More generic strategies

The objective of the strategy possibility frontier is to graphically show two generic sources of competitive advantage, non-price uniqueness and low cost. By placing all companies in an industry in the chart it is possible to spot weak and strong low cost strategies. However, the model has a problem differentiating between good and bad non-price uniqueness strategies. There are several ways to be unique, but not all unique positions are valued by the customers.



A useful approach to disentangle non-price uniqueness is to consider the following three dimensions. Think abstractly about the dimensions, because they express themselves differently in different industries.

• Product features. This is often accomplished by R&D development. For a manufacturer this could be having cutting edge features of the products and be the first introducing new product generations (e.g. Samsung and Sony smart phones). This could also be a broader product range consisting of products with different features. Companies outside manufacturing can also focus on product features. A large supermarket might have a broad product range. A stock broker might make it possible to invest in multiple types of instruments in multiple countries. These are also aspects of product features.
• Status. This is often accomplished by marketing, Buyers sometimes like to acquire status goods to increase their own status. Apple is a good example providing customers with a status. Naturally, Apple also need to spend money of features, especially on the software side. However, that is not making Apple unique in the market place. McKinsey is another example of a company focusing on status. Status is a tricky dimension because it is often relative status. If everyone decides to buy an Apple phone there is no longer much status involved in owning an Apple phone. Managing the exclusivity becomes important. Another type of status is peer group status. Many clothing companies use this strategy when appealing to a specific customer group.
• Service. This is often accomplished by customer service and support. A lot of manufacturers of industrial goods are also selling turn-key solutions or large maintenance contracts. Some clothing retailers have a larger number of more helpful staff in their stores. Convenience stores also provide service without focusing on hiring staff. The service is embedded in having conveniently located stores, which are open during long hours.

There is no absolute trade-off between any of these categories, making the situation more complex compared to the trade-off between non-price uniqueness and low cost. However, if the companies in an industry are clustered around a similar mix of the three dimensions, the situation is problematic. Generally there will be a lot of room for many niche companies in most industries. However, a surprisingly small number of industry-wide companies will have strong positions based on this framework. It might only be possible to have 2-4 companies with various types of strong industry-wide non-price uniqueness position in each geographically delimited industry.

Finally, be aware that the idea of generic strategies is a simplification of reality. What we really should do is to study each individual strategy to understand whether it is unique. An intermediary step, and organising device, is to focus on generic strategies. 

In terms of the value proposition to the buyers we can then consider four generic dimensions: (1) price, (2) product features, (3) status, and (4) service.