Successful companies now pursue hybrid strategies
Which competitive strategy does your company pursue? Cost leadership or differentiation? If your answer to this question is "both", you are probably on the right track. Today, more and more large-sized companies around the world rely on hybrid strategies that successfully combine low cost and differentiation advantages.
Competitive strategies define how a company tries to achieve a competitive advantage in the market. According to Michael E. Porter (1980), three basic types of strategies can be distinguished:
Porter argued that in order to ensure long-term profitability, a company needs to make a choice between these three strategies. Otherwise, it runs the risk of getting “stuck in the middle.”
The postulate of the incompatibility of cost and differentiation advantages is considered disproved from a current viewpoint. Thanks to modern production technologies and organizational structures, it is now possible to achieve both high quality and productivity at the same time. More importantly, pursuing singular generic strategies is considered to be no longer sufficient in today’s competitive environment. Increased competition and cost pressures as side effects of globalization as well as changing customer expectations require companies to adopt a multidimensional strategic approach. These days, most customers expect to get everything at once: differentiated, high-quality products combined with excellent service at a low price. Hybrid strategies that integrate cost and differentiation advantages represent a way for companies to respond to these changes in the competitive environment more flexibly and effectively and stay competitive (Piller & Schoder, 1999). Recent empirical studies have shown that companies that pursue a hybrid strategy may achieve higher performance than those companies using a singular strategy (Acquaah & Yasai-Ardekani, 2006; Spanos et al, 2004; Jenner, 2000). Some well-known examples include IKEA, Swatch, Dell, Toyota, Sony, or Canon.
Two types of hybrid strategies can be distinguished:
Some key success factors for the implementation of hybrid strategies are innovative strength, close orientation towards customer needs, and organizational learning. In addition, just like generic strategies, hybrid strategies require companies to make consistent strategic decisions how to pursue competitive advantages and align resources and capabilities accordingly. Otherwise, they may indeed fall into the “stuck in the middle” trap.
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