While there are different schools of thought about how strategy comes about, researchers generally agree that strategic focusstrategic focusWhen an organization is clear about its mission and vision and has a coherent, well-articulated strategy for achieving those. Three of the most widely read books on competitive analysis in the 1980s were Michael Portera€™s Competitive Strategy, Competitive Advantage, and Competitive Advantage of Nations.[210] In his various books, Porter developed three generic strategies that, he argues, can be used singly or in combination to create a defendable position and to outperform competitors, whether they are within an industry or across nations.
These strategies are termed generic because they can be applied to any size or form of business. Porter suggests that another factor affecting a companya€™s competitive position is its competitive scope.
Firms using a narrow focus strategy can also tailor advertising and promotional efforts to a particular market niche. By positioning itself in either broad scope or narrow scope and a low-cost strategy or differentiation strategy, an organization will fall into one of the following generic competitive strategies: cost leadership, cost focus, differentiation, and focused differentiation. The cost-leadership strategy may be more difficult in a dynamic environment because some of the expenses that firms may seek to minimize are research and development costs or marketing research costsa€”expenses the firm may need to incur to remain competitive. Several studies have shown that a differentiation strategy is more likely to generate higher profits than a cost-leadership strategy, because differentiation creates stronger entry barriers. A differentiation-focus strategy is the marketing of a differentiated product to a narrow market, often involving a unique product and a unique market. Differentiation does not allow a firm to ignore costs; it makes a firma€™s products less susceptible to cost pressures from competitors because customers see the product as unique and are willing to pay extra to have the product with the desirable features. Firms pursuing a differentiation strategy are vulnerable to different competitive threats than firms pursuing a cost-leader strategy. Imitation may also reduce the perceived differences between products when competitors copy product features.
For a variety of reasons, including the differences between intended versus realized strategies discussed in an earlier section, none of these competitive strategies is guaranteed to achieve success. An organization pursuing a differentiation strategy seeks competitive advantage by offering products or services that are unique from those offered by rivals, either through design, brand image, technology, features, or customer service. Research suggests that, in some cases, it is possible to be a cost leader while maintaining a differentiated product. While Michael Portera€™s generic strategies were introduced in the 1980s and still dominate much of the dialogue about strategy and strategizing, a complementary approach was offered more recently by CSC Index consultants Michael Treacy and Fred Wiersema.
Provide the best offer in the marketplace, by excelling in one specific dimension of value. Treacy and Wiersema describe three generic value disciplines: operational excellence, product leadership, and customer intimacy. Operational Excellenceoperational excellence strategyWhere the strategy emphasizes superb operations and execution. The case study that their book uses to illustrate the a€?operational excellencea€? value discipline is AT&Ta€™s experience in introducing the Universal Card, a combined long-distance calling card and general purpose credit card, featuring low annual fees and customer-friendly service.
Key characteristics of the strategy are superb operations and execution, often by providing a reasonable quality at a very low price, and task-oriented vision toward personnel. Product Leadershipproduct leadership strategyWhere the strategy emphasizes innovation and brand-based marketing. Customer Intimacycustomer intimacy strategyWhere the strategy emphasizes customer attention and customer service. The recent partnership between Airborne Express, IBM, and Xerox is a great example of an effective customer intimacy strategy.
Treacy and Wiersema maintain that, because of the focus of management time and resources that is required, a firm can realistically choose only one of these three value disciplines in which to specialize.
The companies that do not make the hard choices associated with focus are in no sense market leaders.
Within the context of redesigning the operating model of a company to focus on a particular value discipline, Treacy and Wiersema discuss creating what they call a€?the cult of the customer.a€? This is a mind-set that is oriented toward putting the customera€™s needs as a key priority throughout the company, at all levels. How do Portera€™s generic strategies differ from, and relate to, the Treacy and Wiersema approaches? Keith Brown served with the Royal Marines before pursuing a career in local government administration, where he was also an active trade union representative with UNISON. Norman Baker MP has been Parliamentary Under-Secretary of State for Transport since May 2010 and is the Liberal Democrat Member of Parliament for Lewes, East Sussex. Prior to entering the House of Commons in 1997, he had a variety of jobs including periods as a Regional Executive Director for Our Price Records, a teacher of English as a second language and clerk at Hornsey Railway Station. Norman held a number of portfolios in the Liberal Democrat Shadow Cabinet, including Shadow Minister for the Cabinet Office, Shadow Chancellor of the Duchy of Lancaster, and Shadow Secretary of State for Transport. As an MP, Norman made his reputation for uncovering scandal and as a dedicated and effective campaigner for the environment and animal rights.
Professor Roderick A Smith, now Chief Scientific Advisor to the Department of Transport, has had an academic career at the Universities of Oxford, Cambridge, Sheffield and Imperial College. He has published widely in areas of fatigue and structural integrity, and has lectured in many countries. Jim Steer is the founder of Steer Davies Gleave, transport consultants, where he is a Board Director. He established Greengauge 21 in 2006 to foster debate on a high speed rail network for Britain. He was seconded to the Strategic Rail Authority from 2002-5, heading strategy and planning. He is Vice President of the Chartered Institute of Logistics and Transport, and a columnist for the Transport Times, and was a member of HS2 Ltd’s Strategic Challenge Panel. Dr PETE WATERMAN OBE, DL is the most successful British producer-songwriter in pop history, an author, DJ, Pop Idol judge and television presenter and a lifelong entrepreneur. Colin is a Director of Arup, where he is jointly responsible for the Partnership’s international design operation for transport projects. He is currently Project Director for the route options study being carried out by Arup for HS2 Ltd., to identify a new high speed line from London to the West Midlands and also the proposed Y-route to the North-East.
Arup High Speed Rail projects include High Speed 1 and High Speed 2 in UK, California High Speed Rail, Texas High Speed Rail, Express Rail Link (China to Hong Kong), Portugal HSL, High Speed Line Holland and Beijing South High Speed Rail Station. Colin has played key roles in the delivery of major infrastructure projects and has first hand experience of private finance projects through his roles as project manager, designer and technical advisor to financial institutions and strategic advisor for the implementation of private finance initiatives.
Councillor Paul Watson was elected as Chair of the Association of North East Councils in October 2009. Born in Sunderland, he served an apprenticeship at Sunderland Shipbuilders where he worked until 1981. The Leader of the Council, as Leader of the controlling majority political group, Chairs the Cabinet and acts as the Council’s lead political spokesman. Stephen joined TfGM after a stint at Manchester City Council where he combined the roles of Head of Transport Policy for the city and Deputy Clerk to GM Integrated Transport Authority.
David's policy brief at the London Chamber of Commerce and Industry focuses on 'London's Infrastructure', with a particular focus on major transport projects.
Previously David has worked in the House of Commons, and in political consultancy advising a number of international businesses across the technology, manufacturing, energy and skills sectors. David Thrower has had a longstanding interest in high speed rail, going back to 1989 when he served on the former North West Channel Tunnel Group, which successfully sought the inclusion of a study of a high speed rail link into the North West's regional plans. For most of the past decade, following working for two Passenger Transport Authorities, he has on a freelance basis advised the North West Business Leadership Team on high speed rail issues, including assisting with giving evidence to the House of Commons Transport Committee and the All Party Campaign for High Speed Rail.
David Simpson, Network Rail route managing director for Scotland, has been running Scotland’s Railway since 2005.
Richard Lakin is a former journalist with experience of working in communications in the rail industry in London, the West Midlands and the North West. He leads communications activity for the Go-HS2 consortium of groups and organisations which supports bringing high-speed rail to the West Midlands. James uses twenty years’ communications experience working across government, media and industry to build businesses for other people. Iain Docherty BSc PhD CMILT is Professor of Public Policy and Governance and Head of Management at the University of Glasgow Adam Smith Business School.
Iain has worked with and advised a range of private sector, governmental and other organisations including governments and public agencies in the UK, US, Australia, Canada and Sweden, and the OECD. This spirit of focus is echoed in the following two parts of this section where we introduce you to the complementary notions of strategy as trade-offs and strategy as discipline.
The strategies are (1) overall cost leadership, (2) differentiation, and (3) focus on a particular market niche. We refer to them as trade-off strategies because Porter argues that a firm must choose to embrace one strategy or risk not having a strategy at all. Many automobile dealers advertise that they are the largest volume dealer for a specific geographic area.


Such customization may range from individually designing a product for a single customer to offering a menu from which customers can select options for the finished product. Firms pursuing this type of strategy must be particularly efficient in engineering tasks, production operations, and physical distribution. Two or more firms competing for cost leadership may engage in price wars that drive profits to very low levels. Firms employing this strategy may focus on a particular buyer segment or a particular geographic segment and must locate a niche market that wants or needs an efficient product and is willing to forgo extras to pay a lower price for the product.
Because this type of strategy involves a unique product, price is not the significant factor. This strategy is viable for a company that can convince consumers that its narrow focus allows it to provide better goods and services than its competitors. Differentiation can be achieved through real product features or through advertising that causes the customer to perceive that the product is unique.
Differentiation may also lead to higher profit margins and reduce the need to be a low-cost producer.
Thus, for firms to be able to recover the cost of marketing research or R&D, they may need to add a product feature that is not easily copied by a competitor.
The feature that customers like and find attractive about a product this year may not make the product popular next year. Some companies that have successfully implemented one of Portera€™s generic strategies have found that they could not sustain the strategy.
That is, can a firm straddle strategies so that it is simultaneously the low-cost leader and a differentiator? Alternatively, an organization pursuing a cost-leadership strategy attempts to gain competitive advantage based on being the overall low-cost provider of a product or service. You may think that Nike has always been highly successful, but it has actually weathered some pretty aggressive competitive assaults. Trends suggest that executives operating in highly complex environments, such as health care, do not have the luxury of choosing exclusively one strategy over another. Their value disciplines model is quite similar to the three generic strategies from Porter (cost leadership, differentiation, focus).
You cana€™t allow performance in other dimensions to slip so much that it impairs the attractiveness of your companya€™s unmatched value.
When a company focuses all its assets, energies, and attention on delivering and improving one type of customer value, it can nearly always deliver better performance in that dimension than another company that divides its attention among more than one. As with Portera€™s perspective about the importance of making trade-offs, any company must choose one of these value disciplines and consistently and vigorously act on it, as indicated by the four rules mentioned earlier.
The focus is on efficiency, streamlined operations, supply chain management, no frills, and volume. Organization leaders demonstrate a recognition that the companya€™s current success and future prospects lie in its talented product design people and those who support them.
This logic is similar to Portera€™s in that firms that mix different strategies run the risk of being a€?stuck in the middle.a€? Most companies, in fact, do not specialize in any of the three, and thus they realize only mediocre or average levels of achievement in each area. In todaya€™s business environment of increased competition and the need more than ever before for competitive differentiation, their complacency will not lead to increased market share, sales, or profits. Two prevalent views of strategy where focus is a key component are strategy as trade-offs and strategy as discipline. He is a graduate of Dundee University and studied at the University of Prince Edward Island.He has been a Member of the Scottish Parliament since 2007 and is currently the constituency MSP for Clackmannanshire and Dunblane.
He was educated at the Royal Liberty School, Gidea Park, before taking a degree in German at Royal Holloway College, University of London.
Perhaps best known as one-third of the phenomenally successful Stock Aitken Waterman team and for his world-famous PWL label and production company, Pete has sold in excess of 500 million records around the world over five decades, launching artists such as Kylie Minogue, John Travolta, Rick Astley and Steps.
David has spoken at a number of events on the vital importance of projects like High Speed 2 to the economy on behalf of the business community.
Prior to entering politics, David studied History and Politics at the University of Leicester before completing a Masters at Brunel University. Having originally joined the rail industry as a BR graduate trainee in 1986, David has worked in a wide variety of roles for BR, Railtrack, Network Rail and within freight operating companies. Go-HS2 members include Birmingham City Council, West Midlands transport authority Centro, Birmingham Airport, NEC Group and Birmingham Chamber of Commerce.
James has worked to develop and promote SCDI’s Blueprint for Scotland, focusing on growing Scotland's economy by creating an enterprising nation, maximising our assets and realising the potential of our people.
During this time, James sat as an observer on the Scottish Funding Council and Chaired the Funding Council’s review into the quality of further and higher education in Scotland. As a former senior BBC correspondent he understands the importance of balance and neutrality.
Iain’s research and teaching addresses the interconnecting issues of public administration, institutional change and city and regional competitiveness, with particular emphasis on the structures and processes of local and regional governance, policies for delivering improved economic performance and environmental sustainability, and the development and implementation of strategic planning and transport policies. As wea€™ve seen, vision and mission provide a good sense of direction for the organization, but they are not meant to serve as, or take the place of, the actual strategy. Strategic focus is seen when an organization is very clear about its mission and vision and has a coherent, well-articulated strategy for achieving those. Overall lower cost or cost leadershipoverall cost-leadership strategyA strategy in which an organization attempts to gain a competitive advantage by reducing its costs below the costs of competing firms.
A company can have a broad (mass market) competitive scope or a narrow (niche market) competitive scope. Other car dealers advertise that they have the highest customer satisfaction scores within their defined market or the most awards for their service department. Tailor-made clothing and custom-built houses include the customer in all aspects of production, from product design to final acceptance, and involve customer input in all key decisions. Because these firms focus on a large market, they must also be able to minimize costs in marketing and research and development (R&D). Ideally, a firm using a cost-leader strategy will develop an advantage that others cannot easily copy. A companya€™s costs can be reduced by providing little or no service, providing a low-cost method of distribution, or producing a no-frills product.
In fact, consumers may be willing to pay a high price for a product that they perceive as different. Since customers see the product as different from competing products and they like the product features, customers are willing to pay a premium for these features. Price-sensitive customers may be willing to forgo desirable features in favor of a less costly alternative. Several risks associated with these strategies are based on evolved market conditions (buyer perceptions, competitors, etc.). Porter asserts that a successful strategy requires a firm to stake out a market position aggressively and that different strategies involve distinctly different approaches to competing and operating the business.
To be a€?all things to all peoplea€? can mean becoming a€?stuck in the middlea€? with no distinct competitive advantage.
The company has been able to reduce costs by not assigning seating and by eliminating meals on its planes. For instance, when customer preferences moved to wide-legged jeans and cargo pants, Nikea€™s market share slipped. The hospital industry may represent such an environment, as hospitals must compete on a variety of fronts. Airborne provides Xerox and IBM with a central source of shipment data and performance metrics. Michael Porter identifies three flavors of strategy: (1) cost leadership, (2) differentiation, or (3) focus of cost leadership or differentiation on a particular market niche. The discipline of market leaders: Choose your customers, narrow your focus, dominate your market.
The discipline of market leaders: Choose your customers, narrow your focus, dominate your market (p. Before being appointed Deputy First Minister and Cabinet Secretary for Health and Wellbeing after the May 2007 election she had been Shadow Minister for Education, Health & Community Care and Justice. Amongst countless international industry awards, in 1990 Pete was recognised as the Music Industry’s Man of the Year. David, who was educated at Aston University in Birmingham, was also heavily involved in the introduction of Pendolino trains on the WCML and has led the devolution of Network Rail’s business in Scotland. James played a central role in the development of Scotland’s cities strategy that created the Scottish Cities Alliance and now chairs its Delivery Group. Following this, he worked for Scotland’s Colleges, representing the college sector as Senior to politicians and the media.


John Morrison is the owner of Morrison Media Strategies a leading PR, Public Affairs and Media Training company. His total research and consultancy awards in the last six years exceed £2 million, and he is currently Co-Director of the Scottish Cities Knowledge Centre and Co-Investigator on two major Research Council projects on sustainable transport and low carbon transitions.
Strategy is about choices, and that eventually means making trade-offs such that the strategy and the firm are distinctive in the eyes of stakeholders. When a once high-flying firm encounters performance problems, it is not uncommon to hear business analysts say that the firma€™s managers have lost focus on the customers or markets where they were once highly successful. A firm following the focus strategyfocus strategyA strategy in which an organization concentrates on a specific regional market, product line, or group of buyers in combination with its pursuit of either an overall cost leadership or differentiation strategy. However, providing such individualized attention to customers may not be feasible for firms with an industry-wide orientation.
A low-cost leader can gain significant market share enabling it to procure a more powerful position relative to both suppliers and competitors. Cost leaders also must maintain their investment in state-of-the-art equipment or face the possible entry of more cost-effective competitors. The product difference may be based on product design, method of distribution, or any aspect of the product (other than price) that is significant to a broad group of consumers.
As long as the firm can increase the selling price by more than the marginal cost of adding the features, the profit margin is increased.
For example, although Ralph Laurena€™s Polo has been a very successful brand of apparel, some younger consumers have shifted to Tommy Hilfiger and other youth-oriented brands. Some research suggests that straddling strategies is a recipe for below-average profitability compared to the industry.
The difference between being a€?stuck in the middlea€? and successfully pursuing combination strategies merits discussion. It has also been able to promote in its advertising that its fares are so low that checked bags fly free, in contrast to the fees that competitors such as American and United charge for checked luggage. According to the value disciplines model, no discipline may be neglected: threshold levels on the two disciplines that are not selected must be maintained. The focus is on development, innovation, design, time to market, and high margins in a short time frame. The focus is on: customer relationship management (CRM), deliver products and services on time and above customer expectations, lifetime value concepts, reliability, being close to the customer. The air-express carrier also manages a single, same-day delivery contract for both companies. Firms can straddle these strategies, but such straddling is likely to dilute strategic focus. In September 2012, still as DFM, she was appointed Cabinet Secretary for Infrastructure, Investment and Cities with responsibility for government strategy and the constitution. In this section, you will learn about strategic focusa€”that is, how trade-offs are reconcileda€”as well as two frameworks for thinking about what such focus might entail. For instance, Dell Computera€™s strategy is highly focused around the efficient sale and manufacture of computers and computer peripheral devices.
DifferentiationdifferentiationThe strategy where competitive advantage is based on superior products or service. At the other end of the customization scale, customers buying a new car, even in the budget price category, can often choose not only the exterior and interior colors but also accessories such as CD players, rooftop racks, and upgraded tires.
This strategy is particularly effective for organizations in industries where there is limited possibility of product differentiation and where buyers are very price sensitive.
Major changes in technology may drastically change production processes so that previous investments in production technology are no longer advantageous. A company choosing this strategy must develop and maintain a product perceived as different enough from the competitorsa€™ products to warrant the asking price. Firms must be able to charge more for their differentiated product than it costs them to make it distinct, or else they may be better off making generic, undifferentiated products. Porter also argues that straddling strategies is an indication that the firma€™s managers have not made necessary choices about the business and its strategy. Although Porter describes the dangers of not being successful in either cost control or differentiation, some firms have been able to succeed using combination strategies. Southwesta€™s consistent low-fare strategy has attracted a significant number of passengers, allowing the airline to succeed. For instance, reimbursement to diagnosis-related groups, and the continual lowering of reimbursement ceilings have forced hospitals to compete on the basis of cost.
He was recently awarded the Degree of Doctor of Science honoris causa by the University of Lincoln. Since buying the first national rail franchise in 1993, Pete has continued to contribute massively to the preservation and development of this historic and essential industry.
As a development professional, James continuously advises organisations on their growth plans, including Ministry of Sound, Capital Radio, Portland Communications (where he was managing partner) and PoliticsHome.
However, during the mid-2000s, Dell started branching out into other products such as digital cameras, DVD players, and flat-screen televisions. Finally, firms may become so concerned with maintaining low costs that they overlook needed changes in production or marketing. The two products may be physically identical, but stores are able to sell the private-label products for a lower price because very little money was put into advertising to differentiate the private-label product. A straddling strategy may be especially dangerous for narrow scope firms that have been successful in the past, but then start neglecting their focus. However, Nike achieved a turnaround by cutting costs and developing new, distinctive products. At the same time, many of them jockey for position with differentiation based on such features as technology and birthing rooms. Structure also encourages innovation through small ad hoc working groups, an a€?experimentation is gooda€? mind-set, and compensation systems that reward success. The operating principles of this value discipline include having a full range of services available to serve customers upon demanda€”this may involve running what the authors call a a€?hollow company,a€? where a variety of goods or services are available quickly through contract arrangements, rather than the supplier business having everything in stock all the time.
Treacy and Wiersemaa€™s three strategic disciplines are (1) operational excellence, (2) product leadership, and (3) customer intimacy.
In 1997, he established London & North Western Railway, a state-of-the-art independent railway maintenance company.
As a result, it lost focus on its core sales and manufacturing business, and its performance flagged.
Superiority arises from factors other than low cost, such as customer service, product quality, or unique style.
They must carefully monitor the incremental costs of differentiating their product and make certain the difference is reflected in the price.
Intel, the leading computer chip company, is a great example of a firm pursuing a successful product leadership strategy. As recently as mid-2008, however, Dell has realized a tremendous turnaround: a€?We are executing on all points of our strategy to drive growth in every product category and in every part of the world,a€? said a press release from Michael Dell, chairman and CEO. To put these strategies into context, you might think about Wal-Mart as pursuing a cost-leadership strategy and Harley Davidson as pursuing a differentiation strategydifferentiation strategyA strategy in which an organization seeks to distinguish itself from competitors through the perceived quality of its products or services.
Martin-Brower, the third-largest food distributor in the United States, serves only the eight leading fast-food chains. Company research suggested the endorsement by the Italian soccer team, for example, was not achieving the desired results.
It is the worlda€™s largest distributor of products to the worlda€™s largest restaurant companya€”McDonalda€™s. Michael Jordan and a few other a€?big namea€? endorsers were retained while others, such as the Italian soccer team, were eliminated, resulting in savings estimated at over $100 million. Laying off 7% of its 22,000 employees allowed the company to lower costs by another $200 million, and inventory was reduced to save additional money. Pete is a director and currently chairs the board of Cadogan Entertainment Investments Ltd, the landlords of County Hall, Britain’s second biggest building and a key London tourist attraction.
As a result of these moves, Nike reported a 70% increase in earnings for the first quarter of 1999 and saw a significant rebound in its stock price.
While cutting costs, the firm also introduced new products designed to differentiate Nikea€™s products from the competition.



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