Competitive Strategy Three-Cornered Model
The three-cornered competitive strategy model is an influential analytical tool used in strategic management. It acts as a great aid to firms in assessing their competitive environment, as well as in choosing strategies to compete against their rivals. This article provides an overview of the three-cornered competitive strategy model, which includes three distinct types of strategic elements: cost focus, differentiation focus, and cost and differentiation focus.
Cost Focus
The cost focus strategy requires firms to focus resources on areas where they can maximize efficiency and minimize costs. Cost focus strategies are often used by firms that can achieve a great number of economies of scale or by firms that capitalize on their superior cost structure.
Firms that use this strategy aim to produce a good or service at a lower cost than its rivals. They may do this by relying on fewer resources and/or utilizing innovative techniques to reduce production costs. To make cost focus strategies successful, firms produced goods or services must be of satisfactory quality, in addition to being relatively inexpensive.
Differentiation Focus
The differentiation focus strategy involves intense focus on a particular product, market, or service that the firm distinguishes itself from its rivals. A high degree of differentiation means that customers can recognize the firm’s offering as distinct from the offerings of its competitors.
Firms that use a differentiation focus strategy typically do so by delivering superior value to their customers, which can be achieved through unique designs, performance, support, service, and brand. Also, firms that focus on differentiation can charge higher premiums for their goods and services due to the extra value they offer.
Cost and Differentiation Focus
The cost and differentiation focus strategy is a combination of the two previous strategies. This strategy enables firms to produce their offerings at lower costs, while also offering superior value in comparison to their rivals’ offerings. In contrast to firms that focus solely on either cost or differentiation, firms engaging in cost and differentiation focus can achieve both low costs and high value.
This strategy is often used by large firms that are capable of achieving economies of scale. By making large investments in a specialized set of capabilities and processes, such as research and development, large firms can leverage their size for a competitive advantage.
Conclusion
The three-cornered competitive strategy model provides a great framework for assessing a firm’s competitors and developing a strategy to compete against them. Firms can choose to focus on either cost, differentiation, or a combination of cost and differentiation to achieve a competitive advantage. Cost and differentiation focus, while more difficult to achieve, is often the best choice and can enable firms to produce a good or service at a lower cost while also offering superior value that its rivals cannot match.
