THE COMPETITIVE ADVANTAGE AND THE BUSINESS STRATEGIES USED BY ROMANIAN COMPANIES

THE COMPETITIVE ADVANTAGE AND THE BUSINESS
STRATEGIES USED BY ROMANIAN COMPANIES
Cordoú M lina
Str. Arnsberg, nr. 9, Bl. F5, Ap.26, Alba Iulia, 510014, Universitatea „1 Decembrie 1918”, Facultatea de
Stiinte, Alba Iulia, Str. Nicolae Iorga, Nr.11-13, Alba Iulia, 510009, malina_cordos@yahoo.com, 0745
230991
Mihalcea Alina-Daniela
ASE, Economics Faculty- Management, Bucharest, Str. Varful cu Dor, Nr. 11, Bl. V6A, Sc. A, Ap.4,
Constanta, aly_mihalcea@yahoo.com, 0723 008282

Business, as an object of the strategy, has been an attraction point for many established strategic
management writers - I.H. Ansoff (1965), M.E.Porter (1980), H.Mintzberg (1988), M.Gervais (1995),
J.Chevalier (2002), etc. In what follows, I will try to foreground a few of the most complex and pertinent
typological approaches.

Strategy, strategic management ,generic strategies
1. Igor Ansoff’s approach
In 1965, Igor Ansoff suggested a matrix with four strategies which rapidly became very well known –
penetrating the market, product development, market development and diversifying. 15 years later,
Michael Porter introduced what will later become the most known typology for generic strategies: based
on costs, on differentiation and focused. But both approaches are incomplete: while Ansoff’s is
concentrated on the extension of the strategy, Porter’s focuses on identifying the strategy and bringing it to
the foreground.
Ansoff’s approach is based on a 2x2 matrix, resulted from combining four elements: product, market,
existent, new, as shown in figure no. 1:
EXISTENT
NEW

PRODUCT
PRODUCT
PENETRATING THE
EXISTENT
PRODUCT DEVELOPMENT
MARKET
MARKET
MARKET
NEW
DIVERSIFYING
DEVELOPMENT
MARKET
Figure 1. Igor Ansoff’s Generic Strategies
(by I. Ansoff, Corporate strategy, McGraw Hill, New York, 1965)

Penetrating the market strategy wants to increase the sales volume for a product that is already on the
market. The strategic objectives consist of obtaining an important market share or the position of market
leader.
The product development strategy wants to increase sales by improving an existent product or by creating
a new product which fits the demands of the market. This strategy is accessible to companies with a big
innovating potential, with a new organizational structure or which use human resources through project
teams or interdisciplinary teams. The management of these firms is orientated towards valuing distinctive
competencies, towards indentifying and exploring the opportunities offered by the competitive
environment.
The market development strategy wants to increase the sales volume for an existent product by penetrating
new markets. This strategy aims at the geographical expansion of the company, but also at conquering new
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market segments by creating new uses or adding new characteristics to the products, according to the
consumer’s needs.
The diversifying strategy aims to extend the existent business portfolio by adding new products, by using
new technologies, new distribution ways to the ones the company already has. This strategy can offer the
firm the advantage to use emergent or distinctive competencies.
2. Michael Porter’s approach
Michael Porter (1980) thinks there are two types of competitive advantages a company can own: low cost
and differentiation25. These two combined with the essence of the company’s operations – the aimed
market segments – generate three generic strategies – low costs, differentiation and focalization (based on
costs and based on differentiation), as shown in figure no. 2.

COMPETITIVE ADVANTAGE

Low costs
Differentiation








T

T

H

a
h
1. LOW COSTS
2. DIFFERENTIATION
i
e
E
m

e

S
e
n
d
T
t

i
m
r
R
e
a

A

r

T
k


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E

t



G






Y






’


S







E


3b. FOCUSED ON

A

S

3a. FOCUSED ON COST


S

m
s
E
DIFFERENTIATION
e
a
N
g
r
m
k
C
e
e
t
E
n


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Figure 2. The generic strategies’ matrix (source: M.Porter, Competitive Advantage of Nations, Mac
Millan Press Ltd., Londra, 1980, p.3)

The four quadrants of the matrix are then reduces to three basic types of strategies:
•
The domination through costs strategy, specific to companies which produce and sell
standardized products. The aimed market is vast, with numerous segments. Adopting this
strategy implies intensifying the investments, which afterwards implies a productivity growth,
a better organization of the production processes, rationalizing the products gamut, etc. This
strategy is generally used by firms with a big financial power;
•
The domination through differentiation strategy is adopted by companies which offer
strongly individualized products. This strategy gives the firm a domination power exactly
because of the uniqueness of the product’s characteristics or services. It also implies a
growing attention to maintain this advantage in front of the competitors;
•
The focusing strategy implies the firm to concentrate over a narrow market segment on
which they will try to obtain superior advantages from the ones obtained by the industry in its
ensemble, by optimizing the differentiating cost. This strategy is generally adopted by small
and medium companies, in order to avoid direct confrontation with stronger competitors.
According to Porter’s generic strategies, we could consider the following:

25 M.Porter, Competitive Advantage of Nations, Mac Millan Press Ltd., Londra, 1980, p.11
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•
the pragmatic value of a strategy is the realistic projecting of getting comparative advantages,
which aim either the materializing of a low cost for the products or services, or their
differentiation, according to one or more criteria, in comparison to the competitors’ products.
•
ensuring a low cost, under the costs’ average from the respective field, is the first type of
competitive advantage. Obtaining this advantage is the result of the actions taken over all the
price’s components (tied to aspects of the firm’s internal environment, such as: infrastructure,
human resources, technologies, the distribution logistics, the primary products and materials’
production’s logistics, marketing and sales, post-selling services, etc). In order to reduce as
much as possible the cost of the finish product, the company must maximize production by
counting on the savings obtained from large-scale or mass production. The firm can also
practice other methods to reduce costs: the preferential access to raw materials, applying
major innovations, etc.
•
in order to obtain a different product in comparison to the competitors, a product preferred by
consumers, the company’s management must choose, by strategy, one or more attributes for
the product, which are known as being critical for the people who will purchase the product
(intrinsic quality, functions, the product’s reliability, the delivery method, the promotion, the
facilities offered at purchasing, etc);
•
in reality, the two types of competitive advantages are combined in different proportions. At
the same time, the intent to combine in equal measures the two strategies is impossible. The
desire to obtain a perfect product, from the points of view of the price and quality, is meant to
fail in the context of the existent highly competitive markets. This is why the managers must
choose the strategies which prioritize one of the strategic advantages, while leaving the other
advantage to a minimum level.
3. Henry Mintzberg’s approach
Henry Mintzberg, an author with numerous contributions to the development of the strategic management
and to the strategies’ substantiating, classifies the strategies in accordance with two criteria26:
•
depending on their character and evolution: static strategies and dynamic strategies;
•
depending on the development vector: penetrating strategies, market development strategies,
product development strategies and diversifying strategies.
At their turn, the differentiating strategies can take many forms:
•
Price differentiating strategies represent the easiest way to differentiate a product or a
service. This strategy can be used by the companies which can’t differentiate themselves
otherwise. Thus, the producer can get a competitive advantage on the basis of smaller
marginal costs or by accomplishing a big sales volume.
•
Image differentiating strategies are based on creating a special image for the product. It can
also include o simple “make-over” of the product, by using new wrapper, more attractive for
the consumers, which doesn’t lead to major changes in the structure or performance of the
product.
•
Support activities (auxiliary) differentiating strategies. This strategy is tied to the
differentiating methods of the product connected to the support activities – delivering
conditions, service, guarantee and post-guarantee services or for complementary products or
services. This idea is sustained by Theodore Levitt also, who claims “no matter how difficult
it is to obtain differentiation by projection, there is always a way to get a different type of
differentiation, especially with the help of support activities” 27.
•
Qualitative differentiating strategies target those characteristics of the product which make it
better than the competition’s product (and the product is not necessarily fundamentally

26 H. Mintzberg, J. Lampel, J.B. Quinn, S. Goshal, The strategy process, Fourth Edition, Pearson
Education International, 2003, p.120-125
27 H.Levitt, Marketing Succes Through Differentiation – of Anything, Journal of Marketing, nr.6, 1980,
p.8.
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different). This strategy refers to: the trust in the product, its durability and superior
performances.
•
Design differentiating strategies confer to the product something really different, which
breaks all the conventional design patterns and give the product unique characteristics.
•
Non-differentiating strategies: in the context of a vast market, of a poorly performing
management, the only way to get an advantage is to copy existent products from the market.
Mintzberg also delimits the strategies, in accordance to the position of the main business in one of the
technological process’ phases, as follows28:
•
Strategies of the primary development phases, namely the phases in which one or more raw
materials are combined in order to result different basic products with multiple uses. These
phases tend to be intensive in technology and capital, more so than intensive in human
resources and are rather looking to obtain a strategic advantage by keeping costs low.
•
Strategies of the secondary development phases, namely the phases in which the use of a raw
material allows obtaining semi-manufactured goods, which combined lead to finished
products;
•
Strategies of the tertiary transformation phases, namely the phases which include the
product’s assembling, transportation and distribution to consumers.
Another classification of Mintzberg, which has as criteria the distinctive characteristics which allow an
organization to get the competitive advantage, gives him the possibility to delimit the following strategy
types29:
•
Projection strategies which target fields like research and product development;
•
Processing strategies which target: process and operations (fabrication, assembling, etc)
developing;
•
Resources ensuring strategies (materials, human, financial);
•
Delivering strategies which are concentrated on the marketing domains (market channels,
promotion), sales, distribution and service;
•
Support strategies which target fields like: the legal domain, inspection, training, etc.
According to the market opportunity’s proportion, Mintzberg offers another classification of the strategies,
as follows30:
•
Non-segmentation strategies – the firm wants to take over an important part of the market
with a product which has a basic configuration;
•
Segmentation strategies – the company can choose to cover all market segments, or can be
selective by positioning itself only on certain market segments;
•
Niche strategies – allow the company to focus its attention to one market segment;
•
Individualization strategies – represent the segmentation of the market to the point in which
each consumer represents a unique segment. Individualization in its purer form represents the
process in which the product is thought in its smallest details in order to satisfy the
consumer’s needs. In this case the entire value chain is influenced: the product is delivered in
specific conditions, not only fabricated and assembled in this manner, but also specially
created for a certain type of consumers. Partial individualization aims at basic design of the
product, which is subsequently modified according to the consumer’s needs and wishes.
Standardized individualization – the finished product is assembled from standard components
to which particularization elements from the consumer are added (the color of the car, the
optional package, etc).

28 H. Mintzberg, J. Lampel, J.B. Quinn, S. Goshal, The strategy process, Fourth Edition, Pearson Education
International, 2003, p.116-118
29 Ibidem, p. 118
30 Ibidem, p. 123
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