Business level strategy Competitive strategy and industry ...

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Business level strategy Competitive strategy and industry ...

  1. 1. Business level strategy Competitive strategy and industry environment Session 11
  2. 2. Business-level strategy <ul><li>What is satisfied? </li></ul><ul><ul><li>Customer needs </li></ul></ul><ul><ul><li>Differentiation </li></ul></ul><ul><li>Who is being satisfied? </li></ul><ul><ul><li>Customer groups </li></ul></ul><ul><ul><li>Segmentation </li></ul></ul><ul><li>How are customer needs satisfied? </li></ul><ul><ul><li>Distinctive competencies </li></ul></ul><ul><ul><li>Building blocks of competitive advantage </li></ul></ul>
  3. 3. What does the customer want? Source: HBR
  4. 4. Satisfying consumer needs Compaq Nordstrom Oral B User-friendly Installation video No-questions asked return policy A toothbrush that tells customers when they need a new one. Source: MacMillan and McGrath
  5. 5. Business level strategy <ul><li>How to compete? </li></ul><ul><li>Generic business strategies </li></ul><ul><li>Choice of business strategy </li></ul><ul><li>Investment strategies </li></ul>
  6. 6. Business level strategy <ul><li>Cost Leadership </li></ul><ul><li>5-Forces model (protected through low costs) </li></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Cost competition from competitors </li></ul></ul><ul><ul><li>Imitation </li></ul></ul><ul><ul><li>Focus exclusively on efficiency </li></ul></ul>
  7. 7. Business level strategy <ul><li>Differentiation </li></ul><ul><li>5-Forces model (protected through differentiation, brand loyalty) </li></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Need to maintain uniqueness </li></ul></ul><ul><ul><li>Imitation </li></ul></ul><ul><ul><li>Changes in consumer tastes and demands </li></ul></ul>
  8. 8. Business level strategy <ul><li>Focus strategy </li></ul><ul><li>5-Forces model (Protected by either low costs or differentiation) </li></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Smaller volumes, higher costs </li></ul></ul><ul><ul><li>Changes in technology or consumer taste </li></ul></ul><ul><ul><li>Competition from differentiators </li></ul></ul>
  9. 9. Business level strategy <ul><li>Cost leadership and differentiation </li></ul><ul><ul><li>Production and process technology </li></ul></ul><ul><ul><li>Flexible manufacturing systems </li></ul></ul><ul><li>Stuck in the middle </li></ul><ul><ul><li>Importance of FIT – capabilities and strategy </li></ul></ul><ul><ul><li>Align product/technology/market choices with strategy </li></ul></ul>
  10. 10. Investment strategy <ul><li>Supports competitive strategy (FIT) </li></ul><ul><li>Cost of strategy </li></ul><ul><ul><li>Resources required </li></ul></ul><ul><li>Returns from strategy </li></ul><ul><ul><li>Firm competitive position </li></ul></ul><ul><ul><li>Stage of industry life cycle </li></ul></ul>
  11. 11. <ul><li>We don’t like their sound , and guitar </li></ul><ul><li>music is on the way out. </li></ul><ul><li>Decca Recording Co., rejecting the Beatles, 1962 </li></ul>
  12. 12. Investment Strategy <ul><li>Strength of company competitive position </li></ul><ul><ul><li>Market share </li></ul></ul><ul><ul><li>Distinctive competency </li></ul></ul><ul><li>Industry life cycle </li></ul><ul><ul><li>Opportunities </li></ul></ul><ul><ul><li>Threats </li></ul></ul>
  13. 13. Competitive Strategy & Industry Environment <ul><li>Managing industry environment (FIT) </li></ul><ul><li>Fragmented Industries </li></ul><ul><li>Embryonic & Growth Industries </li></ul><ul><li>Mature Industries </li></ul><ul><li>Declining Industries </li></ul>
  14. 14. Fragmented Industries <ul><li>Characteristics </li></ul><ul><ul><li>Many small/medium sized companies </li></ul></ul><ul><ul><li>Few economies of scale, High transport costs </li></ul></ul><ul><li>Strategic Focus </li></ul><ul><ul><li>Niche, customization </li></ul></ul><ul><li>Consolidation Strategies </li></ul><ul><ul><li>Chaining </li></ul></ul><ul><ul><li>Franchising </li></ul></ul><ul><ul><li>Horizontal Merger </li></ul></ul>
  15. 15. Embryonic & Growth Industries <ul><li>Characteristics </li></ul><ul><ul><li>Created by pioneers </li></ul></ul><ul><ul><li>Attract imitators </li></ul></ul><ul><li>Strategic focus </li></ul><ul><ul><li>Exploit innovation </li></ul></ul><ul><li>Strategies </li></ul><ul><ul><li>Go it alone </li></ul></ul><ul><ul><li>Enter into alliance </li></ul></ul><ul><ul><li>License innovation </li></ul></ul>
  16. 16. To lead or to follow? Source: Grant ? Nintendo/ Sega Atari Video game player ? TI Bowmar Pocket calculator ? Kodak Polaroid Instant camera ? Coca Cola R.C. Cola Diet Cola ? Corning Pilkington Float glass ? Boeing De Haviland Jet airliner Winner Follower Innovator Product
  17. 17. Mature Industries <ul><li>Characteristics </li></ul><ul><ul><li>Consolidated </li></ul></ul><ul><ul><li>Competitive interdependence </li></ul></ul><ul><li>Strategic focus </li></ul><ul><ul><li>Deter entry </li></ul></ul><ul><ul><li>Manage rivalry </li></ul></ul><ul><ul><li>Supply and distribution strategy </li></ul></ul>
  18. 18. Mature Industry <ul><li>Deter entry </li></ul><ul><ul><li>Product proliferation/ Filling niches </li></ul></ul><ul><ul><li>Price cutting </li></ul></ul><ul><ul><li>Maintaining excess capacity </li></ul></ul><ul><li>Manage Rivalry </li></ul><ul><ul><li>Price signaling </li></ul></ul><ul><ul><li>Price leadership </li></ul></ul><ul><ul><li>Product differentiation </li></ul></ul><ul><ul><li>Controlling industry capacity </li></ul></ul><ul><ul><ul><li>Preemptive </li></ul></ul></ul><ul><ul><ul><li>Co-ordination </li></ul></ul></ul>
  19. 19. Declining Industry <ul><li>Characteristics </li></ul><ul><ul><li>Falling demand </li></ul></ul><ul><ul><li>Intense competition </li></ul></ul><ul><li>Strategic Focus </li></ul><ul><ul><li>Dealing with decline </li></ul></ul><ul><li>Strategies </li></ul><ul><ul><li>Leadership </li></ul></ul><ul><ul><li>Niche </li></ul></ul><ul><ul><li>Harvest </li></ul></ul><ul><ul><li>Divestment </li></ul></ul>

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