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Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Outline Theme 1. Porter Generic Strategies
1. Porter´s Generic
Strategies Framework
2. Cost Leadership
Strategy
3. Differentiation
Strategy
1
4. Focus
Strategy
5. Summary and
Conclusions
We are here!
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
1. Porter´s Generic
Strategies Framework
2
We are here!Cost Leadership Differentiation
Differentiation
FocusCost Focus
FOCUS
Source of Competitive Advantage
Low Cost Differentiation
Broad Target:
Industry Wide
Narrow Target:
Single SegmentCo
mp
eti
tive S
co
pe
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
3
We are here!Cost Leadership Differentiation
Differentiation
FocusCost Focus
FOCUS
Source of Competitive Advantage
Low Cost Differentiation
Broad Target:
Industry Wide
Narrow Target:
Single SegmentCo
mp
eti
tive S
co
pe
3. Differentiation
Strategy
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
We are here!
3. Differentiation
Strategy
8-Jan-2018
Generic Strategy Key Strategy ElementsResource and Organizational
Requirements
Cost Leadership
· Investments in scale-efficient
plant
· Design of products for ease
of manufacture
· Control of overheads
· R&D
· Avoidance of marginal
customer accounts
· Access to capital
· Process engineering skills
· Frequent Reports
· Tight Cost Control
· Structured Organization and
responsibilities
· Incentives related to
quantitative targets
Differentiation
· Emphasis on Branding
· Brand Advertising
· Design Service
· Quality
· Marketing abilities
· Product Engineering skills
· Creativity
· Innovation
· Capability in basic research
· Strong inter-functional
coordination
3a
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
4
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3. Differentiation
Strategy
Differentiation:
• A firm differentiates from its competitors “when it provides something unique that
is valuable to buyers beyond simply offering a low price”.
• There is no limit to a firm´s opportunities for differentiating its offering to
customers, because every firm is different, this set of differentiation opportunities
is unique to each firm.
• The range of differentiation opportunities depends only upon the type of product
or service: Automobiles or restaurants have greater potential for differentiation
than highly standardized products such as cement or commodities.
•
Nevertheless even commodities can be supplied in ways that create customer
value.
• Differentiation happens at the supply-side, and at the demand side (what creates
value for the customers)
8-Jan-2018
Drawing by Martin Lovev.
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
5
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3. Differentiation
Strategy
Differentiation:
• From the point of view of the supply side: The firm has to find out
which resources and capabilities can help to create uniqueness and
do it better than competitors.
• From the point of view of the demand side, the key is to have insight
into and understanding of customers and their needs and
preferences. Understanding what customers want, how they choose
the product and what their motivations are, we can identify
opportunities for profitable differentiation.
• Understanding both sides (supply and demand) is important in the
analysis of differentiation.
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
6
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3. Differentiation
Strategy
Drivers of Uniqueness for differentiation from the Supply Side:
Dif
fere
nti
ati
on
of
Pro
du
cts
or
Dif
fere
nti
ati
on
of
Serv
ices
Product features and performance
Services of the firm (credit, delivery, repair)
Intensity of particular marketing activities
Content of Activities (Pre-post sales services provided)
Technology employed in performing an activity
Quality of purchased inputs
Procedures governing the conduct of particular activities- frequency of quality control
inspections, frequency of sales visits to a customer, velocity of service procedures
Skill and experience of employees in activities
Control procedures used in different activities
Location
Degree of vertical integration
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
7
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3. Differentiation
Strategy
Identifying the Potential for Differentiation in the Supply Side: Using Porter´s Value Chain
Infrastructure Activities
Research Development, Design
Human Talent Development
Purchasing,
Inventory,
Materials
handling
ProductionWarehousing
and
Distribution
Sales and
Marketing
Dealer
Support
and
Customer
Service
Pri
mary
Act
ivit
ies
Su
pp
ort
Act
ivit
ies
Build Corporate Reputation.
Technology that supports innovation and responsiveness
to customer needs through close internal coordination
Unique Product
Features. Fast new
product development
Design for reliability
and serviceability
Education that supports
goals of quality and
responsiveness.
Incentives that are
consistent with
differentiation goals
Developing commitment
to customer services
Training for customers.
Fast, reliable repairs.
Availability of spare
parts. Training for
dealers. Customer
credit.
Quality and
reliability of
components
and materials.
Fast Mfg.
Defect free Mfg.
Ability to produce
to customer
specification
Fast Delivery. Efficient
Order Processing.
Sufficient inventories
to meet unexpected
orders
Advertising that
enhances brand
reputation.
Effective sales
force. Quality
sales literature8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
8
We are here!
3. Differentiation
Strategy
Drivers of Uniqueness for differentiation from the Demand Side:
Dif
fere
nti
ati
on
of
Pro
du
cts
or
Dif
fere
nti
ati
on
of
Serv
ices
Products attributes and positioning
Customers requirements and preferences
Social and Psychological influences of the customers
Purchase decisions are driven by the need to identity with others, to establish
individuality and to proclaim aspirations
The fit between the customers or buyers and the product
Good listening to customers: Get out from behind your desk and go to where the
customers are.
8-Jan-2018
FORMULATE
DIFFERENTIATION
STRATEGY
• Select product
positioning in relation
to choice of attributes
• Select target customer
group
• Ensure compatibility
between product
attributes and
preferences of target
customer group
• Evaluate the potential
returns from
differentiation relative
to the costs of
differentiation
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
9
We
are
here!
3. Differentiation
Strategy
Identifying the Potential for Differentiation on the Demand Side:
The ProductWhat needs does the product
satisfy?
Identify the principal product
attributes
The Customers
By What Criteria do customers
choose?
Identify the patterns of customer
preferences in relation to
individual attributes and
combination of attributes
Identify the Price-premiums that
individual attributes can
command?
What are the motivational and
other influences that determine
consumer behavior?
Identify the demographic
socioeconomic and
psychographic factors that
correlate with customer behavior
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
10
We are here!
3. Differentiation
Strategy
Strategies of Differentiation:
Differentiation
Strategies
Quality
Design
Support
Image
Price
No basis for
differentiation
Beyond constraints the
potential in any product or
service for differentiation
is limited only by the
boundaries of human
imagination.
Differentiation is likely to
be built into the identity,
style and values of the
company.
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
11
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3. Differentiation
Strategy
Price
• Most Basic way to differentiate a product is simply to charge a
lower price or a higher price.
• If charging a lower price, the producer absorbs the lost margin, or
makes it up through a higher volume of sales.
• If charging a higher price, this usually happens with “first movers”.
• With similar products, perhaps commodities, product
differentiation maybe used.
Strategies of Differentiation:
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
12
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3. Differentiation
Strategy
Image
• Marketing is used to create differentiation where it does not
otherwise exist.
• Highlighting differences and luxurious packaging are used as
techniques. But be aware, the packaging doesn´t affect the
content. Example: Yogurts, expensive face moisturizers,
perfumes or cosmetics.
• If the image is established through advertising efforts, results
must be attached in order to sustain the image over time.
• When looking for foreign direct investments or attract
tourism, the image is a key differentiation factor.
Strategies of Differentiation:
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
13
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3. Differentiation
Strategy • Nowadays, any company has to establish a “customer support”
program
• Support may be linked from the moment of the buying decision
process, servicing the product with free-advisory, providing an
adjacency service alongside the basic one. Examples: Special
payment scheme or 24 hour delivery, exceptional after-sales
service, paddling lessons with the kayak or SUP you buy.
• Support is a substantial form of differentiation when there is no
other way to differentiate.
Strategies of Differentiation:
Support
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
14
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3. Differentiation
Strategy • The differentiation on the basis of design, offering something that
is truly different, that breaks away from the “dominant design” of
the industry. For example: Apple offered the iPhone when the
industry had a different “dominant design”.
• To provide unique features requires a culture of innovation and
creativity
• Countries wishing to attract investments need a team of
innovative “country brand” designers who know how to compete
with other country peers.
• Which of the social media tools have a better design? Instagram
or Snapchat?
Strategies of Differentiation:
Design
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
15
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3. Differentiation
Strategy• Quality differentiation is related to features of the product that
make it better – not different, but better.
• The product performs with:
• Greater initial reliability
• Greater long term durability
• Superior performance
• An example in the retail industry: Which retailer has the best
quality products?
Strategies of Differentiation:
Quality
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
16
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3. Differentiation
Strategy• To have no basis for differentiation is a strategy: Indeed by all
observation this is a common one, and in fact it is a strategy
to don´t have a differentiation strategy too.
• Some firms deliberately decide to don´t pursue
differentiation, but to copy others´ success. Example: Yaris
from Toyota has been copied by several competitors.
Strategies of Differentiation:
No basis for differentiation
8-Jan-2018
Eleonora Escalante MBA-MEng, Strategic Corporate Advisory Services
© 2017 Eleonora Escalante-all rights reserved
Leg 4. From Melbourne to Hong Kong.
Theme 1. Porter Generic Strategies
17
We are here!
3. Differentiation
Strategy
Thank you!
8-Jan-2018