Reflections on Competitive Strategy and Its Impact on Modern Production Concepts

Competitive strategy requirements for modern production concepts Competitive strategies are to obtain a long-term superior competitive position for a company by means of superior performance in comparison with its competitors in its relevant strategic business unit (SBU). Thereby the participation and growth of the company in its market will be ensured in the long term. The aim is to create competitive advantages by means of performance features which the customer perceives and regards as important. These performance features have to be defended against competitors attempts to imitatethem. The organization of production systems plays an important role in creatingand maintaining competitive advantages. Therefore this paper focuses on modern production concepts supporting the requirements of competitive strategy. Porter's concept of generic competitive strategies assumes that cost leadership and differentiation are two fundamentally different approaches to achieve competitive advantages. Cost leadership is aiming at a relative cost advantage over competitors in the relevant market segment by concentrating all strategic activities on cost reduction. In contrast differentiation strategy intends to strengthen the image of a company by selling unique products. As these products are characterized by valuable features, such as quality, customer orientation, location, design, integration, they provide an additional value to the customer which he rewards by paying a higher price(1). In the following the question if generic strategy options have to be implemented alternatively or combined will be discussed. Porter proposes to concentrate on one of the basic strategy alternatives becauseof their fundamental incompatibility(2). The assumption of the dominant strategyorientation is that competitive advantages can be achieved by concentrating the company's resources on a few compatible strategic success factors ("incompatibility-hypothesis"(3)). Whereas price is the dominant strategic success factor in cost leadership, valuable features, such as quality, product flexibility, processing times or reliability of delivery are the dominant strategic success factors in differentiation strategy. In order to support such strategic success factors in the organization of production systems, all products of a heterogeneous production program with diverging competitive strategy requirements should not be produced in the same production system. It seems more effective to create "product-market-production combinations" based ona segmentation of the production system into several production units. As indicated in Skinner's "focused factory" these production units aim at supporting the individual competitive strategies. As a consequence it is required that a company focus its production systems on the optimum i mplementation of strategic requirements(4). In contrary to this view, recent management approaches suggest that a combination of generic strategy options applied simultaneously in a competitive strategy may be necessary as well as feasible, This means that on the one hand pursuing generic strategy options simultaneously is required by the market in numerous business unit constellations. On the other hand it is also feasible concerning modern organizational and technological concepts realized in the production system ("hypothesis of simultaneity"). So the outpacing strategies concept of Gilbert and Strebel calls for a simultaneous application of both -- cost leadership and differentiation strategy features -- required by the relevant market or business unit and depending on the actual competitive position. The concept rejects a dichotomization of generic strategy options and favours instead their dynamic integration in "outpacing strategies"(5). …