2 Responses 09/09

Varun Work:

Operational Planning & Policy Discussion- Generic Strategies

According to chapter 5 reading, generic strategies refers to the organization’s general positioning within its respective industry (Thompson et al., 2022). These strategies were defined back in 1985 by Michael Porter Generic strategy gives firms a competitive advantage. There are five generic strategies that a firm can employ anticipating to gain competitive advantages or edge. These strategies include broad differentiation, Focused low cost, focused differentiation, overall low cost and best-cost provider strategy.

 Precisely, a lower-cost provider strategy involves a firm setting its prices lower than its rival’s hence attracting a spectrum of customers.  Broad differentiation strategy involves a firm differentiating its product and offerings by focusing on quality attributes, thus betting rival competition.  A focused low-cost strategy consists of a company narrowing down to a lower purchasing power segment. Focused differentiated generic strategy is offering targeted segment (niche members) customized products and services with superior taste than rivals. Lastly best cost provider strategy involves firms satisfying customers’ expectations and needs through value creation. The strategy is also known as the hybrid strategy since it blends the other generic strategies (Islami et al., 2020).

This article will use the case study of Toyota Motors Corporation. The firm employs two main generic strategies; broad differentiation and focused low-cost strategy (Notesmatic.com, n.d.).  Toyota's differentiation strategy focuses mainly on three main areas: product quality, customer experience, and the level of technology. Additionally, recently the firm’s differentiation strategy has incorporated manufacturing of more fuel-efficient models and environmentally friendly automobiles to address the CSR issue. Toyota Motors Corporation's strategy has given it a competitive advantage against its rivals such as GM, Ford, and Volkswagen (Toyota Motor Corporation, 2015).

Additionally, Toyota employs a focused, low-cost strategy. Although the firm doesn’t entirely depend on lower segment buyers, its production focuses on production and (reduced operating and distribution expenses) and its supply chain management. Therefore, the firm has managed to control its prices and set them low compared to its rivals, which have also yielded another competitive advantage.  Ford constitutes one major rival of Toyota Motors Corporation.  The firm initially utilized a focused low-cost strategy, and its central vision in the early 1990s was to manufacture affordable cars for the American working class (Panmure Institute, n.d.). However, the strategy never succeeded since GM was able to dethrone its position by 1927(Ford Motor Company, 2015). Currently, Ford employs Broad differentiation generic strategy towards competing with automobile giants such as Toyota, GM and Volkswagen. 

References

Ford Motor Company (2015). Business Strategy.

Islami, X., Mustafa, N., & Latkovikj, M. T. (2020). Linking Porter’s generic strategies to firm performance. Future Business Journal, 6(1), 1-15.

Notesmatic.com. Toyota Generic and Intensive Growth Strategies.  https://notesmatic.com/toyota-generic-and-intensive-growth-strategies/

Panmore Institute. Business, Management. Ford Motor Company: Generic & Intensive Growth Strategies  http://panmore.com/ford-motor-company-generic-intensive-growth-strategies

Thompson, A., Peteraf, M., Gamble, J., Strickland III, A. J., & Jain, A. K. (2022). Crafting & executing strategy 20/e: The quest for competitive advantage: Concepts and cases. McGraw-Hill Education.

Toyota Motor Corporation (2015). Toyota’s Strategy for Environmental Technologies.

Mukhesh Work:

Company             –             NIO        Industry          --          Electric Vehicles

NIO is a Chinese company that specializes in manufacturing Electric vehicles.  NIO Inc. was founded in 2014 and is headquartered in Shanghai, China. William Li is the founder and CEO of the company (NIO Inc. (NIO) company profile & facts 2021). The competitive strategy of any organization is dynamic, which means at various stages of the company's growth the competitive strategy changes to meet the needs to fuel the growth. A company's competitive strategy lays out the specific efforts of the company to position itself in the marketplace, please customers, ward off competitive threats, and achieve a particular kind of competitive advantage (Thompson et al., 2021). In the case of NIO, which is a fairly new company, started their business by implementing "A Focused Differentiation Strategy" to target a niche audience. As the company has grown over the years now, it is best to say that the strategy of the company has changed, and the current strategy would be "Best-Cost Strategy".

In the initial stages, NIO manufactured only SUVs at a higher price point to attract customers looking for a niche product in the electric vehicle category. With the absence of Tesla, NIO was able to capture a good market share. Now, NIO has ventured to broaden its offerings to multiple vehicles at various price points and unique services to lower the costs of its products. To achieve the previous objectives, NIO has to adapt to a new competitive strategy combing the benefits of differentiation and low cost. Hybrid strategies are more flexible and are therefore better able to respond to changing customer preferences and needs and shifting market landscapes. Hybrid strategies may help a company secure several sources of advantage and thus become more balanced (Salavou, 2015).

NIO is not trying to lower its costs by just decreasing the prices to compete with its competitors. The following are the ways NIO is able to offer lower costs cars with more features than Tesla

· BaaS ( Battery as a Service ) option decreases the overall car price and allows customers to subscribe for a monthly fee.

· Chinese government's new policy provides subsidies to electric vehicles that have battery swap technology.

For NIO, the business model is not just about premium EVs. Instead, it is a blend of EVs with charging solutions (NIO Power), subscription services (BaaS), NIO Life, NIO Spaces, and NIO House (Shenvi, 2021). NIO now offers multiple SUVs and sedans to compete with Tesla on all fronts. NIO is implementing a Best-Cost strategy to create an ecosystem of products that provide customers with a whole range of services after selling its initial product.

TESLA is the biggest competition for NIO in CHINA and still implementing a "Focused Differentiation" strategy catering to a niche audience. They only sell 3 models of electric vehicles and don't have proper charging infrastructure or ecosystem in China. As of now, NIO is in a hyper-growth phase and cannot look at a broad low-cost market because it will disrupt their path. The broad Low-Cost strategy should be considered after the electric vehicle market share reaches at least 50%, decades away. Maybe in the future, they can release a new car just for the mass market.

References:

SALAVOU, H. E. (2015). Competitive strategies and their shift to the future. European Business Review, 27(1), 80-99. doi:http://dx.doi.org.nec.gmilcs.org/10.1108/EBR-04-2013-0073   

Shenvi, D. (2021, July 12). NIO's business model & ecosystem strategy - the Strategy Story. TheStrategyStory. Retrieved September 9, 2021, from https://thestrategystory.com/2021/07/12/nio-business-model-ecosystem-strategy/.

Thompson, A. A., Peteraf, M. A., Gamble, J., & Strickland, A. J. (2021). Crafting & Executing strategy: The quest for competitive advantage: Concepts and cases. McGraw-Hill.