General Environment Analysis• Analyze minimum number of factors

– Economic

– Demographic

– Political/legal

– Technological

– Global

– Sociocultural

Economic

Demographic

Canada USA

China India

Political/Legal

Technological

Global

Sociocultural

Breadth of Competitive Scope

Source of Competitive Advantage

BroadTargetMarket

NarrowTargetMarket

Cost

Focused Differen-

tiation

CostLeadership

Differen-tiation

Focused Low Cost

Uniqueness

Breadth of Competitive Scope

Source of Competitive Advantage

BroadTargetMarket

NarrowTargetMarket

Cost

Focused Differen-

tiation

CostLeadership

Differen-tiation

Focused Low Cost

Uniqueness

Cost Leadership -- Definition

Characteristics of Low Cost Competitor

• Cost conscious organizational culture

• Spartan facilities

• Limited perks and frills for executives

• Intolerance of waste

• Intensive screening of budget requests

• Employees enlisted in cost control efforts

Breadth of Competitive Scope

Source of Competitive Advantage

BroadTargetMarket

NarrowTargetMarket

Cost

Focused Differen-

tiation

CostLeadership

Differen-tiation

Focused Low Cost

Uniqueness

AlignmentARENAS• Inexpensive, contemporary furniture• Young, white-collar customers• Worldwide

VEHICLES• Organic expansion• Wholly-owned stores

DIFFERENTIATORS• Very reliable quality• Low price• Fun, non-threatening shopping experience• Instant fulfillment

STAGING• Rapid international expansion, by region• Early footholds in each country, fill in later

ECONOMIC LOGIC• Scale (global, regional, and individual store)• Efficiencies from replication

Round or Flat?

Research

Source: Rugman,, 2005; Ghemawat, 2007; Reid, 2008