3 Generic Strategies Answers

3 Generic Strategies Answers

Again, I know that these cases are dated, but they are also the best examples of the three generic strategies that I can find. Below are the answers and the reasoning behind the answers. Recall that the way to determine the strategy is to look for the preponderance of the evidence, and management’s motivation. Strategy is a pattern of actions. This implies time.

Walgreen: Differentiation based on service. The first tendency is to say focus – with the target market being sick people, and the product/service being drugs. However, everyone gets sick at some point – so there is no target market. And drugs are too broad. Some say low cost because they are putting in computers and scanners to better manage inventory. True. However, when you look at the motivation, you see that efficiency and lowering costs are a byproduct, not a goal. The purpose of the majority of the actions is to improve customer service. And, equally important as a strategy characteristic, they charge a premium price.

Cooper: Low cost. Many start with the idea that since they are selling only to the replacement market, that this must be a focus strategy. However, the ‘replacement’ market is any one needing a replacement tire – and that could be anyone at any time. Even me. Some say that because they are taking such good care of their buyers (independent dealers) that they are differentiating based on service. Could be. However, once again we come back to motivation. Why are they doing these things? To lower costs. Selling to the OEMs such as GM, Toyota, Ford, requires more expense than selling to the replacement market. Independent dealers again is also very broad. Taken together, the actions and motivation of management is to lower costs. They keep the dealers happy to ensure that they can sell all that they make (capacity utilization).

Progressive: Focus. Doing the first two cases in this manner allows seeing that Progressive does have a definable target market group – high risk drivers. And, they provide a specific product/service – high risk insurance. Not insurance! High risk insurance. The difference is important. At the time of the case, Progressive would not have sold me a policy because I do not have a bad driving record.

One thing that should be obvious now is that it is possible to find support for each of the three strategies. That is where the challenge comes in. Go with the preponderance of the evidence and the motivation of management. Much easier system than that offered by the text book. So, go over your answers and see how the thinking process works. We will be doing more of this before the next test.