Cost leadership in different situation is two common ways to characterize generic strategies. But they are not the only ways to characterize comparative advantages. A different approach was suggested by Michael Tracey in fed Wiersma in the popular 1995 book called the discipline of market leaders. The main approach was to do branding by targeting the audience by consideration their cultural values.
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Market leaders have categorized competitive advantage into three fundamentally different types, according to whether the focus of the advantages on achieving superiority three expertise in the process, product or customer.
Process:
Companies that focus on process are called leaders and operational excellence. In other words these companies operate in the ways that allow them to deliver similar products rivals but at lower prices and on greater convenience. These companies raised the bar of competition by constantly pushing the limits on efficiency in their systems, processes, and supply chains. Thus these companies tend to set new standards in their industries for minimal cost, minimal waste, and maximum convenience.
This level of efficiency usually requires high standardized and centralized operations. A great example of the company that focuses on processes is motel six. The Motel six corporate file declares that the company goal is to clean, comfortable rooms at the lowest price of national chain.
In the 1960s Motel six pioneer the first real budget motel design for the no travelers. Indeed the name of motel six came from the original 1962 price. For years Motel six was a household name, synonymous with quality and value. Indeed Motel six enjoyed for many year a highest brand recognition factor of any budget lodging brand.
Product:
Company itself that focuses on the product is called a product leader. The fundamental goal of the product leader is to have a truly distinctive and superior product. The price is charged by the product leader and no great bargain and the service may be nothing special either. But these factors are more than compensated for by the superior performance or features of the product itself.
Indeed product leaders raise the bar for competitors by constantly pushing the limits of product performance. Product leaders set new industry standards for technologies, style, features and speed. Achieving this requires a passion for imagination, invention, and innovation. As well as heavy investments in R&D and new market exploration, where as an operational excellence leader usually uses standardized and centralized organizational with tough penalties to eliminate waste.
A company perusing product leader ship usually takes the opposite approach. A product leader needs a loose flexible fluid organizational structure in order to adapt to the constantly evolving new product initiatives, and must find a way to reward product successes without punishing all the many failed experiments that are needed in order to find those fewer successes.
Product leadership also requires the organizational flexibility to adapt quickly to new product initiatives. BMW is a classic example of a company that is focused on product leadership. BMW advertising portrays product as the ultimate driving machine. BMW trumpets its features like superior acceleration, handling, responsiveness, and fuel efficiency. So BMW is all about making engineering number one about everything else, even if that make cost and service secondary.
Let’s come back to the hospitality industry for another example. W Hotels Par Starwood is a classic example of a hotel chain focused on differentiating the product itself. W’s advantages are all about the unique style of the physical hotel itself. The W hotel website describes the company as follows quote, the difference with W is in the details, inspiring, ironic, and innovative, influential from our inception W hotel has approached its space with both designs and comfort in mind.
You can see from this description that W hotel is focused on distinguishing itself through the product, it is a product leader.
Customer:
The company that leaders to the customer intimacy distinguishes itself through throughout services and by providing the best total solution tailored to each customer’s unique needs. The price is charged by the customer intimacy focused company are no bargain.
Although its products may be excellent it will not be the very best product performance product in the market, nor will it be the most distinctive for cutting edge product. But these factors are more than compensated by the superior service that customer intimacy leader’s uses to anticipate understand and fully meet the need of each carefully selecting customer.
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The vital objective of the customer-intimate company is to create a lifelong bond with its customer, even if that means sacrifice in the short term profitability of the current transactions. Achieving this superior level of intimacy requires an extreme level of delegation and decentralization.
It also requires information system to help them place track of each customers unique needs taste and preferences, such as the personal book data base maintained by Nordstrom.
The name suggests this system was originally a simple paper book kept in the keep track of each customer’s past purchases. But today it is a powerful system that enables any No0rdstrom associates to say welcome back. Here is the example of hospitality industry for customer intimacy.
Ritz-Carlson takes the pursuit of customer intimacy to the highest level of any hotel chain. The official credo of Ritz-Carlson says that Ritz-Carlson hotel is a place for the genuine care and comfort of our guest in our highest mission. We pledge to provide the finest personal facilities for our guest, who will always enjoy warm relaxed yet refined ambiance.
Even beyond this company credo all of its employees are also require adhering to service values and the first seven of these service values are direct expressions of customer intimacy. Those seven service value are as follows:
- Build strong relationship.
- Responsive
- Create unique experiences
- Understand role.
- Seek opportunities to innovate
- Resolve guest problems
- Create a work environment of teamwork.
So you can see Ritz-Carlson is a classic example of a customer intimacy focused company.
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