M. Porter identified three main strategies that are universal in nature and applicable to any competitive force. It - cost advantage, differentiation and focus.

Cost advantage creates a greater freedom of choice of actions both in pricing policy and in determining the level of profitability of the product. The cost reduction strategy was widely used in the late 19th and early 20th centuries. Today, it is gaining new popularity due to the fact that developed market economies have entered the so-called "epoch of deflation" (due to market saturation), which means a general decline in prices and incomes of the population. The main drawback of the strategy is that due to cost reduction, an unjustified decrease in the quality of the product produced often occurs.

Differentiation means the creation by a company of a product or service with unique properties, which are most often secured by a trademark. When the uniqueness of a product is reinforced by a simple declaration, then one speaks of imaginary differentiation. This strategy became widespread in developed economies in the second half of the 20th century. due to the saturation and individualization of consumer demand. The main drawback of the strategy is that it often requires significant investments (investments) in R&D and innovation processes.

Focusing- this is a concentration of attention on one of the market segments: a special group of buyers, goods or a limited geographical region of their distribution. Its main drawback is the requirement for accurate marketing research results, which is not always possible.

Each of these strategies requires the necessary resources, skills and correct managerial actions.

As a result, in our time, five options for approaches to the company's competition strategy have been formed, namely:

1. Cost leadership strategy reduces the total cost of producing a product or service, which attracts a large number of buyers.

2. Broad differentiation strategy is aimed at giving the company's products specific features that distinguish them from the products of competing firms, which helps to attract more buyers.

3. Strategy of optimal costs enables customers to get more value for their money through a combination of low costs and wide product differentiation. The task is to provide optimal (lowest) costs and prices relative to producers of products with similar features and quality.

4. Focused strategy, or market niche strategy based on low costs, is focused on a narrow segment of buyers, where the company is ahead of its competitors due to lower production costs.

5. A formulated strategy, or a market niche strategy based on product differentiation, aims to provide representatives of the selected segment with goods or services that best meet their tastes and requirements.

Figure 4.1 Five main competitive strategies

(from Michael E. Porter. Competitive Strategy: New York: Free Press, 1980. P.35-40)

On fig. 4.1 shows five main approaches to competition strategy; each of them occupies different positions in the market and provides for completely different approaches to business management. In table. Figure 4.1 presents the salient features of these competitive strategies (for simplicity, the two varieties of focused strategy are grouped under the same heading, since their only distinguishing feature is the basis of competitive advantage.

Table 4.1. Distinctive features of the main competitive strategies

Model Development Strategies

Existing reference (standard) organization development strategies:

· concentrated growth strategies;

· integrated growth strategies;

· diversified growth strategies;

· reduction strategies.

Let's consider each of them.

Group 1. Concentrated growth strategies:

· a strategy for strengthening the position of an already mastered product in an already mastered market (due to marketing efforts);

a strategy for finding new markets for an already produced product;

a strategy for developing a new product in an already developed market.

Group 2. Integrated growth strategies:

strategy reverse vertical integration(integration with suppliers);

strategy forward integration(integration with distributors and trade organizations).

Group 3. Diversified growth strategies:

strategy centered diversification(search for additional opportunities for the manufacture of new products on the basis of the existing old production; it remains at the center of the business);

strategy horizontal diversification(production of new products using new technology, different from those used in the already developed market);

strategy conglomerate diversification(the company expands through the production of new products that are technologically unrelated to those already produced; new products are sold in new markets; this is the most difficult development strategy).

Group 4. Reduction strategies:

business liquidation strategy;

· Harvesting strategy (reducing purchases and labor costs, maximizing revenue in the short term from the sale of existing products);

· reduction strategy (closure or sale of divisions or businesses that do not fit well with the remaining ones);

· cost reduction strategy (development of a number of measures to reduce costs).

Topic 5 SBUs and identifying their capabilities:

Test

Topic of work on the course of strategic planning:

Competitive analysis. Strategies according to M. Porter

Competitive analysis based on the five forces of competition according to M. Porter……..4

M. Porter’s strategies……………………………………………………………….9

Conclusion……………………………………………………………………… 12

List of used literature…………………………………………….

Introduction
The essence of competitive strategy is the attitude of the company to its external environment.. 1
^ M. E. Porter
Over the past decade, increased competition has been observed virtually all over the world. Until recently, it was absent in many countries. The markets were protected and the dominant position in them was clearly defined. And even where there was rivalry, it was not so fierce. The growth of competition was held back by the direct intervention of governments and cartels.

Today, no country or company can afford to ignore the need for competition. They should try to understand and master the art of competition.

The structure and development of the economy and the ways in which companies achieve competitive advantage are at the core of competition theory. A clear understanding of them serves as the basis on which the company's competitive strategy is based.

The recognized leader in the development of competitive analysis is Professor M. Porter of the Harvard Business School, the author of the main models for determining the main forces of competition and options for competitive strategies.

The purpose of the control work is to give an idea of ​​the competitiveness of the enterprise. The analysis of literary sources was chosen as research methods.

^ Competitive analysis based on the five forces of competition according to M. Porter
Competitive conditions in different markets are never the same, and the processes of competition in them are similar. This was demonstrated by Professor Michael Porter of the Harvard Business School: - The state of competition in an industry is the result of five competitive forces. 2

1. 
   Rivalry between competing sellers in an industry.
2. 
   Market attempts by companies from other industries to win over consumers with their substitute products.
3. 
   Potential entry of new competitors.
4. 
   Market power and means of influence used by suppliers of raw materials.
5. 
   Market power and means of influence used by consumers of products.

Porter's five forces model shown in Figure 1 is a powerful tool for diagnosing competitive market conditions and evaluating how important and effective each of them is. This is the most popular method of competition analysis and is easy to apply in practice.

^ Rice. 1 Forces governing competition in the industry.
Using the five components of the competitive structure, it is possible to describe the prerequisites for the long-term profitability of the industry and the ways in which companies can keep it under control.

There is still a narrow and pessimistic view of competition, although some company executives make the opposite assertion.
1. New members. Their appearance in the industry can be prevented by the following entry barriers:

• 
  economies of scale and experience in the production of firms already established in the industry help to keep costs at such a low level that is inaccessible to potential competitors;
• 
  differentiation of products and services, that is, reliance on trademarks that emphasize the uniqueness of the product and the recognition of its customers (for example, it is difficult to compete with the unique properties of handicrafts - Palekh, Gzhel. The very appearance of numerous counterfeit goods emphasizes the practical unsurpassedness of these trade marks);
• 
  capital requirement. Very often, effective competition requires large initial investments. This barrier, combined with economies of scale and experience, creates, in particular, serious barriers to new investment in the Russian automotive industry; reorientation costs associated with changing suppliers, retraining, scientific and project development of a new product, etc.;
• 
  the need to create a new system of distribution channels. Thus, due to the lack of well-established distribution channels, the Apple company was not able to widely infiltrate the Russian market with its personal computers;
• 
  state (government) policies that do not promote market penetration, such as setting high customs duties for foreign competitors or the absence of preferential government subsidies for newcomers.

Obstacles in the way of substitute goods can be:

• 
  carrying out price competition, which switches the attention of the buyer from the problem of quality to price reduction;
• 
  advertising attacks on consumers;
• 
  production of new, attractive products. For example, feeling competition from manufacturers of sausages, cheese producers begin to produce new, original varieties with various additives;
• 
  improving the quality of service in the sale and distribution of goods.

• 
  a large number of competitors;
• 
  homogeneity of manufactured goods;
• 
  the presence of barriers to cost reduction, for example, persistently high fixed costs;
• 
  high exit barriers (when a firm cannot exit the industry without incurring significant losses);
• 
  maturity, market saturation (this situation is typical for the global computer market today, which is faced with saturation of the needs of buyers).

4. The strength of the influence of sellers. The company competes, that is, it is waging an economic struggle, not only with its own similar manufacturers, but also with its contractors-suppliers, competitors.

Strong sellers can:

• 
  raise the price of your goods;
• 
  reduce the quality of the products and services supplied.

• 
  the presence of large companies-sellers;
• 
  the absence of substitutes for the supplied goods;
• 
  a situation where the industry to which supplies are made is one of the non-main customers;
• 
  the decisive importance of the supplied goods among the necessary economic resources;
• 
  the ability to attach the firm-buyer through vertical integration.

• 
  pressure on prices to bring them down;
• 
  in higher quality requirements;
• 
  in demands for better service;
• 
  in pushing intra-industry competitors against each other.

• 
  cohesion and concentration of the consumer group;
• 
  degree of importance of products for consumers;
• 
  the range of its application;
• 
  degree of product homogeneity;
• 
  the level of consumer awareness;
• 
  other factors.

Strategies according to M. Porter

To strengthen the position of the enterprise, M. Porter recommended using one of three strategies.

^ 1. Leadership through cost savings.

Enterprises that have decided to use this strategy direct all their actions to reduce costs in every possible way. An example is the company "British Ukraine Shipbuilders" (B-U-ES) for the construction of bulk carriers. The low-paid workers of Ukrainian shipyards will be engaged in the preparation of ship hulls. Cheap Ukrainian steel will be used in the production of ships. The filling of the ships will be supplied mainly by British companies. Therefore, it is expected that the cost of new vessels will be significantly lower than the price of similar products from European and Asian shipbuilders. Thus, a dry cargo ship with a displacement of 70,000 tons is estimated at $25-26 million, while a similar Japanese-built vessel costs $36 million.

Prerequisites:

• 
  large market share
• 
  the presence of competitive advantages (access to cheap raw materials, low costs for the delivery and sale of goods, etc.),
• 
  strict cost control
• 
  the possibility of saving costs for research, advertising, service

• 
  enterprises are profitable even in conditions of strong competition, when other competitors suffer losses;
• 
  low costs create high barriers to entry;
• 
  when substitute products appear, the leader in cost savings has more freedom of action than competitors;
• 
  low costs reduce supplier influence

• 
  competitors may adopt cost-cutting techniques;
• 
  major technological innovations could eliminate

• 
  concentration on costs will make it difficult to detect changes in market requirements in a timely manner;
• 
  unforeseen effects of cost-increasing factors can lead to a narrowing of the price gap compared to competitors.

Enterprises that decide to use this strategy direct all their actions towards creating a product that has greater benefits for consumers compared to the product of competitors. At the same time, costs are not among the top-priority problems. An example of a differentiation strategy can be the strategies of Mercedes, Sony, Brown, etc.

Prerequisites:

• 
  special prestige of the enterprise;
• 
  high potential for R&D;
• 
  perfect design;
• 
  production and use of materials of the highest quality;
• 
  it is possible to fully take into account the requirements of consumers;

• 
  consumers prefer the product of this enterprise;
• 
  consumer preference and product uniqueness create high barriers to entry;
• 
  product features reduce the influence of consumers;
• 
  high profit facilitates relationships with suppliers.

• 
  the price of the product can be so significant that consumers, despite the loyalty of this brand, will prefer the product of other firms;
• 
  imitation of other firms is possible, which will lead to a decrease in the advantages associated with differentiation;
• 
  a change in the value system of consumers can lead to a decrease or loss of the value of the features of a differentiated product.

The enterprises which have decided to use this strategy direct all actions to a certain segment of the market. At the same time, the enterprise may strive for leadership by saving on costs, or to differentiate the product, or to combine one or the other.

Prerequisites:

The company must satisfy the requirements of consumers more efficiently than competitors.

^ Advantages of the strategy:

Specified earlier.

Strategy risks:

• 
  differences in prices for products of specialized enterprises and enterprises serving the entire market may not correspond in the eyes of consumers to the advantages of products specific to this segment;
• 
  competitors can specialize their product even more by separating sub-segments within a segment.

As practice shows, prosperous and promising markets have high entry barriers, patronage from the state, unpretentious consumers, a cheap supply chain and the smallest number of alternative industries that can replace them. A business with the latest technology and high efficiency is most susceptible to attacks by competitors, the probability of bankruptcy in such markets is very high.

For many small businesses, competition comes down to being like their big (powerful) competitors. This gives them self-confidence. But to imitate others is to deprive oneself of any advantage. Lack of competitive advantage is a sure way to bankruptcy. Some enterprises, having a certain competitive advantage, do not make any efforts not to lose them. The presence of a competitive advantage should not stop further search.

The desire to be the first in all areas of competition, the pursuit of momentary profits often forces enterprises to abandon the previously developed competition strategy, which brings chaos to the enterprise and does not allow it to focus on long-term goals in the field of competition.

The question of where to compete, in which market to make a profit is always one of the key ones.
List of used literature

1. 
   A.A. Thompson, Jr. A.J. Strickland III. Strategic management. Textbook for universities - M INFRA-M, 2001.
2. 
   Gusev Yu.V. Strategic Management: Study Guide/Part 1. NGAEiU. - Novosibirsk, 1995.
3. 
   Zabelin P.V., Moiseeva N.K. Fundamentals of Strategic Management: Textbook. - M.: Information and implementation center "Marketing", 1997.
4. 
   Kono T. Strategy and structure of Japanese enterprises. - M.: Progress, 1987.
5. 
   M. Porter. Competition. Moscow: International relations, 1993.
6. 
   Porter M. International competition./Ed. V.D. Shchetinin. - M.: International relations, 1993.

"Strategy competition- these are defensive or offensive actions aimed at achieving a strong position in the industry, at successfully overcoming five competitive forces and thus higher returns on investment." Although Porter acknowledges that companies have shown many different ways to achieve this goal, he insists that it is possible to outperform other firms with just three internally consistent and successful strategies. These are typical strategies:

Cost minimization.

Differentiation.

Concentration.

Cost minimization strategy. The advantages of this strategy:

Low costs protect this firm from powerful buyers, as buyers can use their power only to bring its prices down to the level of prices offered by a competitor that is next in efficiency to this firm.

Low costs protect the firm from suppliers by providing greater flexibility to counter them as input costs rise.

Factors that lead to low costs usually create high barriers to entry of competitors into the industry - these are economies of scale or cost advantages.

Finally, low costs usually put the firm in an advantageous position with respect to substitute products.

Thus, the low-cost position protects the firm from all five competitive forces, because the struggle for favorable terms of the transaction can reduce its profits only until the profits of its next most efficient competitor are destroyed. Less efficient firms in the face of increased competition will be the first to suffer.

The minimum cost strategy is not suitable for every company. Companies wishing to pursue such a strategy must control large market shares relative to competitors or have other advantages, such as the most favorable access to raw materials. Products should be designed to be easy to manufacture; in addition, it is reasonable to produce a wide range of interconnected products in order to evenly distribute costs and reduce them for each individual product. Next, low-cost companies need to win a broad consumer base. Such a company cannot be satisfied with small market niches. Once a company becomes a cost leader, it is able to maintain a high level of profitability, and if it wisely reinvests its profits in upgrading equipment and facilities, it can hold the lead for some time. Dangers: Managers must respond immediately to the need to dismantle obsolete assets, invest in technology - in short, keep an eye on costs. Chances are that some new or old competitor will take advantage of the leader's technology or cost management techniques and win. Cost leadership can be an effective response to competitive forces, but there is no guarantee against defeat.

The author of the method of strategic choice based on the concept of rivalry is Professor M. Porter of the Harvard Business School, who proposed a set of typical strategies based on the idea that each of them is based on a competitive advantage and the company must achieve it by choosing its own strategy.

It must decide what type of competitive advantage it wants to gain and in what area.

Thus, the first component of the strategic choice according to this model is a competitive advantage, which is divided into two main types: lower costs and product differentiation.

Low costs reflect a firm's ability to develop, produce, and sell a comparable product at a lower cost than its competitors. By selling a product at the same (or approximately the same) price as competitors, the firm in this case receives a large profit.

true story. Thus, Korean firms producing steel and semiconductor devices won over foreign competitors in this way. They produce comparable goods at very low cost, using a low-paid but highly productive labor force and modern technology and equipment bought from abroad or manufactured under license.

Differentiation is the ability to provide the customer with a unique and greater value in the form of a new product quality, special consumer properties or after-sales service. For example, German machine tool firms compete using differentiation based on high product performance, reliability and fast maintenance. Differentiation allows the firm to dictate high prices, which, at equal costs with competitors, provides greater profits.

The second component of the strategic choice is the sphere of competition, which the firm focuses on within its industry. One reason competition is important is that industries are segmented. Almost every industry has well-defined product varieties, numerous distribution and marketing channels, and several types of buyers. Basically, the choice in this component is as follows: either compete on a "broad front", or aim at any one sector of the market. For example, in the automotive industry, leading American and Japanese firms produce a whole range of cars of various classes, while BMW and Daimler-Benz (Germany) primarily produce powerful, high-speed and expensive high-class cars and sports cars, and Korean firms Hyundai and Daewoo focused on small and ultra-small cars.

The type of competitive advantage and the scope in which it is achieved, M. Porter combines in the concept of typical strategies, which are shown in Fig. 4.3.

For example, in shipbuilding, Japanese firms have adopted a strategy of differentiation and offer a wide range of high quality vessels at high prices. Korean shipbuilding firms have adopted a cost leadership strategy and offer a variety of good quality ship types, but the cost of Korean ships is lower than that of Japanese ships. The strategy of successful Scandinavian shipyards is focused differentiation. They produce specialized types of ships, such as icebreakers or cruise ships, which are built using specialized

4.3. Typical competitive strategies according to M. Porter

new technologies. These vessels are sold at a very high price to justify the cost of labor, which is highly valued in the Scandinavian countries. Finally, Chinese shipbuilders, who have recently become highly competitive in the world market, offer relatively simple and standard ships at even lower costs and at lower prices than Korean ones (cost-focused strategy).

An example of competitive strategies in the automotive industry is given by J. Thompson.

So, for example, Toyota is known throughout the world for the low cost of its cars while maintaining a certain, fairly high level of their quality.

Fig.4.4. M. Porter's Model of Competitive Strategies for the Global Automotive Industry (Situation at the End of the 80s - Early 90s)

In turn, General Motors, competing with Toyota in the same market segments, has emphasized the differentiation of its products in terms of a variety of colors and availability of specifications. So, in 1988, 105 Vauxhalls models were offered on the UK market at prices ranging from £ 4,800 to 20,500.

Hyundai is known worldwide for producing low cost small cars (Pony 1.3 and Pony 1.6).

The strategy of BMW and Mercedes is designed to produce high-quality cars for a certain, wealthy segment of the population. At the same time, the difference in the type of additional specifications makes it possible to achieve exclusivity of the car being sold for a specific customer order, and the high image of the companies themselves allows them to occupy a stable market share.

Thus, the concept of model strategies is based on the idea that each strategy is based on competitive advantage and that in order to achieve it, the firm must justify and choose its strategy.

The scheme for making a profit by a firm, depending on the chosen typical strategy, can be represented as follows (Fig. 4.5).

In terms of cost leadership strategy, there are many ways to reduce costs while maintaining industry average quality. However, some ways to reduce costs are associated with moving along the experience curve, increasing the scale of production to achieve maximum savings.

On fig. 4.6 is an example of an experience curve. A lower cost level is achieved as the volume of production increases.

Rice. 4.5. Typical Strategies and Profitability

Rice. 4.6. Experience Curve

production, i.e., repeated production of the same type of product will lead to finding a more efficient method of its production.

The philosophy of economies of scale in production is based on the so-called experience curve. It was proposed in 1926 when, through empirical analysis, it was found that the cost of producing a unit of output falls by 20% every time output doubles. According to this theory, increasing the company's market share is emphasized, since this allows you to increase production volumes and move down the curve towards lower production costs. This is how you can achieve a higher level of income and profit margins and, consequently, greater competitiveness of the enterprise in the market.

In turn, the transfer of production skills and the distribution of areas of activity allows a diversifying enterprise to receive higher profits from joint activities than that which would be received by independently operating enterprises. In this case, economies of scale arise when it becomes possible to reduce the costs of managing disparate industries through centralized management, as well as reduce costs in any link in the production process due to existing internal relationships. Although this strategic fit can occur at any point in the production process, it is most often seen in three main ways.

On fig. Figure 4.7 shows economies of scale in industry.

Unit cost

Rice. 4.7. Economies of scale in production

If the output on this curve corresponds to point X, then at the cost of output you are inferior to the firm whose position corresponds to point Y on the graph.

The main idea behind these two effects is that they imply that sales volume is an important prerequisite for achieving low production costs. This path to achieving better results involves capturing and holding a large share of the market. As a consequence, when multiple firms compete, competition for market share can greatly undermine any low-cost advantage if prices are lowered by firms seeking to achieve certain sales volumes (Figure 4.8).

Rice. 4.8. Cost reduction and price reduction

How does low cost give a firm a competitive advantage if its products are basically the same as those of other manufacturers in the industry? Low cost can allow a firm to:

First, to conduct, if necessary, price competition;

Secondly, to accumulate profits that can be reinvested in production to improve the quality of products, while the price of these products will correspond to the average price in the industry.

Thus, it is not the low cost itself that creates competitive advantages, but the opportunities that it provides to improve the competitiveness of products.

There are several types of risks associated with a cost leadership strategy.

First, an overemphasis on efficiency can cause a firm to become unresponsive to changing customer demands. In particular, in many industries, consumer requirements have become more modern and individualized. A low-cost manufacturer who produces a standard, non-branded product may one day find that the customer base for his product is reduced by competitors who are adjusting and improving their products to meet the demands of the times.

Second, if the industry is indeed a consumer goods industry, then the risk from a low cost strategy is much higher. This is because in this case there can be only one cost leader, and if the firms compete exclusively on price, then the second and third cost leaders provide only marginal advantages.

Third, many ways to achieve low cost can be easily copied. Competitors, for example, may acquire the most efficient scale plant, and as the industry matures, the experience curve effect will be canceled out, since most firms have already gained the full benefit of accumulated experience. But perhaps the greatest threat comes from competitors who are able to price at the industry's marginal cost because they have other, more profitable product lines that more than cover fixed production costs.

If we talk about the strategy of differentiation, then it means that it is necessary to be different from others in some way. The key to success in differentiation is uniqueness, which is valued by customers. If buyers are willing to pay a high price for these unique features, and if costs are controlled by the firm, then the price premium will result in high profitability.

Understanding the needs of the customer is central to this strategy. The firm needs to know what is valued by customers, provide exactly the required set of qualities and, accordingly, set the price. If the firm is successful, then a certain group of buyers in this market segment will not consider products offered by other companies as a substitute for its products. The firm thus creates a group of loyal customers, almost a mini-monopoly.

A successful differentiation strategy reduces the intensity of competition often found in consumer goods industries. If suppliers raise prices, "loyal" buyers with little price sensitivity are more likely to accept the final price increase offered by the manufacturer of the exclusive product. Moreover, customer loyalty acts as a kind of barrier for new manufacturers to enter the market and replace this product with other similar products.

However, the differentiation strategy is not a risk-free strategy.

First, if the basis of differentiation, that is, what a firm wants to be different from others, can be easily copied, other firms will be perceived as offering the same product or service. Then competition in this industry is likely to turn into price competition.

Second, firms that focus on broad differentiation may be marginalized by firms that focus on only one particular segment.

Thirdly, if the strategy is based on the process of continuous product improvement (with the goal of always being one step ahead of its competitors), then the company risks simply being at a disadvantage, as it will bear the maximum costs of research and development, while competitors will use the results of its activities in their own interests.

Fourth, if the firm ignores the costs of differentiation, then raising prices will not increase profits.

The term "differentiation" is widely used in both strategic planning and marketing. However, it can also be used in a narrower sense in determining the firm's position in the industry. In most industries, companies do not offer products that are exactly the same as competitors. For example, they may differ in style, in the distribution network used, in the level of after-sales service. If such differences lead to the fact that the company can charge a higher price than the industry average price, then we can assume that the company is differentiating, using the terminology of M. Porter. However, in most cases, such differences give us only an idea of ​​the position in the industry of a particular firm.

Since there are few "pure" industries, most firms in an industry are inevitably forced to offer something slightly different from others in order to stay in the game. Such firms will therefore not be differentiators if they cannot charge a higher price.

A focus strategy involves choosing a narrow segment or group of segments in an industry and meeting the needs of that segment more effectively than competitors serving a broader market segment can. The focus strategy can be applied by both a cost leader serving a given segment and a differentiator that meets the special requirements of a market segment in a way that allows high prices to be charged. So firms can compete broadly (serving multiple segments) or focus narrowly (targeted action). Both options for the focus strategy are based on the differences between the target and the rest of the industry segments. It is these differences that can be called the reason for the formation of a segment that is poorly served by competitors that carry out large-scale activities and do not have the ability to adapt to the specific needs of this segment. A cost-focused firm may outperform a consumer-oriented firm by its ability to eliminate "excesses" that are not valued in that segment.

Moreover, broad differentiation and focused differentiation are often confused. The difference between the two is mainly that a broadly differentiated company bases its strategy on widely valued differentiators (e.g., IBM in computer manufacturing), while a focused manufacturer seeks out a segment with specific needs and fulfills them. much better.

The obvious danger of the focus strategy is that the target segment may disappear for any reason. In addition, some other firms will enter this segment, surpassing this firm in focus, and lure buyers, or for some reason (for example, tastes will change, demographic changes will occur), the segment will shrink.

However, there is a certain attraction in the idea of ​​focusing on a narrow target market segment and the ability to tailor your product to the needs of specific consumers. If the firm understands this correctly, it can greatly benefit from it. But if a firm was once a manufacturer of a large number of different products for a wide range of consumers and decided to definitely focus its efforts on a high-income segment using a strategy of focused differentiation, then this can lead to adverse consequences in the future.

If a firm has discovered an opportunity to profit from selling a product at a higher price to certain consumers, then you can be sure that other firms have also been able to consider this option. Before the firm realizes it, price-sensitive consumers will have a huge number of firms to choose from, ending the firm's ability to charge a higher price. In addition to price pressure, there is another problem related to the level of costs. A firm's shift of interest from a broad market to a limited segment of it usually means a drastic reduction in output. In turn, this can lead to extremely high unit costs if the firm does not cut overhead costs, which should be consistent with lower output and driven by a narrower customer base. Thus, the firm can end its operations using both price and cost pressures.

The biggest strategic mistake, according to M. Porter, is the desire to chase all the rabbits, that is, to use all competitive strategies at the same time. In other words, according to M. Porter, a company that has not made a choice between strategies - to be a cost leader or to engage in differentiation - runs the risk of getting stuck halfway. Such companies try to gain advantages on the basis of both low cost and differentiation, but actually get nothing. Poor performance results from the fact that the cost leader, differentiator, or strategy focused firm will be in the best market position to compete in any segment. A firm stuck in the middle will make a significant profit only if the industry is extremely favorable, or if all other firms are in a similar position. Rapid growth in the early stages of an industry's life cycle may allow such firms to earn good returns on their investments, but as the industry matures and competition becomes more intense, firms that have not made their choice between existing alternative strategies risk being squeezed out of the market.

Following one or another typical strategy makes it necessary for the firm to have certain restrictions (barriers) that would make it difficult for competitors to imitate (copy) the strategies chosen by it. Since these barriers are not insurmountable, a firm is usually required to offer its competitors a changing goal through constant investment and innovation.

Despite the distinctness and diversity of M. Porter's typical strategies, they nevertheless have common elements: both strategies require entrepreneurs to pay great attention to both product quality and cost control. Therefore, it is very important to consider these two strategies not as mutually exclusive alternatives, but as orientations (Figure 4.9).

Rice. 4.9. Differentiation and efficiency

From fig. Figure 4.9 shows that the firm in position A on the graph would undoubtedly seek to pursue a strategy aimed at differentiation, serving a certain segment of the market, offering a product with a unique combination of properties, and would be able to charge a higher price.

The firm in position B follows a purely efficient strategy. Efforts are aimed at reducing costs at all stages of work. The main profit is obtained due to low cost at average prices for the industry.

The firm in position C follows neither strategy. In the words of M. Porter, this firm is "stuck halfway." Lack of differentiation means the inability to raise the price above the industry average, and efficiency leads to higher costs.

The firm in position D is in an advantageous position, as it has advantages in both strategies. The ability of a firm to differentiate leads to the ability to charge a higher price, while at the same time efficiency provides cost advantages. At the same time, it is quite difficult for a firm to use the advantages of two strategies at the same time. This is explained by the fact that usually differentiation leads to the need to improve products, which in turn leads to increased costs. Conversely, achieving the lowest cost in an industry is usually associated with the fact that the firm needs to step back from differentiation due to product standardization. But most often, significant difficulties arise due to the incompatibility, and even contradictory requirements for the organization of production, which each of the strategies implies.

F. Kotler offers his own classification of competitive strategies based on the market share owned by an enterprise (firm).

1. The strategy of the "leader". The “leading” company of the product market occupies a dominant position, and this is also recognized by its competitors. The leading firm has a set of strategic alternatives at its disposal:

Expansion of primary demand, aimed at discovering new consumers of the product, expanding the scope of its use, increasing the one-time use of the product, which is usually advisable to apply at the initial stages of the product's life cycle;

A defensive strategy that an innovator firm adopts to protect its market share from its most dangerous competitors;

An offensive strategy, most often consisting in increasing profitability by maximizing the experience effect. However, as practice shows, there is a certain limit, above which a further increase in market share becomes unprofitable;

A demarketing strategy that involves reducing one's market share in order to avoid accusations of monopoly.

2. Strategy "challenger". A firm that does not occupy a dominant position can attack the leader, that is, challenge him. The purpose of this strategy is to take the place of the leader. In this case, the solution of two most important tasks becomes key: choosing a springboard for attacking the leader and assessing the possibilities of his reaction and defense.

3. The strategy of "following the leader." A "follow-the-leader" is a competitor with a small market share that chooses adaptive behavior by aligning its decisions with those made by competitors. Such a strategy is most typical for small businesses, so let's take a closer look at possible strategic alternatives that provide small businesses with the most acceptable level of profitability.

Creative market segmentation. A small firm should only focus on certain market segments in which it can better exercise its competence or have greater agility to avoid major competitors.

Use R&D effectively. Since small enterprises cannot compete with large firms in the field of fundamental research, they must focus R&D on improving technologies in order to reduce costs.

Stay small. Successful small businesses focus on profit rather than increasing sales or market share, and they tend to specialize rather than diversify.

Strong leader. The influence of the manager in such firms goes beyond formulating a strategy and communicating it to employees, covering also the management of the current activities of the company.

4. The strategy of a specialist, "Specialist" focuses mainly on only one or several market segments, i.e. he is more interested in the qualitative side of the market share. It seems that this strategy is most closely associated with the focusing strategy of M. Porter. Moreover, despite the fact that the “specialist” firm dominates its market niche in a certain way, from the point of view of the market for this product (in the broad sense) as a whole, it must simultaneously implement the strategy of “following the leader”.

Since the mid-90s of the last century, the theory of “corporate core competencies” by G. Khamel and K. K. Prokholad has become a popular concept for developing strategies. The main ideas of this direction in the field of strategic management were published in the well-known in the West book of these authors “Competing for the Future”, published in 1994 and translated into Russian.

Managers who preach this theory see further than traditional business administrators. They use their imagination to create products, services, and even industries that do not yet exist, and then turn their dreams into reality. In this way, they create a new market space in which they can dominate the competition, since this market space was invented by themselves.

To do this, according to G. Hamel and K. K. Prokholad, managers should perceive their company not as a set of enterprises, but as a combination of key basic components, that is, a combination of skills, abilities and technologies that allow providing benefits to consumers. Going not from the market to the product manufactured by the company, but from the product to the market, even if it is completely new - this is the essence of the theory of key competencies. G. Hamel and K. K. Prahalad write: “Diversified companies are like a tree whose trunk and largest branches are core products, other branches are divisions, and leaves, flowers and fruits are end products. The root system that provides nourishment, support and resilience to the tree form the core competencies. When analyzing competitive products being produced, do not lose sight of the forces behind them. Yes, the crown is an ornament of trees, but we should not forget about the roots.

The key components are the “form of existence”, the result of the collective experience of the organization as a whole, especially when it comes to coordinating

Rice. 4.10. Competences as the roots of competitiveness

dination of actions for the production of a wide range of products and the integration of various technological areas.

Thus, what prevents companies from predicting their competitive future is precisely the fact that management looks ahead through the narrow prism of existing and served markets. But any company, according to G. Hamel and K. K. Prahalad, can be looked at from different points of view, for example, Honda.

Do Honda's management see their company as a motorcycle manufacturer only, or as a company with unique capabilities in the design and manufacture of engines and electric trains? The point of view expressed in the first part of each of these questions is limited and leads to future products and services appearing very similar to those produced and supplied in the past. For example, the opinion "Honda only makes motorcycles" leads to the conclusion that this company should focus on making more modern motorcycles.

The second point of view liberates and suggests a wide range of future products and services, i.e., encourages the company to develop, manufacture and sell cars, lawn mowers, mini tractors, marine engines and generators in addition to motorcycles.

Immediately after its publication, the concept of G. Hamel and K. K. Prahalad was criticized. The main "thesis against" was very reminiscent of the criticism of strategic planning in the early seventies of the last century: the main thing is not to develop a system of key competencies and even have them, and most importantly - to implement them. The examples of Microsoft, which took advantage of the development of Apple, General Motors, whose "strategic architecture" led to a decrease in market share from 46 to 35%, confirmed this position. Core competencies are only a part of competitive success. Stronger arguments are needed. In 1995, they were proposed by M. Tracy and F. Wiersema in their book "The Discipline of Market Leaders" ("Discipline of the Market Leader"), with a volume of only 208 pages. They presented three value disciplines, or ways of delivering value to the consumer—production excellence, product leadership, and proximity to the consumer. Companies that wish to gain a competitive edge and dominate the market must choose only one of these disciplines and excel in it.

1. Manufacturing excellence. An example of companies with such a value discipline are AT & T, McDonald's, General Electric. They deliver to their consumers a combination of quality, price and ease of purchase that no one in this market can match. These companies do not offer new products or services and do not cultivate special, non-traditional relationships with their customers, they guarantee a low price or unconditional, on demand, service.

The main emphasis is on the optimization and rationalization of production processes, tight management, the development of close and unhindered relationships with suppliers, zero tolerance for losses and the reward of efficiency, the provision of standard basic services without disputes with the consumer and at his first request.

2. Product leadership. Examples of companies that have this value discipline are Microsoft, Motorola, Reebok, Revlon. Companies of this type focus their efforts on offering goods and services that push the existing boundaries of efficiency and quality, introduce fundamentally new consumer properties into their products. The main focus is on invention, product development and market exploitation, decentralized management, exceptional creativity and the speed of ideas commercialization, speed of decision making and the appropriate organization of production processes.

If in the first case, with manufacturing excellence, the key to success is the skillful interweaving of unique knowledge, the application of technology and tough management, then in this case it is overcoming constant tension, ensuring the optimal balance between the modernization of old products and the development of a new generation product.

3. Proximity to the consumer. Examples of such companies with this value discipline are IBM, Cannon, Airbone Express. They deliver value through proximity to the consumer, delivering not what the market wants, but what the specific consumer needs, constantly adapting their products and services to the needs of the consumer at a reasonable price. The main emphasis is on developing long-term relationships with consumers, adapting products and services to customer requirements, delegating responsibility to employees who work directly with customers. The key to the success of such companies is the combination of skilled workers, the use of modern methods of implementing a wide network of capacities to provide products and services.

Just like M. Porter with his competitive strategies, M. Tracy and F. Wirsema firmly argue that in order to compete successfully, a company must choose one of the value disciplines, and not scatter forces and resources, cause tension, confusion and death. However, the choice itself is one of the central moments of the concept and is divided, according to the authors, into three rounds.

Round 1. Understanding the status quo

During this round, senior management must find out what the current position of the company is, that is, determine it from the standpoint of the realities of the external business environment and the resource potential of the company.

Round 2. Discussing realistic options for action

In this round, senior management moves from an analysis of the current situation to a discussion of options for the future. Managers identify opportunities (for each of the options) of value disciplines and estimate the approximate costs for their implementation.

Round 3. Development of specific projects and decision-making

At this stage, senior management hands over its schemes to special teams that translate the main ideas into specific projects, and top management is given the final decision - the choice of a specific value discipline that will provide the company with market dominance through appropriate competitive advantages.

The views of M. Tracy and F. Wiersem turned out to be the seeds that fell on fertile ground, as they returned entrepreneurs to the traditional, understandable presentation of competition as a head-to-head battle based on the principle “my win - your loss”. However, the current trends in the world economy turned out to be more complex and multifaceted. That is why neither the concept of G. Hamel and K. K. Prahalad, nor the views of M. Tracy and F. Wiersem could give universal recipes for all occasions.