Ch. 2 - Competing with Information Technology

Last Thursday, we learned about five competitive strategies companies should use to become successful.

• Cost Leadership: become low-cost producers, help suppliers and customers reduce costs, and increase costs to competitors.
• Differentiation Strategy: develop ways to differentiate a firm's product from its competitors.
• Innovation Strategy: find new ways of doing business (unique products/services or unique markets).
• Growth Strategy: expand into global markets and diversify into new products or services.
• Alliance Strategy: establish alliances with customers, suppliers, competitors and consultants.

Successful organizatons use one, some or all of these strategies, while unsuccessful organizations tend to aim for a middle of the road approach. For example, businesses such as Wal-Mart, Target and Saks 5th Avenue are successful because they focus on producing quality fashion at low prices, or providing high-quality fashion at higher prices. Businesses such as Sears and JC Penny are less successful because they are stuck in the middle - they provide clothes that are not as fashionable as Saks 5th Avenue but not as cheap as Wal-Mart or Target.

I thought it was interesting how similar these competitive strategies were to some of the marketing strategies we learned about in Principles of Marketing. Similar to the Differentiation Strategy, marketing strategy is the marketing logic by which the business unit hopes to create customer value and achieve profitable customer relationships. The company decides which customers to serve (through segmentation and targeting) and how (through differentiation and positioning). Differentiation is actually differentiating the market offering to create superior customer value.

The innovation strategy also relates to the marketing concept of New-product Development - the development of original products, product improvements, product modifications, and new brands through the firm’s own product-development efforts.