Strategic Advantage Strategic Target
Strategic Advantage Strategic Target
In its earlier days, Progressive Insurance’s service was unique. Representatives responded to accident claims 24‐7, arriving at the scene of the accident with powerful laptops and software that enabled them to settle claims and cut a check on the spot. More recently, Progressive was the first to offer a usage‐based insurance product, called Snapshot, that bases insurance rates on the miles driven by customers. These innovations enabled a strategy that spurred Progressive’s growth and widened its profit margins. Apple Inc. is another example of a company that com- petes in its markets on its ability to differentiate its products. Apple’s various innovations in its operating system, laptop design, iPads, iPhones, iPods, iTunes and iWatches have created a strategy based on the uniqueness of its products and services.
Focus allows an organization to limit its scope to a narrower segment of the market and tailor its offerings to that group of customers. This strategy has two variants: (1) cost focus, in which the organization seeks a cost advantage within its segment and (2) differentiation focus, in which it seeks to distinguish its products or services within the segment. This strategy allows the organization to achieve a local competitive advantage even if it does not achieve competitive advantage in the marketplace overall. Porter explains how the focuser can achieve compet- itive advantage by focusing exclusively on certain market segments:
Breadth of target is clearly a matter of degree, but the essence of focus is the exploitation of a narrow target’s differ- ences from the balance of the industry. Narrow focus in and of itself is not sufficient for above‐average performance.7
Marriott International demonstrates both types of focus with two of its hotel chains: Marriott has a cost focus, and Ritz‐Carlton has a differentiation focus. To better serve its business travelers and cut operational expenses, Marriott properties have check‐in kiosks that interface with their Marriott Rewards loyalty program. A guest can swipe a credit card or Marriott Rewards card at the kiosk in the lobby and receive a room assignment and keycard
St rate gic Tar ge t
Uniqueness perceived by customer Low-cost position
Industrywide Differentiation Cost leadership
Particular segment only Focus
Source: Adapted from M. Porter, Competitive Advantage, 1st ed. (New York: The Free Press, 1985) and Competitive Advantage: Creating and Sustaining Superior Performance, 2nd ed. (New York: The Free Press, 1998).
FIGURE 1.3 Three strategies for achieving competitive advantage.
7 Porter, Competitive Advantage: Creating and Sustaining.
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23Brief Overview of Business Strategy Frameworks
from the machine. She can also print airline boarding passes at the kiosks. Further, the kiosks help the Marriott chain implement its cost focus by cutting down on the personnel needed in at the front desk. The kiosk system is integrated with other systems such as billing and customer relationship management (CRM) to generate operating efficiencies and enhanced corporate standardization.
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