Instructions
1) Every company pursues one or more of Porter’s generic strategies (p. 148): (1) cost leadership – low cost; (2) cost leadership – best value;(3) differentiation; (4) focus – low-cost, and (5) focus – best value.
Discuss the generic strategy (in detail) used by Staples, Macy’s, and Old Navy.
(2) What is each company doing to gain a COMPETITIVE advantage through their respective strategies?
Instructions: Make sure to answer EACH part of the question. Research the topic and provide YOUR interpretation. I encourage research
from valid sources (not only the text). You MUST also relate the textbook chapter readings to the topic being discussed (through citations). Discussions must be formatted in APA (citations and reference page).
At minimum 2 references must be made available in the discussion area as part of the original post. References need to be at the end of the discussion.
References are different from citations. References are the number of sources used when researching/analyzing the discussion question.
Citations are giving the author credit for his/her research. At minimum 3 citations from the textbook should be part of your discussion. Include other citations as applicable. Citations lead to finding direct applications between theory and practice.
Ex: According to Gamble et al. (2015), strategy is….. For LEGO and Mattel, strategy is…… One sentence alone does not meet
this requirement; you must be able to find several relationships between the topic being discussed and the textbook.
I included textbook pages below.
David, F. R., David, F. R. (2015). Strategic Management: Concepts, A Competitive Advantage Approach, 15th Edition. [VitalSource Bookshelf Online]. Retrieved from http://bookshelf.vitalsource.com/#/books/9780133444902/
Discussion Question Anwers
Generic Strategy
Businesses and industries have been in existence since time immemorial. Over the years, the industrialization has ‘gained ground’ all over the world and is now the most expansive sector. New businesses are established on a daily basis and introduced to the already ‘bursting’ market. The massive influx of firms into the free market has created a very competitive environment where each business wants to be recognized and gain market dominance (Wang et al., 2011). However, for any company to gain competitive advantage, it has to lay down specific strategies to act as a guideline for its operation.
Porter, in his research activities identified three strategies that are of key importance for any firm to thrive in a competitive market. Porter’s approaches are referred to as generic strategies because they are neither dependent on firm nor the industry; instead they apply to any business unit level. According to David (2015), these generic strategies include cost leadership, differentiation and focus. It is imperative that every firm adopts either one or two of the generic strategies, despite its size or form. Each approach is a reflection of a choice made by the company by considering both the scope and the competitiveness.
Cost leadership is one of the strategies aimed at creating dominance over the competitors. Two methods are used to achieve this strategy. Type 1 also referred to as the low-cost strategy, emphasizes thata firm should strive to enhance its market share by selling its goods and services at lowest prices possible in the prevailing market(David, 2015).Type 2 also referred to as the best value strategy, encourages a firm to reduce its operational costs to maximize the profits accrued. The firm can further maximize its profits by ensuring that it charges average industry prices for its products or services. Nevertheless, the firm should ensure that the prices are within reasonable ranges to achieve rational profit for each sale despite the ‘slash’ on the operational costs.
Differentiation strategy is adopted especially where the customers are not price sensitive but are very specific in their needs. David (2015) explains that the strategy emboldens a firm to be unique in its line of operation. The products and services offered should stand out in the presence of those from the competitors. The properties mostly considered under differentiation approach include functionality or durability of a product among many others. Therefore, it is essential that the organization develops good research and innovative systems to keep up with the ever-changing market trends; to deliver products of high quality and engage in efficient sales and marketing schemes (Wang et al., 2011).
Focus strategy involves the production of goods or services to meet the needs of a particular niche in the market. The organization has to understand the consumer dynamics and their needs then strive to develop low cost and best value products for that market. The focus approach tends to create a sense of brand loyalty among the consumers (David, 2015).The customers are attracted and feel fulfilled with the firm’s product thus enabling the company to gain a competitive advantage.
Different companies have embraced Porter’s generic strategies for them to flourish in the already ‘overflowing’ market. Macy’s, Staples and Old Navy companies are no exceptions. They all use either one or two of the Porter’s strategies. Macy’s is one of the largest retail companies in the world. It uses the low cost, low price and differentiation approaches in its operations especially in its clothing line (Weitz & Whitfield, 2010). The approaches have helped the company to establish a competitive edge since it works majorly from the local stores thus reaching out to the customers in their locations.
In addition, Staples is also a retail company that majorly deals with office supplies. It exercises the cost leadership and differentiation strategy,to meet its store and online demands. The online sales give the company an upper hand compared to their competitors. Finally, Old Navy is a renowned retail company that deals with accessories and clothing. It mainly uses both focus and cost leadership strategies. It has redefined a particular consumer target group and offers trendy products at captivating prices (Weitz & Whitfield, 2010).The company has further localized its marketing campaigns to reach its target market. The strategies thus offer the company a competitive edge in the market.
References
David, F. R. (2015). Strategic Management: Concepts, A CompetitiveAdvantage Approach, 15th Edition. [Vital Source Bookshelf Online]. Retrieved from http://bookshelf.vitalsource.com/#/books/9780133444902/
Wang, W. C., Lin, C. H., & Chu, Y. C. (2011). Types of competitive advantage and analysis. International Journal of Business and Management, 6(5), p100.
Weitz, B. A., & Whitfield, M. B. (2010). Trends in the U.S retailing. In Retailing in the 21st Century (pp. 83-99). Springer Berlin Heidelberg.
