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.

Postings on generic strategies

Strategy students: This positing contains a summary of my earlier postings on generic strategies.

Mobile handset manufacturing

The mobile handset market can be characterised by a lot of failing companies and a few winners. The following diagram plots the development of the industry from 2003 to 2012 using the strategy possibility frontier model. All companies with a worldwide market share above 1% have been included in the diagrams. All companies with a market share above 5% are furthermore highlighted in bold.

Additional topics on the strategy possibility frontier

This is the sixth and final posting in a series on business-unit strategy. This posting deals with the following topics not covered earlier:

• Stuck in the middle (strategic advantage)
• Stuck in the middle (strategic scope)
• Movement of companies position over time
• Movement of the strategy possibility frontier

Food retailing in Singapore revisited

This is the fifth posting in a series on business-unit strategy.

The objective of this posting is to show how the strategy possibility frontier can be applied to the Singapore food retailing industry. I am not an expert on the industry so this is work in progress. The posting is mostly relevant to students of strategy that would like to perform similar analyses for other product categories. I have previously written about the model (start reading here) and the industry (here). It is helpful to revisit those postings before continuing.

Niche strategy

This is the fourth posting in a series on business-unit strategy.

We have so far assumed that the the competition occurs on a fairly broad level of the market. In addition to the previous two strategies, a third strategy focuses on one particular market niche. This strategy has some interesting implications illustrated in the figure 1.

Uniqueness strategy

This is the third posting in a series on business-unit strategy.

Uniqueness competition. The area labelled [b] is the realm of uniqueness competition (or differentiation). In contrast to the low-cost competition, there is generally more than one way to be unique. Companies 5, 6, 7 and 8 all have unique positions as indicated by them all being on the strategy possibility frontier. Think about companies with different advertising image, product development focus and/or customer service. (The diagram should ideally be represented in (n+1) dimensions. There are n dimensions of uniqueness and one dimension of low cost.)

Figure 1.

Low-cost strategy

This is the second posting in a series on business-unit strategy.

Low-cost competition. The area labelled [a] is the realm of price-oriented competition. Since the companies do not offer much uniqueness the only remaining way to compete is to offer the buyers lower prices. Company 1 has been the most successful in achieving a low-cost position. Company 2 and 3 both have a higher cost position (and slightly lower in terms of uniqueness). A higher cost position is often the result of lower economies of scale, but can also be due to other factors (e.g. capacity utilisation, economies of learning, location, better designed value chain).

Figure 1.

The strategy possibility frontier

This is the first posting in a series on business-unit strategy.

Product-category. A good level to understand a company's strategy is to consider the product-category level. A product category includes the individual products that fulfil a similar need for the buyers. The definition of a product category is often straightforward, but not always. Here are a few examples of product categories:

• Carbonated sweet softdrinks. In the US market this is a distinct product category, even though the definition has become somewhat blurred due to the popularity of non-carbonated softdrinks as well as bottled water. In the Asian context the definition also needs to deal with tea-based drinks.
• Packaging containers for beverages. This would include aluminium, glass, plastic and waxed paper. However, it could be argued that each raw-material should be a separate product-category. 
• Commuter transportation. This would include metropolitan rail as well as bus services in large cities. 
• Smartphones. Since a smartphone is able to function like a computer it should be seen as a different product category compared to the traditional mobile phone.

When in doubt regarding the exact definition of a product category it is necessary to explore the different options available. The considerations are similar to the ones made when analysing substitutes for an industry analysis.

The product category often corresponds to a business-unit inside a company. However, there is no guarantee that there will be a direct correspondence. If a company has more than one business-unit for a particular product-category we should consider the different business-units separately. And if a business-unit includes several product-categories we should consider the different product-categories separately.

Grocery retailing in Singapore - an illustration of generic strategies

This post will use the grocery retailing industry in Singapore as an illustration of basic strategic management concepts; in particular the notion of generic strategies (Porter, 1980, chapter 2). First some background information on the market.