Differences Between Generic Strategies and the Strategy Clock
Discussion Questions: 1. Critically discuss the purpose and application of the following two models, and highlight any differences between them: (a)Porter’s Generic Strategies (b)The Strategy Clock Purpose of Porter’s Generic Strategies and Bowman’s Strategic Clock are both aimed to help companies understand how they compete in the marketplace. Base on the different combinations of price and perceived value, companies should know how to choose a position of competitive advantage that understanding the company’s competencies.
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Application of Generic Strategies is focus on three ways in which a company could provide its customers with what they wanted at a better price, or more effectively than others. Three generic strategies are: cost leadership, differentiation, and focus. ? Application of Strategic Clock is to extend Porter’s three strategic positions to eight, and explains the cost and perceived value combinations many companies use, and also identifying the possibility of success for each strategy. Differences between these models are: )Generic strategies focus strategy concentrates on a narrow market by cost advantage or differentiation but Strategy Clock is not. 2)Generic strategies are talking about using strategy of cost leadership or differentiation, but Strategy Clock is using the combination of both and it concern more the relationship within value of product and price. 2. With reference to the Strategy Clock, what strategy is IKEA pursuing and what evidence is there in the case to support your conclusion? IKEA is using the Hybrids strategy; they offer products at a lower cost, but ffer products with a higher perceived value than those of other low cost competitors. IKEA is providing high volume is an issue here, 7000 number of items from kitchen cabinets to candlesticks, but it built a reputation of offering fair prices for reasonable goods. And also IKEA aimed to lower the prices across its entire offering by an average of 2-3% each year. The quality and value is good and the consumer is assured of reasonable prices. This combination builds customer loyalty. No other competitors offer the whole concept in the big shed 3. Why do you think this strategy may be hard for competitors to imitate?
If the core competences are complex and causal ambiguity or they are embedded in a company’s culture. IKEA’s core competences are providing huge volume of products with competitive prices and it practiced a form of ‘gentle coercion’ to keep customers for staying long time in the store to spend more. IKEA hired top designers to develop different product styles to meet different countries cultures. 4. What are the dangers of this strategy and how can managers avoid the potential pitfalls? IKEA may drift into a “stuck in the middle” position, competitors can out-flank it by both low-prices and differentiating at the same time.
Then it will not achieve a competitive advantage. Such as in US, Target Corp. has recruited top designer to develop a range of low-priced products that is Ikea-like style called Fly is popular in France. In avoiding the potential pitfalls, companies can create difficulties of imitation; create a situation of imperfect mobility, that is the capabilities that sustain differentiation cannot be trade, such as intangible assets; and establish a lower cost position than the competitors, it can allow the company to sustain better margins that can be reinvested to achieve and maintain differentiation.