Dimensions of Competitive Strategy

Companies’ strategies for competing in an industry can differ in a wide variety of ways. However, the following strategic dimensions usually capture the possible differences among a company’s strategic options in a given industry:

  • specialization: the degree to which it focuses its efforts in terms of the width of its line, the target customer segments, and the geographic markets served;
  • brand identification: the degree to which it seeks brand iden-tification rather than competition based mainly on price or other variabl Brand identification can be achieved via ad-vertising, sales force, or a variety of other means;
  • push versus pull: the degree to which it seeks to develop brand identification with the ultimate consumer directly versus the support of distribution channels in selling its product;
  • channel selection: the choice of distribution channels ranging from company-owned channels to specialty outlets to broad- line outlets;
  • product quality: its level of product quality, in terms of raw materials, specifications, adherence to tolerances, features, and so on;
  • technological leadership: the degree to which it seeks techno-logical leadership versus following or It is impor-tant to note that a firm could be a technological leader but deliberately not produce the highest quality product in the market; quality and technological leadership do not necessar-ily go together;
  • vertical integration: the extent of value added as reflected in the level of forward and backward integration adopted, in-cluding whether the firm has captive distribution, exclusive or owned retail outlets, an in-house service network, and so on;
  • cost position: the extent to which it seeks the low-cost posi-tion in manufacturing and distribution through investment in costminimizing facilities and equipment;
  • service: the degree to which it provides ancillary services with its product line, such as engineering assistance, an in-house service network, credit, and so fort This aspect of strategy could be viewed as part of vertical integration but is usefully separated for analytical purposes;
  • price policy: its relative price position in the market. Price po-sition will usually be related to such other variables as cost position and product quality, but price is a distinct strategic variable that must be treated separately;
  • leverage: the amount of financial leverage and operating lev-erage it bears;
  • relationship with parent company: requirements on the be-havior of the unit based on the relationship between a unit and its parent com The firm could be a unit of a highly diversified conglomerate, one of a vertical chain of busi-nesses, part of a cluster of related businesses in a general sec-tor, a subsidiary of a foreign company, and so on. The nature of the relationship with the parent will influence the objec-tives with which the firm is managed, the resources available to it, and perhaps determine some operations or functions that it shares with other units (with resulting cost implications), as has been discussed in Chapter 1 ;
  • relationship to home and host government: in international industries, the relationship the firm has developed or is sub-ject to with its home government as well as host governments in foreign countries where it is operating. Home governments can provide resources or other assistance to the firm, or con-versely can regulate the firm or otherwise influence its goals. Host governments often play similar roles.

Each of these strategic dimensions can be described for a firm at differing levels of detail, and other dimensions might be added to re-fine the analysis; the important thing is that these dimensions pro-vide an overall picture of the firm‘s position.

The scope for strategic differences along a particular dimension clearly depends on the industry. For example, in a commodity busi-ness like ammonium fertilizer, no firm has much brand identifica-tion and product quality is essentially uniform. Yet firms differ widely in backward integration, the degree to which they provide service, integration forward into dealerships, relative cost positions, and relationships to their parents.

The strategic dimensions are related. A firm with a low relative price (such as Texas Instruments in semiconductors) usually has a low-cost position and good though not superior product quality. To achieve its low costs such a firm probably has a high degree of verti-cal integration. The strategic dimensions for a particular firm usu-ally form an internally consistent set, as in this example. An industry normally has firms with a number of different though internally consistent combinations of dimensions.

Source: Porter Michael E. (1998), Competitive Strategy_ Techniques for Analyzing Industries and Competitors, Free Press; Illustrated edition.

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