Industry Positioning by
Major Competitors
View
Template for: Industry Positioning by Major Competitors
The purpose of this section is to summarize on one page the
industry positioning by major competitors. According to Michael
Porter, there are four generic strategies which represent fundamentally
different approaches to achieving competitive advantage. They are: cost
leadership (broad focus, low cost); cost focus (narrow scope; low
cost); differentiation (broad scope, differentiation); differentiation
focus (narrow scope, differentiation). Firms which have no generic strategy
are categorized as stuck in the middle.
Note that low cost refers to the firm's costs, and not to the firm's current
pricing strategy. Also, there is nothing cheap about a low cost strategy. It
simply means that the firm is smart enough to perform one or more significant
activities at a relatively lower cost than competitors.
In practice, deciding on whether or not a firm has a focus strategy or a
broad-based strategy needs to be determined within the context of the industry
segmentation matrix. If a firm competes in only one or a few segments it, by
definition, has a focus strategy.
Deciding whether or not a firm has (or should have) a differentiation
strategy versus a low-cost strategy is fairly easy when the industry involves
the building of a physical product. For example, a Rolls-Royce (differentiation
focus) and an IBM PS/2 (differentiation) have more features and are superior in
quality to the average car or PC.
When comparing offerings, it is important to consider the entire offering,
not just the physical product itself. For example, some people think it's
outrageous that the same suit, dress or coat can cost twice or three times the
amount depending on whether you buy it on 18th Street, 34th Street or 50th
Street in Manhattan. Location, amount of sales help, and return policy are just
three dimensions of the total purchase that are significant enough that the
pricing is, in fact, logical and rational at all three stores.
For some people, discussing alternative strategies is more difficult when a
service is provided, or when the product is a non-physical one such as software
or information. Although it might be more difficult to 'see' the differences
between non-physical product offerings, the basic concept is the same:
competitors usually offer a different level of features. Comparing the
features provided by competitors is more complicated than drawing a normal curve
that displays the number of features provided because more than one variable is
at play. The big picture is that competitors differ in the degree to which they
can meet the needs of the customers.
In discussing differentiation strategies, a situation which should be
avoided is the one in which someone declares at the outset that "the
industry is a pure commodity industry." It should be noted that bottled
water is not a commodity industry. Sodas are not commodities. Cola sodas are not
pure commodities. And if you think table salt is a commodity industry, read the
Diamond Crystal label. It reads, in part, "If you look at Diamond Crystal
Salt under a microscope, you will see that every grain has facets like a tiny
diamond crystal. Unlike granulated salt which looks like plain cubes and bounces
off your food, Diamond Crystal, the uncommon salt, has facets to cling."
If the powers that be still insist that the product or service is a pure
commodity, it's helpful to remember that image and reputation, customer service,
location, billing procedures and countless other variables can still be used to
distinguish competitors.
| 
