FREE online courses on Information Technology - Chapter 4 IT AND CORPORATE
STRATEGY - Some Generic Strategies
Michael Porter at Harvard
has suggested that follow one of three generic strategies:
1.
Low-cost producer: Here the firm tries to have the lowest costs in the
industry so that it can complete on price.
2.
Differentiation:
The firm tries to separate its product image from that of the competition in
such a way that the customer wants its product. Luxury automobile manufacturers
like BMW are very adopt at differentiating their products from other cars. For
example – if you are buying a BMW, you are buying “the ultimate driving
machine”.
3.
Market
niche strategy: A number of firms try to find a market niche and exploit it.
A niche is some part of a market that is not being served by others. Hermes has
stayed in its niche of producing high quality, expensive products like women's
scarves for a limited clientele.
In today's competitive economy, we
have observed firms focusing on more specific strategies that are listed below.
Most of the time, the firm adopts only one of these, but it is possible to
follow two at the same time.
Customer Driven:
Here the firm focuses on its customers. How can we provide better customer
service? How can we design products that meet our customer's needs? What
technology exists so we can better serve our customers? Customer service is
extremely important in commodity businesses, for example, the mail-order sales
of personal computers.
Reducing Cycle Times:
A firm has a variety of cycle times;
a typical one is the length of time it takes to design a new product of service.
Detroit automobile manufacturers are focusing on reducing
cycle times. They now use parallel design and engineering, where tasks are done
simultaneously rather than sequentially. In addition to saving time, parallel
development results in better coordination among team members working on the
design of a new car.
Global Competition:
As the unification of Western Europe continues and Asian
economics become more open, some firms have decided to follow a strategy of
competing in the global marketplace rather than only in local markets. A firm
with global presence will need a variety of technologies to help coordinate and
control all of its activities. Information technology is a great facilitator for
global operations.
Right-Sizing: In
the U.S., the
first part of the 1980s was an economic boom, leading to a number of excesses.
The late 1980s and the early 1990s were marked by economic downturns and slow
growth. To compete in a difficult economy, firms have attempted to determine
their “right size”. Usually to right-size meant a serious reduction in the
number of workers in the firm, and rather large write-offs for restructuring.
Blue-chip companies such as IBM have reduced their levels of employment by tens
of thousands of workers.
Quality: Japanese
manufactures gained a large market share in a number of industries partially
through a fanatical devotion to quality. Many firms around the world are
focusing on quality in the hopes of getting ahead of the competition. Quality is
an obvious component in the manufacturing sector, but their services firm can
also be concerned about the quality of its output.
As we shall see in the rest of the text, there are many ways that technology can
be used to support the generic strategies described above.
