-Ajinkya D; -Akash. A ; -Akash. P; -C.N. Vishwas; -Ganga. G; -Hareesh. C. H; -Harish.

The Five Generic Competitive Strategies

Low-Cost Provider Strategies

The Two Major Avenues for Achieving a Cost

Advantage 1. Controlling the Cost Drivers Out manage rivals in efficiency with which value chain activities are performed and in controlling the factors driving the costs of value chain activities Eg:Nucor Corporations Low-Cost Provider Strategy 2. Revamping the Value Chain Eg:Utz Quality Foods Use of Internet Technology to Reengineer Value Chain Activities

NO PART OF VALUE CHAIN IS NEGLECTED

Eliminate costs by reducing usage of coal, coke, etc Investing in state of the art infrastructure Plant location selected to minimize electricity costs and to minimize inbound and outbound shipping costs Avoids geographic areas with strong influence of labour forces.

Hiring non union workforce- team based approach. Bonus is based on capabilities of equipment employed(20% for other companies, but 80 to 150% in Nucor)

Emphasis on consistent product quality and maintaining rigorous quality systems.

Minimizing general and administrative expenses.

Nucor managements outstanding execution of its low cost strategy and its commitment to drive out non-value-adding costs throughout its value chain has allowed it to grow at a considerably faster rate than its integrated steel mill rivals and maintain high industry relative profit margins while aggressively competing on price.

UTZ QUALITY FOODS USE OF INTERNET TECHNOLOGY TO REENGINEER VALUE CHAIN ACTIVITIES
Utz Quality Foods, Inc. was started in 1921 by Bill. It produces and delivers more than 20,000 pounds of potato chips

every hour and manages more than 700 delivery routes to 30,000 stores. To coordinate this massive operation, Utz Quality Foods uses portable business intelligence (BI) and data integration technology to streamline sales, marketing, production, and distribution activities.

 The year 1999 the firm begin using UtzFocus, a Web-based data

tracking system that allowed it to analyze sales down to the single store, which helped boost the efficiency of its distribution force. The 500 drivers/salespeople which deliver Utz snacks use handhelds terminals to upload daily sales data to headquarters. Every day managers monitor the results to spot missed deliveries, pinpoint stores with lagging sales and measure the effectiveness of special promotions.

 The UtzFocus system also informs delivery personnel on which

stores are promoting Utz products so they can make sure they have enough supplies of the right products on their trucks.
The company automatically monitors all its plants and real-time

data on the usage of ingredients, chip slices measures, production numbers, inventories of ingredients and plastic bags stocks areprovided through the Intranet to verify if they match to sales requirements.
Utz was the first in the snack industry to use in-truck computers to

prepare invoices,manage inventory, and process route accounting transactions.

RESULTS
The re-engineering of the value chain has brought cost-

saving efficiencies, operations effectiveness and helped increase sales and to improve customer relationships
The company is growing faster than any of its competitors

in its core markets and products.

Best-Cost Provider Strategies

Best-cost provider strategies aim at giving customers more value for the money. The objective is to deliver superior value to buyers by satisfying their expectations on key quality/service/ features/performance attributes and beating their expectations on price.

Example
Toyotas Best-Cost Producer Strategy for Its Lexus

Line

Toyota has achieved low-cost leadership status because it has developed considerable skills in Efficient supply chain management and low-cost assembly capabilities Its models are so well-positioned in the low-to-medium end of the price spectrum. These are enhanced by Toyotas strong emphasis on quality. Toyota Best- Cost Provider Strategy appealing: When buyer diversity makes product differentiation the norm When many buyers are also sensitive to price and value

Key Characteristics of Toyotas Best-Cost Provider Strategy for the Lexus: Design an array of high-performance characteristics and upscale features into Lexus models to make them comparable in performance/luxury to other high-end models, i.e. Mercedes, BMW Transfer its capabilities in making high-quality Toyota models at low cost to making premium-quality Lexus models at costs below other luxury-car makers Use its relatively lower manufacturing costs to under price comparable Mercedes and BMW models Establish a new network of Lexus dealers, separate from Toyota dealers, dedicated to providing a level of personalized customer service unmatched in the industry

Motel 6

Low-Cost Provider Strategies.

Motel 6 developed a unique concept where travellers could find consistent, quality economy lodging at the lowest price of any national chain. The price of the original Motel 6 room was $6 emphasizing the low-price concept.
In 1990, Motel 6 was acquired by an investor group led by Accor.

The main key for success was they emphasized more on low cost price and with high quality lodging experience

Progressive Insurance's Focused Differentiation Strategy in Auto Insurance

Progressive pioneered the low-cost direct sales model of

allowing customers to purchase insurance online and over the phone.

Management created teams of roving claims adjusters

who would arrive at accident scenes to assess claims and issue checks for repairs on the spot. Progressive introduced 24-hour claims reporting, now an industry standard. It developed a sophisticated pricing system so that it could quickly and accurately assess each customer's risk and weed out unprofitable customers.

 Progressive introduces MyRateSM, an innovative way to price car insurance that lets drivers get a customized rate based on how they actually drive. This optional program benefits safe drivers who deserve to pay less for car insurance because they're less likely to get into an accident

 Progressive is first major U.S. car insurer to release AndroidTM app just for car insurance. Progressive is the first auto insurer to offer the Name Your Priceoption, which makes it easier to shop for car insurance. With Name Your Price, drivers start a quote, then adjust their price to find a car insurance package thats right for them. Progressive is the first insurance company to offer Pet Injury coverage, which covers dogs and cats if they're hurt when you're in a car accident. Progressive launches the industry's first Web 2.0 site, featuring easier navigation, more personalization and customization, easier-to-use video content and more visuals throughout. Progressive becomes the first auto insurance group to introduce a concierge level of claims service, which oversees all elements of the claims/repair process on behalf of drivers involved in accidents, reducing the time they spend managing repairs from about four days to 15 minutes.

A low-cost provider strategy can defeat a differentiation strategy when buyers are satisfied with a basic product and dont think extra attributes are worth a higher price. True or false? Explain.