- 1. Business Level Strategy
2. Business Level Strategy
- A Business Level Strategy is an integrated and coordinated set
of commitments & actions designed to provide value to customers
and gain a competitive advantage by exploiting core competencies in
specific individual product markets
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- What needs target customers have that it will satisfy
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- How those needs will be satisfied through implementation of
given strategy
3. Types of Business-Level Strategies
- Business-level strategies are intended to create differences
between the firms position relative to those of its rivals
- To position itself, the firm must decide whether it intends to
perform activities differently or to perform different activities
as compared to its rivals
4. Five Generic Strategies Competitive Advantage Competitive
Scope Cost Uniqueness Broad target Narrow target Cost Leadership
Differentiation Focused Cost Leadership Focused Differentiation
Integrated Cost Leadership/ Differentiation 5. Types of Business
Level Strategies
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- Integrated set of actions designed to produce or deliver goods
or services at lower cost
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- Focus on driving costs lower relative to competitors cost
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- Features that are acceptable to customers
6. Cost Leadership Strategy
- Cost saving actions required by this strategy:
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- building efficient scale facilities
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- tightly controlling production costs and overhead
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- minimizing costs of sales, R&D and service
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- building efficient manufacturing facilities
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- monitoring costs of activities provided by outsiders
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- simplifying production processes
7. How to Obtain a Cost Advantage Cost Drivers Value Chain
Determine and control Reconfigure, if needed
- Direct sales in place of indirect sales
- Change location relative to suppliers or buyers
8. Major Risks of Cost Leadership Strategy
- Dramatic technological change could take away your cost
advantage
- Competitors may learn how to imitate value chain
- Focus on efficiency could cause cost leader to overlook changes
in customer preferences
9. Differentiation
- Unique attributes & characteristics of a firms product
provide value to customers
- Premium prices due to unique need satisfaction
- Firms must be truly be unique at something to be perceived as
unique
- Unusual Features, Responsive Customer Service, Rapid Product
Innovations, Different Status , Engineering Designs, Prestige &
Status
- Anything to create real or perceived value
- Challenge to identify features that create value for
customers
10. Factors That Drive Differentiation
- Unique product performance
- Exceptional skill or experience
11. Focus Strategy
- Integrated set of actions designed to produce goods or services
that serve the needs of a particular competitive segment
- A particular Buyer group, A different segment of a product
line, different geographic market
- Focused Cost Leadership or focused Differentiation
- Firms have the core competencies required to provide value to a
narrow competitive segment that exceeds the value available from
firms serving customers on industry wide basis
12. Focused Business-Level Strategies
- A focus strategy must exploit a narrow targets differences from
the balance of the industry by:
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- isolating a particular buyer group
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- isolating a unique segment of a product line
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- concentrating on a particular geographic market
13. Factors That May Drive Focused Strategies
- Large firms may overlook small niches
- Firm may lack resources to compete in the broader market
- May be able to serve a narrow market segment more effectively
than can larger industry-wide competitors
- Focus may allow the firm to direct resources to certain value
chain activities to build competitive advantage
14. Major Risks of Focused Strategies
- Firm may be outfocused by competitors
- Large competitor may set its sights on your niche market
- Preferences of niche market may change to match those of broad
market
15. Advantages of Integrated Strategy
- A firm that successfully uses an integrated cost
leadership/differentiation strategy should be in a better position
to:
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- adapt quickly to environmental changes
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- learn new skills and technologies more quickly
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- effectively leverage its core competencies while competing
against its rivals
16. Benefits of Integrated Strategy
- Successful firms using this strategy have above-average
returns
- Firm offers two types of values to customers
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- some differentiated features (but less than a true
differentiated firm)
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- relatively low cost (but now as low as the cost leaders
price)
17. Major Risks of Integrated Strategy
- An integrated cost/differentiation business level strategy
often involves compromises (neither the lowest cost nor the most
differentiated firm)
- The firm may become stuck in the middle lacking the strong
commitment and expertise that accompanies firms following either a
cost leadership or a differentiated strategy
18. Functional Strategies
- The short-term goal-directed decisions and actions of an
organizations functional departments.
- All organizations perform 3 basic functions as they create and
deliver goods and services:
- Marketing (to assess and establish product demand then market
and deliver the product after production)
- Production and operations (to create the product/service)
- Financial and accounting ( to get payment for the
product/service and information on performance results)
- These three basic functions typically expand into:
- Production-Operations-Manufacturing Strategies
- Human Resource Management Strategies
- Research and Development Strategies
- Information System Strategies
- Financial-Accounting Strategies
19. MARKETING
- Building Customer Satisfaction, Value, & Retention
- Market Oriented Strategic Planning
- Analyzing Consumer Markets and Buying Behavior
- Setting the Product & Branding Strategy
- Developing Price Strategies & Programs
- Designing & Managing Value Networks and Marketing
Channels
- Managing Integrated Marketing Communications
- Managing Advertising, Sales Promotion, & PR
- Direct Marketing Fundamentals
20. Financial Management
- Acceptable cost of capital
- Desired proportion of short term & long term debt;
Preferred & common equity
- Balance b/w Internal & External Funding
- Appropriate Risk & Ownership structures
- Levels & Forms of leasing for providing assets
21. Financial Management
- Priorities for Capital Allocation Projects
- Final selection of Projects
- Capital Allocation by operating Managers w/o approval
- DIVIDEND & WORKING CAPITAL MANAGEMENT
- Proportion of earnings as dividends
- Importance of dividend stability
- Cash Flow Requirements; Minimum & Maximum Cash
balances
- Liberal/ Conservative Credit Policies
- Payment timings & Procedures
22. Financial Management
- CAPITAL STRUCTURE DECISION:
- Optimal Capital Structure
- External vs. Internal Financing
23. Functional Strategies in the R & D Area
- Research vs. Commercial Development:
- Emphasis on Innovation & Break Through
- Emphasis on product development, Refinement &
modification
- Orientation to support business strategy
24. Functional Strategies in Personnel
- Development of Managerial Talent:
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- Employee Recruitment, Selection & Orientation
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- Career Development & Counseling, Training &
Development
- Compensation & Regulatory Concerns:
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- Compensation, Labor/Union Relations
- Competent & Well Motivated:
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- Discipline, Control & Evaluation
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- Performance Appraisal, 360 degree Feedback