How are the drivers of Differential Advantage threatened in both Low Cost and Differential strategies (HINT: use Exhibit 5.8, page 149)?
In a Low Cost strategy, the drivers of Differential Advantages can be threated by: new technology, inferior quality, social/political and economic risk of outsourcing (Carpenter and Sanders, 2008, p.149). Whereas in a Differential strategy, the threats are: failing to increase buyer’s willingness to pay higher prices, underestimating costs of differentiation, over-fulfilling buyers’ needs and lower-cost imitation (Carpenter and Sanders, 2008, p.149). When using a low cost strategy, such as WalMart, a firm will look to implement sustainable products in a mass production environment without raining their prices (Spicer and Hyatt, 2017).
What threats (risks) affect firms pursuing a Focus and Integrated position?
Firms in a focus position faces threats such as: being out-focused by the competition, growing and trying to meet the needs of too many customers (Carpenter and Sanders, 2008, p.161). As for firms in an integrated position, they can face threats such as: not knowing exactly what opportunities are being foregone and not knowing what tradeoffs can be made which would let them know what the competitors can and can’t do when trying to handle more than one strategy (Carpenter and Sanders, 2008, p.161). Firms in an intergraded position will position themselves with different strategies from the competition in order to gain a better entry as the threat of potential rivals entering the market will be high (Matsui, 2012). According to Carpenter and Sanders (2008), straddling is the, “Unsuccessful attempt to integrate both low-cost and differentiation positions” (p.151). At Northrop Grumman, we are constantly looking for innovative ideas to implement into our strategy in order to separate ourselves from the main competition such as Boeing and Lockheed-Martin. By doing this, it wouldn’t work for my company try and establish a low cost position because it is essential for us to break barriers and find new ways to achieve success in Aerospace.
Carpenter, M. A. & Sanders, Wm., G. (2008). Strategic management: A dynamic perspective. Upper Saddle River, NJ: Pearson Prentice Hall.
Matsui, K. (2012). Strategic upfront marketing channel integration as an entry barrier. European Journal of Operational Research, 230(3), 865-875. Retrieved February 17, 2018, from https://csumb-primo.hosted.exlibrisgroup.com/primo-explore/fulldisplay?docid=TN_sciversesciencedirect_elsevierS0377-2217(12)00191-9&context=PC&vid=01CALS_UMB_alternate&lang=en_US&search_scope=EVERYTHING&adaptor=primo_central_multiple_fe&tab=everything&query=any,contains,integration&sortby=rank&offset=0.
Spicer , A., & Hyatt, D. (2017 ). Walmart’s Emergent Low-Cost Sustainable Product Strategy.
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