Chapter 4

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Chapter 4

  1. 1. BUSINESS LEVEL STRATEGY ANALYSIS  The Positioning Approach.  Porter’s 5 Forces.  Value Chain Analysis.  The Generic Strategies.
  2. 2. The Positioning Approach  The oldest approach to military strategy.  The newest of the three prescriptive approaches to strategy . Design and Planning Approaches were explained in Chapter 3.  Focuses on how firms in a given context differ in product market positions compared to the competition. 80
  3. 3. Premises of The Positioning Approach  Strategy follows structure.  Looks at the groups of competitors in an industry.  Relies more heavily on calculation than the design or planning schools.  Places even more emphasis on the role of strategic planners. 81
  4. 4. Porter’s Five Forces Analysis Breaking Apart Industry-Level Competition 87
  5. 5. Porter’s Five Forces Analysis Threat of Entry
  6. 6. The 6 Barriers of Entry Economies of Scale. Product Differentiation. Capital Requirements. Cost Disadvantages Independent of Size. Access to Distribution Channels. Government Policy. 89
  7. 7. Porter’s Five Forces Analysis Power of Buyers
  8. 8. Buyer Power Determinants  Bargaining Leverage. Buyer Concentration Buyer Volume. Buyer Switching Costs. Buyer Information. Ability to Integrate Backward. Substitute Products. Pull-Through. 90
  9. 9. Buyer Power Determinants  Price Sensitivity. Price/Total Purchases Product Differences. Brand Identity. Impact on Quality/Performance. Buyer Profits. Decision-Maker’s Incentives. 90
  10. 10. Porter’s Five Forces Analysis Power of Suppliers
  11. 11. Supplier Power Determinants  Differentiation of Inputs.  Switching Costs of Suppliers.  Presence of Substitute Products.  Supplier Concentration.  Importance of Volume to Supplier.  Cost Relative to Total Purchases in the Industry.  Impact of Inputs on Cost or Differentiation. 90
  12. 12. Porter’s Five Forces Analysis Power of Substitutes
  13. 13. Power of Substitutes  Relative Price Performance of Substitute.  Switching Costs.  Buyer Propensity to Substitute. 92
  14. 14. Porter’s Five Forces Analysis Competitive Rivalry
  15. 15. Determinants of Rivalry  Industry Growth.  Fixed Costs/Value Added.  Intermittent Overcapacity.  Product Differences.  Brand Identity.  Switching Costs.  Concentration and Balance.  Informational Complexity.  Diversity of Competitors.  Corporate Stakes.  Exit Barriers. 92
  16. 16. Determinants of Rivalry Competition is  Industry Growth. Everything!!!  Fixed Costs/Value Added.  Intermittent Overcapacity.  Product Differences.  Brand Identity.  Switching Costs.  Concentration and Balance.  Informational Complexity.  Diversity of Competitors.  Corporate Stakes.  Exit Barriers.
  17. 17. Value Chain Analysis Figure 3 98
  18. 18. Value Chain Analysis Figure 3 Primary Activities
  19. 19. Value Chain Analysis A C S T Procurement U I P V Human Resource Management P I O R T Technology Development I T E Procurement S Figure 3 Primary Activities
  20. 20. Value Chain Analysis  Importance of value- chain analysis is that it provides a framework for identifying or developing a distinctive competence. 82
  21. 21. Devising a Plan of Action  Position the Company.  Influence the Balance of the Forces.  Anticipate Shifts in the Forces. 93
  22. 22. Creating Families of Strategies 1 . Locating the core business. 2 . Distinguishing the core business. 3 . Elaborating the core business. 4 . Extending the core business. 5 . Reconceiving the core business. 94
  23. 23. Creating Families of Strategies 1 . Locating the core business. 2 . Distinguishing the core business. 3 . Elaborating the core business. 4 . Extending the core business. 5 . Reconceiving the core business. The Core Business is reflected in the Choice of Generic Strategies
  24. 24. Porter’s Generic Strategies Cost Advantage Lower Cost Differentiation Broad 1. Cost Leadership Target Competitive Scope Narrow Target 99 Figure 4
  25. 25. Porter’s Generic Strategies Cost Advantage Lower Cost Differentiation Broad 1. Cost Leadership 2. Differentiation Target Competitive Scope Narrow Target Figure 4
  26. 26. Porter’s Generic Strategies Cost Advantage Lower Cost Differentiation Broad 1. Cost Leadership 2. Differentiation Target Competitive Scope Narrow 3A. Cost Focus Target Figure 4
  27. 27. Porter’s Generic Strategies Cost Advantage Lower Cost Differentiation Broad 1. Cost Leadership 2. Differentiation Target Competitive Scope 3B. Differentiation Narrow 3A. Cost Focus Focus Target Figure 4
  28. 28. Strategies of Differentiation  Price Differentiation.  Image Differentiation.  Support Differentiation.  Quality Differentiation.  Design Differentiation.  Undifferentiation. 99
  29. 29. Strategies of Scope Unsegmentation. Segmentation. Niche. Customizing. 100
  30. 30. Elaborating the Core Business  Penetration Strategies.  Market Development Strategies.  Geographic Expansion Strategies.  Product Development Strategies. 101
  31. 31. Elaborating the Core Business  Penetration Strategies.  Market Development Strategies.  Geographic Expansion Strategies.  Product Development Strategies.
  32. 32. Ways to Elaborate a Given Business Existing Product New Product Product Existing Penetration Development Market Strategies Strategies Market New Diversification Development Market Strategies Strategies Figure 5 101
  33. 33. Questions ?
  34. 34. End of Presentation

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