge to underprice competitors and attract price-sensitive buyers in great enough numbers to increase total profits

Option 2:

Charge a price comparable to other low-priced rivals, be content with the resulting sales volume and market share, and rely upon the low-cost edge over rivals to earn a bigger profit margin per unit sold, thereby boosting the firm’s total profits and return on investment.

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Strategic Insight

A lower price improves profitability only if the lower price results in gains in unit sales (and thus revenues) that are big enough to overcome the combined effects of a smaller profit margin and the added costs of the extra units sold.

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FIGURE 5.2 Cost Drivers—The Keys to Driving Down Costs

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The Two Major Avenues for Achieving a Cost Advantage

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Approach 1

Approach 2

Perform value chain activities more cost effectively than rivals.

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

Cost-saving approaches that demonstrate effective use of the cost drivers include:

Striving to capture all available economies of scale

Taking full advantage of experience and learning-curve effects

Trying to operate facilities at full capacity

Substituting low-cost for high-cost raw materials or component parts that do not sacrifice product quality or product performance

Using the firm’s bargaining power vis-à-vis suppliers to gain concessions

Improving supply chain efficiency

Pursuing ways to boost labor productivity, reduce workforce size, and otherwise trim compensation costs

Improving product design and employing cost-saving production techniques

Using online systems and sophisticated software to achieve operating efficiencies

Being alert to the cost advantages of outsourcing and vertical integration

Approach 1: Manage Value Chain Activities Very Cost Efficiently

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Adopt Economical Strategy Elements That Lead to Lower Costs Than Rivals: Some Examples

Have lower specifications for purchased materials, parts, and components than rivals

Strip frills and features from product offerings that are not highly valued by price-sensitive or bargain-hunting buyers

Offer a limited selection or few versions of a product line by deleting slow-selling items and being content to meet the needs of most buyers rather than all buyers

Distribute firm’s product only through low-cost distribution channels and avoid high-cost distribution channels

Use the most economical method for delivering customer orders (even if it results in longer delivery times)

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Approach 2: Revamping the Value Chain

Reengineer the chain to eliminate costly work steps and bypass cost-producing chain activities:

Sell direct to consumers to cut out the activities and costs of distributors and dealers

Use technologies and/or information systems to bypass the need to perform certain value chain activities

Streamline operations by eliminating low-value-added or unnecessary work steps and activities

Have suppliers locate their plants or warehouses close to a firm’s own facilities to reduce materials handling and shipping costs

Wal-Mart’s Approach to Managing Its Value Chain

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Institute extensive information sharing with vendors via online systems

Pursue global procurement of some items and centralize most purchasing activities

Invest in state-of-the-art automation at the company’s distribution centers

Strive to optimize the product mix and achieve greater sales turnover

Install security systems and store operating procedures that lower shrinkage rates

Negotiate preferred real estate rental and leasing rates with owners of store sites

Manage and compensate the workforce in a manner that leads to lower labor costs

Key Elements of Nucor’s Strategy

Use electric arc furnaces to recycle/melt scrap steel, thus lowering investment costs and eliminating expensive steps in making steel products from scratch

Use incentive compensation to achieve high productivity and low labor costs per ton produced

Locate plants close to customers to keep shipping costs down

Cost Advantages and Bottom-line Results

Lower capital investment and operating costs

Ability to charge lower prices than traditional steel companies using make-it-from-scratch technology

Consistently good profitability in an industry where profits have fluctuated wildly from good to OK to terrible

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Nucor Corporation’s Low-Cost Provider Strategy

Key Characteristics of Southwest Airlines’ Low-Cost Provider Strategy

Master fast turnarounds at boarding gates (25 minutes versus 45 minutes for rivals) allows:

Planes to fly more hours per day

More flights to be scheduled per day with fewer aircraft

More revenue to be generated per plane on average than rivals

Elimination of several services results in cost savings:

In-flight meals

Assigned seating

Baggage transfer to connecting airlines

First-class seating and service

Fast, user-friendly online reservation system:

Facilitates e-ticketing

Reduces staffing needs at reservation centers and airport counters

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The Keys to Being a Successful Low-Cost Provider

Scrutinize each cost-creating activity—understand the cost drivers and use them as levers to lower costs

Use knowledge about the cost drivers to streamline or reengineer how activities are performed

Engage all personnel in continuous cost improvement

Use benchmarking to keep close tabs on how the firm’s costs compare with its rivals and other firms performing comparable activities in other industries

Strive to operate with exceptionally small corporate staffs

Spend aggressively on resources and capabilities that promise to drive costs out of the business

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Strategic Insight

Success in achieving a low-cost edge over rivals comes from out-managing rivals in finding ways to perform value chain activities faster, more accurately, and more cost efficiently.

Understand the cost drivers for each value chain activity and use them as levers to drive down costs.

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A low-cost provider strategy becomes increasingly appealing and competitively powerful when:

Price competition among rival sellers is vigorous

The products of rival sellers are essentially identical and supplies are readily available from many eager suppliers

It is hard to achieve product differentiation in ways that have value to buyers

Most buyers use different brands of the product in same ways

Buyers incur low costs in switching purchases to other sellers

A big fraction of the industry’s sales are made to large-volume buyers with significant power to bargain down prices

Industry newcomers use introductory low prices to attract buyers and build a customer base

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When a Low-Cost Provider Strategy Works Best

Pitfalls to Avoid in Pursuing a Low-Cost Provider Strategy

Getting carried away with overly aggressive price cutting to win sales and market share away from rivals

Reducing price does not lead to higher total profits unless the incremental gain in total revenues exceeds the incremental increase in total costs

Relying on cost reduction approaches easily copied by rivals

The value of a cost advantage depends on its sustainability in achieving cost savings that can be kept proprietary or that are very costly and/or time-consuming for rivals to copy

Becoming too fixated on reducing costs and ignoring:

Growing buyer interest in added features, service or an upscale product

Declining buyer sensitivity to price

New developments that alter how buyers use the product

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Strategic Insight

A low-cost provider’s product offering must always contain enough attributes to be attractive to prospective buyers—low price, by itself, is not always sufficiently appealing to buyers to cause them to purchase the product.

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Reducing price to capture a bigger sales volume does not lead to higher total profits unless the incremental gain in total revenues exceeds the incremental increase in total costs associated with the bigger sales volume.

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Beware of Charging a Price That Is Too Low

Broad Differentiation Strategies

Entail offering unique product attributes that a wide range of buyers find appealing, valuable, and worth paying for

Are attractive when buyer needs and preferences are too diverse to be fully satisfied by a single, standardized product offering

Keys to Success

Incorporating buyer-desired attributes into product offering that:

Will appeal to a broad range of buyers

Will be different enough to stand apart from rival product offerings

Creating a product offering that is strongly differentiated rather than weakly differentiated from the offerings of rivals

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Broad Differentiation Strategies

Core Concept

The essence of a broad differentiation strategy is to offer unique product attributes that a wide range of buyers find appealing and worth paying for.

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Differentiation and Competitive Advantage

A product/service with unique, appealing attributes can create a competitive advantage for a firm and allow it to do one or more of the following:

Command a premium price for its product (because many buyers believe the unique attributes are worth the extra price)

Increase unit sales (because additional buyers are won over by the differentiating features)

Gain buyer loyalty to its brand (because some buyers really like the differentiating features and bond with the firm and its products)

Differentiation enhances profitability whenever a firm’s product can:

Command a sufficiently higher price or produce sufficiently bigger sales to more than cover the added costs of achieving the differentiation

Broad differentiation strategies fail when

Buyers don’t value the brand’s uniqueness

A firm’s approach to differentiation is easily and quickly copied or matched by its rivals.

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Is Differentiation the Road to Profits or to Failure?

Options for Differentiating

Unique taste – Dr. Pepper, Listerine

Multiple features – Microsoft Office, Apple’s iPhone

Wide selection and one-stop shopping – Home Depot, Amazon.com

Superior service – Nordstrom, Ritz-Carlton

Engineering design and performance – Mercedes, BMW

Prestige and distinctiveness – Rolex

Quality manufacture – Michelin

Technological leadership – 3M Corporation

Spare parts availability – Caterpillar

Full range of services – Charles Schwab

Wide selection – Campbell’s soups

High-fashion design – Gucci, Chanel

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FIGURE 5.3 Value Drivers—Keys to Successful Differentiation

Source: Adapted by the author from Michael E. Porter, Competitive Advantage (New York: The Free Press, 1985), pp. 124-126.

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Perhaps the most systematic approach managers can take to achieve successful differentiation involves focusing on the value drivers, those factors that are particularly effective in creating differentiation and adding value for buyers.

Astutely using the value drivers to create unique product attributes that have high buyer appeal (because of the added value they deliver) is typically “the secret” to creating a successful differentiation strategy

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Using the Value Drivers to Achieve Stronger Differentiation and Deliver Added Value

Managing Value Chain Activities in Ways That Enhance Differentiation

Ways that managers can use the value drivers to enhance differentiation include:

Create value-adding product features and performance attributes that appeal to a wide range of buyers

Pursuing continuous quality improvements via the use of better parts, components, or ingredients and the use of quality control processes

Emphasizing new product R&D and product innovation

Improving product selection

Investing in production-related R&D, striving for technological advances, and implementing better production techniques

Improving customer service and/or providing more service options.

Emphasizing human resource management activities that improve the skills, expertise, and knowledge of company personnel

Pursuing sales, marketing, and advertising activities that lead to greater brand name power.

Improving distribution capabilities and collaborating with distribution allies to enhance customer perceptions of value

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Signaling the Value of a Firm’s Differentiated Product Offering to Buyers

Signaling value to buyers can often assist a company’s differentiation efforts

Signaling value is particularly important when:

Nature of differentiation is subjective or hard to quantify

Buyers are making a first-time purchase and are unsure what their experience with the product will be

Buyers are not fully aware of a product’s many attributes

Repurchase is infrequent and buyers need to be reminded of a product’s value

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Ways Value Can Be Signaled to Buyers

A high price (in instances where high price implies better quality or better performance)

More appealing or fancier packaging

Ongoing ad campaigns (which impact a product’s image and make it more widely known)

Ad content that emphasizes a product’s standout attributes

The quality of brochures and sales presentations

The luxuriousness and ambience of high-end retailers and sales sites frequented by customers

Making buyers aware that a company (or its products) has prestigious customers

The professionalism, appearance, and personalities of the seller’s employees

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To build sustainable competitive advantage via broad differentiation, a firm typically must do one or more of the following:

Focus on continuous product innovation

Incorporate features that raise product performance and deliver added value to the buyer/end-user

Incorporate product attributes and user features that lower the buyer’s overall costs of using the firm’s product

Incorporate features or features that enhance buyer satisfaction in intangible ways

Deliver value to customers using competitively potent resources and capabilities that rivals do not have or cannot afford to match

Achieving Competitive Advantage Via a Broad Differentiation Strategy

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When a Broad Differentiation Strategy Works Best

Buyer needs and uses of the product are diverse

There are many ways to differentiate the product or service that have value to buyers

Few rival firms are following a similar differentiation approach

Technological change is fast paced and competition revolves around rapidly evolving product features and attributes

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Pitfalls to Avoid in Pursuing a Differentiation Strategy

Differentiation keyed to product/service attributes and features that are easily and quickly copied

Incorporating differentiation attributes that produce an unenthusiastic response on the part of buyers

Overspending to differentiate the firm’s product offering, thus eroding profitability

Failing to achieve meaningful differences in quality, service or performance features vis-à-vis rival products

Adding frills and extra features that exceed the needs and use patterns of most buyers

Charging too high a price premium

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Core Concept

Any differentiating feature that works well is a magnet for imitators.

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A differentiation strategy keyed to product or service attributes that are easily and quickly copied is always doomed.

Over-differentiating and overcharging are fatal strategy mistakes.

Tiny or trivial differences between rivals’ product offerings may not be visible or important to buyers—to generate a fiercely loyal customer following and open up a differentiation-based competitive advantage that results in superior profitability, a company’s differentiation strategy must result in strong rather than weak product differentiation.

Pursuing a Differentiation Strategy: Three Principles to Keep in Mind

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Focused strategies concentrate attention on a narrow piece of the total market

The target segment, or market niche, can be defined by:

Geographic uniqueness

Specialized requirements in using the product

Special product attributes that appeal only to those buyers that comprise the market niche

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Focused (or Market Niche) Strategies

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Focused Low-Cost Strategies

Seek competitive advantage by serving a target market niche at a lower cost and lower price than rivals

Are attractive when a firm can lower its costs significantly by limiting its customer base to a well-defined segment

Achieve a cost advantage over rivals by:

Managing value chain activities more cost effectively than rivals

Finding innovative ways to bypass certain value chain activities

The difference between a low-cost provider strategy and a focused low-cost strategy is the size of the buyer group being targeted.

Examples of Focused Low-Cost Strategies

Budget motel chains

Motel 6, Sleep Inn, Super 8, and Days Inn

The producers and retailers of private-label goods

The makers of generic prescription drugs

The makers of economically-priced replacement ink cartridges for printers (which carry a substantially lower price tag than those offered by makers of name brand printers)

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Focused Differentiation Strategies

Aim at securing a competitive advantage with a product offering designed to appeal to the unique preferences and needs of a narrow well-defined group of buyers

Successful pursuit of focused differentiation requires:

The existence of a buyer segment looking for special product attributes or seller capabilities

A firm’s ability to create a product offering that stands apart from the offerings of rivals catering to the same target market niche

The difference between a broad differentiation strategy and a focused differentiation strategy is the size of the buyer group being targeted.

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Examples of Firms Using Focused Differentiation Strategies

Louis Vuitton

When a Focused Low-Cost or Focused Differentiation Strategy Is Attractive

The target niche is big enough to be profitable and offers good growth potential

Industry leaders do not view having a presence in the niche as crucial to their own success

It is costly or difficult for multi-segment competitors to meet the specialized needs of niche members

The industry has many different niches and segments, thereby allowing a focuser to pick a competitively attractive niche suited to its resource strengths and capabilities

Few other rivals are specializing in same target niche (a condition that reduces the risk of segment overcrowding)

The focuser can draw upon customer goodwill and loyalty to defend against ambitious challengers

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Competitors find effective ways to match a focuser’s capabilities in serving the niche

The preferences and needs of niche members shift over time to match those of mainstream buyers, thus causing the niche to dissolve into the overall market

A segment is so attractive that entry of new rivals results in overcrowding, thereby intensifying rivalry and splintering segment profits

The Risks of a Focused Low-Cost or Focused Differentiation Strategy

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Best-Cost Provider Strategies

Stake out a middle ground:

Between pursuing a low-cost advantage and a differentiation advantage

Between appealing to the broad market as a whole and a narrow market niche

Are aimed squarely at buyers looking for appealing extras and functionality at an appealingly low price

The Objective

Deliver superior value by meeting or exceeding buyer expectations on product attributes and beating their price expectations

The Standout Traits of Best-Cost Provider Strategies

The essence of a best-cost provider strategy is giving customers more value for the money by:

Satisfying buyer desires for appealing features/performance/quality/service

Charging a lower price for those attributes than its rivals

To profitably employ a best-cost provider strategy, a firm must incorporate attractive upscale attributes at lower costs than its rivals

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A Best-Cost Provider’s Competitive Advantage

A best-cost provider’s competitive advantage is its lower costs in incorporating upscale attributes than rivals

This low-cost advantage allows a firm to underprice rivals and still earn attractive profits (provided the size of the price discount does not squeeze profit margins)

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Competitive Strategy Principle

It is usually not difficult to entice buyers away from rivals with an equally good product at a more economical price.

Core Concept

The competitive advantage of a best-cost provider is lower costs than rivals in incorporating upscale attributes (appealing features or functionality or quality or more satisfying customer service), thereby putting the company in a position to underprice rivals whose products have similar upscale attributes.

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How a Best-Cost Strategy Differs from a Low-Cost Strategy

Upscale product attributes in a best-cost provider’s offering entail added costs that a low-cost provider avoids by offering a basic product with few frills

The two strategies are aimed at different buyers:

A best-cost provider’s target market is value-conscious buyers looking for valued extras and utility at an appealingly low price

A low-cost provider’s target market is price-conscious buyers seeking a basic product at a bargain price

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Markets where product differentiation is the norm

The buying side of the market consists of attractively large numbers of value-conscious buyers that can be induced to purchase mid-range or near-luxury products rather than

The cheap basic products of low-cost producers

The expensive products of top-of-the-line differentiators

Economically tough times when there are even more buyers attracted to economically-priced products/services with especially appealing attributes

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When a Best-Cost Provider Strategy Works Best

A best-cost provider is squeezed between low-cost and high-end differentiation rivals when:

Low-cost providers are able to lure customers away with a lower price (despite their less-appealing attributes)

High-end differentiators are able to steal customers away with better product attributes (despite the higher price tag)

Thus, to be successful, a best-cost provider must

Offer buyers significantly better product attributes to justify a price above what low-cost leaders are charging

Achieve significantly lower costs in providing upscale features so it can outcompete high-end differentiators on the basis of a significantly lower price

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The Big Risk of a Best-Cost Provider Strategy

Which generic competitive strategy has your firm decided to pursue?

Have you studied rivals to determine which strategies they pursuing? Which rivals are pursuing a strategy similar to your firm’s strategy?

Are rivals pursuing a competitive strategy similar to yours resulting in segment overcrowding and splintered profits? If so, should your firm consider shifting to a different strategic group?

Which rivals have obscure or muddled or unclear strategies—perhaps because their management teams are pursuing inconsistent or confused actions or are changing strategies every year (because the strategies they have pursued have produced weak results)?

Are firms with shifting or unclear strategies likely to keep experimenting until they find a strategy that works well enough to stick with for a while?

Questions for Simulation Company Co-Managers

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Questions for Simulation Company Co-Managers

After each decision round, should your team closely study the data in the Comparative Competitive Efforts of Rival Firms section of the Competitive Intelligence Reports (CIRs) for the purposes of

Tracking the number of rivals that appear to be pursuing low-cost, differentiation, and best-cost strategies—and most especially those firms with a strategy similar to yours and in your strategic group?

Learning what rivals did in the prior year to fine-tune or overhaul their strategies?

Using the competitive effort comparisons to make guestimates about what close rivals are likely to do next and thereby better craft your own strategic moves for the upcoming decision round?

If you are not currently doing these things, shouldn’t you start doing them immediately? How can you hope to outwit and outmaneuver rivals if you are not carefully studying what they are doing and thinking about what new/different moves they are likely to make in the upcoming decision round?

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Tips for Company Co-Managers

Commit to a basic competitive strategy and aggressively pursue the competitive advantage potential it offers.

Avoid “getting stuck in the middle” by mixing the five strategies and not achieving a clear-cut competitive edge.

Consider switching to a different strategy if:

“Too many” rivals have adopted much the same strategy and your firm finds itself in a strategic group that is “overcrowded”

Rivals pursuing much the same strategy as your firm are effectively blocking your company’s path to achieving better overall business results

Opportunities are more promising in a different strategic group

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Core Concept

A company’s competitive strategy is unlikely to result in good performance or sustainable competitive advantage unless the company has a competitively potent collection of resources and capabilities that enable the company to execute its strategy with great proficiency.

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A low-cost provider must have the resources and capabilities to keep costs below those of competitors.

To successfully pursue a differentiation strategy, a firm must have the resources and capabilities to incorporate unique attributes into its product offering that buyers will find appealing, valuable, and worth paying for.

Focus strategies require the resources and capabilities to outcompete rivals in satisfying the needs/expectations of buyers in the target market niche.

A best-cost strategy requires the resources and capabilities to incorporate upscale attributes/features at a lower cost than rivals.

For all types of competitive strategies, success in sustaining the intended competitive edge depends on having at least some unique and valuable resources/capabilities that are hard for rivals either to duplicate or to develop offsetting close substitute resources/capabilities.

Successful Competitive Strategies Are Always Underpinned by Resources and Capabilities That Allow the Strategy to Be Well-Executed

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Accessibility Content: Text Alternatives for Images

Figure 5.1 The Five Generic Competitive Strategies, Text Alternative

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The illustration lists two types of competitive advantages being pursued: lower cost and differentiation. It also lists two market targets: a broad cross-section of buyers, and a narrow buyer segment (or market niche). The combination of these types creates the five generic strategies:

Overall low-cost provider strategy (lower cost or a broad cross-section of buyers)

Focused low-cost strategy (lower cost or a narrow buyer segment)

Broad differentiation strategy (differentiation or a broad cross-section of buyers)

Focused differentiation strategy (differentiation or a narrow buyer segment)

Best-Cost Provider strategy (an equal balance of competitive advantages and market targets)

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Figure 5.2 Cost Drivers: The Keys to Driving Down Costs, Text Alternate

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The cost drivers are:

Outsourcing or vertical integration.

Economies of scale.

Learning and experience.

Capacity utilization.

Raw materials and components.

Bargaining power vis a vis suppliers.

Supply chain efficiency.

Labor efficiency, pay scales, and incentives.

Product design and production technology.

Online systems and software.

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FIGURE 5.3 Value Drivers—Keys to Successful Differentiation, Text Alternate

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The value drivers are:

Product features and performance.

Inputs and activities that improve product quality and reliability.

New product research and development and product innovation.

Production research and development and breakthrough production techniques.

Wide product selection.

Customer service.

Employee skills, training, experience.

Marketing, advertising, and brand-building.

Distribution activities.

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Strategic Management week4 Discussion

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