Session 2 Business Strategies based on Value ChainAg.docx

Session 2
Business Strategies based on Value Chain
Agenda
Opening case & Porter’s Value Chain hypothesis
Porter’s generic strategies framework
Cost leadership
Differentiation
Two views on Value Chain hypothesis
The Consistency View
The Blue Ocean View
Case
Video case: Nintendo Wii Blue Ocean strategy
The Blue Ocean that Disappeared – The Case of Nintendo Wii
Opening case
To offset its market share losses since 2008, Nestle has sought
to aggressively promote linkages in the premium, luxury market
– that has been immune to the recession and has been growing
rapidly
Nestle as a global corporation has five major business groups;
in each, Nestle links its resource transforming functions in very
different ways, reflecting the personality and the positioning of
its specific brands.
Culinary foods

Maggi
Le Creazioni di Casa Buitoni
Beverages
Nescafe
Nespresso
Confecti-onary
Kitkat
Maisen Cailer
Milk products
Nutrition
Cerelac
Nestle Haagen Dazs

Babynes
Porter’s Value Chain hypothesis
According to Porter’s value chain hypothesis, the primary links
among the resource transforming functions should be sequenced
as a chain, i.e. design, produce, market, deliver and support
(Porter, 1985)
Value chain analysis helps to evaluate effectiveness of a firm in
different functions
Strategies for manipulating value linkages for improving
strategic advantage of a business are referred to as the
“Business-level strategies”
Design
Production
Marketing
Support

Delivery
The Value Chain hypothesis
In Porter’s framework, the functions in a firm’s value chain are
grouped into two broad categories of activities: primary and
secondary
Primary activities are directly involved in transforming inputs
into outputs and in delivery and after-sales support
inbound logistics
Support activities are involved in supporting primary activities
procurement
service—installation, usage guidance, maintenance, parts, and
returns
operations
outbound logistics

marketing and sales
technology development
human resource management
firm infrastructure—general management, planning, finance,
accounting, legal, government affairs and quality management
Porter’s generic strategies framework
Generic Sources of Strategic Advantage in Value Chains
One of the major purposes of Porter’s framework is to explicate
two generic sources of strategic advantage for the businesses of
a firm.
Value
Cost
If customers perceive a product or service as superior, they are
willing to pay a premium relative to the price they will pay for
competing offerings
If a firm gains a cost advantage for performing activities in its

value chain at a cost lower than its major competitors, then it
has flexibility to undercut competitors and offer greater value
for money
Two views on Value Chain hypothesis
There are two views on this hypothesis:
Contingency view
The firms that make consistent, persistent and dedicated
investments in “value” differentiation or “cost” leadership, are
likely to generate stronger and more sustainable competitive
advantage
Blue Ocean View
A strategy built on an integrated approach will position the firm
in strategically advantageous uncontested space
The Consistency View of Value Chain hypothesis
is based on three implicit assumptions:
Knowledge processes/ routines assumption

The firms who strategically concentrate all their investments in
either cost reduction or in differentiation are likely to develop
deep, strong knowledge processes, or routines, to undergird
their competitive advantage, as compared to those who strive to
do both
Motivational processes/ culture assumption:
The firms who strategically strive to promote either cost
reduction or differentiation only are likely to develop deep,
strong motivational processes, or culture, to undergird their
competitive advantage
The firms who strategically position themselves as capable of
cost reduction or differentiation are likely to develop deep,
strong reputation, or credibility, to undergird their competitive
advantage
Reputational processes/ credibility assumption
The Consistency View offers a typology of two pure business
strategies, based on the two generic sources of strategic
advantage:

9
Differentiation strategy
The strategy involves making a fairly standardized product,
combined with aggressive underpricing all rivals (Porter, 1980:
36)
The strategy involves offering superior product features to
customers
Cost leadership strategy
There are three different sub-hypotheses on the relationship
between differentiation and cost leadership strategies:
Lifecycle hypothesis
At different phases of product and organizational lifecycles,
changing conditions enable change in generic strategies and the
firms who embrace this change outpace their competitors
(Gilbert & Strebel, 1989)
Singularity hypothesis
Both cost reduction and value addition are integral to any

business strategy, and are not distinct but singular, i.e. cost is
one variable in the overall differentiation strategy
Mutually-exclusive hypothesis
Porter (1980: 38) asserts that a firm must make a choice among
generic strategies, otherwise it will become “stuck in the
middle.” (Porter, 1985: 11)
There are three different sub-hypotheses on how generic
strategies are related to firm performance:
Differentiation hypothesis
Some scholars assert that the firms using differentiation
strategy in a market outperform those using a cost-leadership
strategy
Equivalency hypothesis
Contingency hypothesis
Porter (1980: 35) asserts that cost leadership and differentiation
strategies offer an equally successful and profitable path to
strategic advantage. This may be true in a highly cyclical
economic environment

Firms from different nations may have different capabilities for
differentiation vs. cost leadership advantage
Risks of Pure Business Strategies
Research shows a lack of support for the Consistency view in
highly dynamic and turbulent markets – here the firms that
focus on only differentiation or cost leadership may not be as
successful because of the risks from the following three risk
factors:
Risks
Risks of diminishing returns: as one invest more and more in
one objective, incremental benefits become less and less.
Risks of diminishing demand: as one invests more and more in
one objective, it becomes less attractive for a broader group.
Risks of competitive interplay: as one gains dramatic cost or
value edge over rivals, new rivals emerge to capture a share of
the market.
Benefits of a Hybrid Business strategy

In highly dynamic markets, the success of the firms pursuing a
hybrid strategy, based on the integration of the linkages for
differentiation or cost leadership, may be attributed to the
following three factors:
Benefits
Benefits of increasing demand
Benefits of increasing returns
Benefits of competitive priorities
The Blue Ocean View of Value Chain hypothesis
Kim and Mauborgne (2005) characterize cut-throat target
markets as ‘Red oceans’, where the sharks compete mercilessly.
To succeed in dynamic environments, the firms need to pursue a
blue ocean strategy, taking an integrated approach aimed at not
killing the competition, but rather to make the competition
irrelevant
Blue ocean strategy refers to the creation by a firm of a new,
uncontested market space that makes competitors irrelevant and
that creates new consumer value often while decreasing costs.
It focuses less on competitors, but more on alternatives. It also
focuses less on existing customers, but more on non-customers,
or potential new customers
The four actions framework for Blue Ocean Strategy

Alternate target customers,
with alternate value factors
Reduce:
What factors should be reduced well below the industry
standard?
Create:
What factors should be created that the industry has never
offered?
Raise:
What factors should be raised well above the industry standard?
Eliminate:
What factors should be eliminated from what the industry has
taken for granted?
The four actions framework for Cirque du Soleil
Cirque du Soleil adopted the blue ocean strategy using a hybrid
focus approach; it helped the company gain a significant
strategic advantage and grow very rapidly by redefining circus
Eliminate
Start Performers
Animal Shows

Aisle concession sales
Multiple show arenasRaise
Unique venueReduce
Fun and humor
Thrill and dangerCreate
Theme
Refined watching environment
Artistic music and dance
Strategy Canvas for Cirque du Soleil
Reduce
Raise
Create
Cirque du Soleil Star peformers Animal shows Aisle
concessions Multiple show arenas Fun and humor Thrills
and danger Unique venue Theme Refined watching
environment Artistic music and dance Price0 0 0 0
6 6 9 9 9 9 8 Smaller Regional
circus Star peformers Animal shows Aisle concessions
Multiple show arenas Fun and humor Thrills and
danger Unique venue Theme Refined watching
7 7 2 0 0 0 3 Strongest National
Circus Star peformers Animal shows Aisle concessions
Multiple show arenas Fun and humor Thrills and
danger Unique venue Theme Refined watching
8 8 3 0 0 0 4
Using Bricolage for constructing Blue Ocean Value Chains
Bricolage offers a useful perspective for constructing blue
ocean value chains in fast-changing competitive environments
Bricolage means using whatever available resources as the

inputs into a creative process
A classic example of Bricolage is the printing press. As noted in
the Wall Street Journal, “The printing press is a classic
combinatorial innovation. Each of its key elements—the
movable type, the ink, the paper and the press itself—had been
developed separately well before Johannes Gutenberg printed
his first Bible in the 15th century.” (Johnson, 2010). Gutenberg
made use of the available materials to develop a printing press
Limitations of Traditional Value Chain Analysis
It takes a static view of both capabilities and markets, and thus
contributes to the commodification of the functions, by
promoting similarities in what firms do.
It ignores the opportunities for broader network relationships
that might shape several inter-related activities.
Video case: Nintendo Wii Blue Ocean strategy
Case: The Blue Ocean that Disappeared – The Case of Nintendo
Wii
The case evaluates the ‘‘turning points’’ and the timing of
Nintendo’s strategies in transforming a Red Ocean to a Blue
Ocean, and back again
With the launch of Nintendo Wii in 2006, the company created a

Blue Ocean by offering a unique gaming experience to previous
non-customers and at the same time keeping the cost of its
system lower than Sony’s and Microsoft’s. Wii became a market
leader by emphasizing its simplicity and lower price (compared
to Sony and Microsoft) to break down barriers for new
customers
Case: The Blue Ocean that Disappeared – The Case of Nintendo
Wii
The competitors’ reaction to Nintendo’s Wii – launch of similar
devices:
In response Nintendo releases the new Wii U in 2012 in an
attempt to differentiate its new console and create a “Blue
Ocean” again. However, if the original Wii represented a shift
away from the hardcore gaming market, the
Wii U signals a movement back towards the hardcore gaming
market space
This case underlines that the Blue Ocean strategy cannot be a
static process (Kim and Mauborgne, 2005).
Nintendo must create a dynamic strategy in order to stay in the
Blue Ocean and not to allow turning it into a Red Ocean again
Sony PlayStation Move
Kinect for Xbox 360

Chapter 2
Business Strategies based on Value Chains – Differentiation,
Cost Leadership and Blue Ocean
By Vipin Gupta
Consider the case of the Switzerland-based Nestle, whose
mission is to provide a caring nest that offers good food and
good life to the consumers. As shown in Exhibit 2.1, Nestle as a
global corporation comprises of five major business groups:
culinary foods, beverages, confectionary, milk products and
nutrition. Within each of these business groups (firms), Nestle
links its resource transforming functions in very different ways,
and each of these ways reflect the personality and the
positioning of its specific brands. Historically, Nestle has been
known for its mass market appeal, with popular global brands
such as Maggi in culinary foods, Nescafe in beverages, Kitkat
in confectionary, Nestle in milk products, and Cerelac in (baby)
nutrition. However, its confectionary business group suffered
more than 25% drop in revenues in a five year period 2008-
2013, and the company as a whole suffered revenue drop during
2011-2013. To offset its market share losses, Nestle has sought
to aggressively promote linkages in the premium, luxury market
– that has been immune to the recession and has been growing
rapidly. In 2011, Nestle launched the premium Maisen Cailer
brand of customized confectionary for the online shoppers in
Switzerland – the customers can order Ecuador-sourced sampler
pack of five chocolates. After tasting, customers fill an online
survey to determine their chocolate personality, and are able to
order larger boxes, marrying their favored chocolate with
preferred fillings ranging from peppercorn and vanilla to
raspberry and verbena. A 16-piece 128 grams box of the
Maison Cailler chocolates costs 26 Swiss francs ($28.30). That
means these are priced at $220 per kilogram, or $100 per pound.

In the beverages group, Nestlé successfully created the luxury
home coffee business by launching its single-serving expresso-
maker Nespresso capsule in two countries in 1986. The capsule
was offered online in the 1990s and in boutique stores in 2002.
By 2012, it became a US$3.3 billion brand, with half its sales
coming from the Internet and more than 250 boutiques
worldwide. Nestlé already has tried its hand at other premium,
customized goods. Similarly in the nutrition group, Nestle
launched BabyNes formula milk capsules in 2011, which fit its
own $272 single-serving machine. In the culinary group, Nestle
has extended its Buitoni brand into the premium segment, by
launching a sub-brand Le Creazioni di Casa Buitoni in 2011. An
example of the innovative products in this sub-brand is the
extra-large, extra-creamy filled pasta, with a state-of-art
technology allowing pieces of ingredients, such as porcini
mushrooms and toasted almonds, to remain intact. Another
innovative linkage for this sub-brand includes a paper-based,
partly recyclable tray, which reduces the amount of plastic
normally required in packaging.
Source: Adapted from Doherty (2012) and Nestle (2011)
Value linkages among resource transforming functions within
and outside the boundaries of a firm, are its ‘building-blocs’ to
successful business strategies. As a matter of fact, these
building-blocs go on to form a firm’s strategic advantage in
various business domains. A value linkage describes the full
range of processes “required to bring a product or service from
conception, through the different phases of production
(involving a combination of physical transformation and the
input of various producer services), delivery to final consumers
and final disposal after use” (Kaplinsky and Morris 2001).
Firms may have several different types of value linkages, and

different firms tend to have different types of value linkages.
For instance, the value linkages for the traditional mass brands
of Nestle are fundamentally different from those for the new
premium brands, because they are targeted at a different
customer profile, and rely on different ingredients,
technologies, packaging, and delivery channels.
Value chain is a specific type of value linkage, which describes
the linear process of operational flow from design and sourcing
of inputs, to processing, marketing, and servicing of customers.
The Value chain hypothesis is concerned with the type of
investments a firm makes in its efforts to develop the most
competitive and sustainable value chains.
In this chapter, we will consider two distinct views on the value
chain hypothesis (the most important of the value linkages): the
Protection view and the Growth view. The Protection view
holds that firms making consistent and dedicated investments in
either differentiation capability or cost leadership capability are
likely to be better protected from competitive attacks. These
firms are more likely to generate stronger and more sustainable
competitive advantage. This view is based on a static view of
the environment, and assumes an inherent trade-off between
lower cost and higher value. The Growth view on the other
hand, holds that in dynamic environments, a strategy built on
investments in cost reduction or differentiation enhancement for
existing, known market spaces will only erode a firm’s strategic
advantage. In existing known market spaces, referred to as red
oceans, firms try to outperform their rivals to grab a greater
share of market. These red ocean market spaces are crowded,
and prospects for profits and growth are low. Conversely, an
integrated approach can allow the firm to create new demand,
instead of fighting for it. In this new yet unexplored space,
referred to as blue oceans, there is sufficient opportunity for
growth that is both profitable and rapid.

The Concept of Value Chain
Value chain is one of the most fundamental concepts in
strategy. Value chain is a chain of functional nodes along which
a firm exchanges and transforms its resources, and involves
design, production, marketing, delivery and support (Porter,
1985). As products in value chains are exchanged and
transformed, they flow downstream in a series of exchanges
among participants at each functional node that adds value and
costs. As we will see below, there are many different ways of
portraying a value chain, depending on the major functions of a
firm.
To analyze a value chain, one generally uses two major lenses:
a value lens or a design lens.
Through a value lens, one evaluates the incremental value and
its cost-effectiveness at each functional node. This allows in
augmenting or insourcing functions associated with a positive
value-add, while simultaneously eliminating or outsourcing
functions associated with a negative value-add. It allows
comparing a firm’s performance with that of its competitors, to
identify gaps in value-added and cost-effectiveness, and to
develop and execute plans to close the identified gaps. Exhibit
2.x illustrates how this is done using the example of two mobile
network operators – Vodafone and Orange.
Exhibit 2.x: Traditional Value Chain Analysis – Closing the
Competitive Performance Gaps
Vodafone
* 99% population * In-house *Own System * Own
branded and * Own portal
Coverage and other retail chains
* Distributors
Orange

* 99% population * In-house *Own System * Own
branded and * Own portal
Coverage and other retail chains
* Distributors
Source: Adapted from Peppard & Rylander (2006)
Through a design lens, one investigates the most appropriate
value and cost linkages for target customers. Practically
speaking, this value chain analysis proceeds by examining the
integrated functions of a firm comprising of activities such as
design, production, marketing, delivery and support. Strategies
for managing investments in value linkages aimed at improving
strategic advantage of a business are referred to as the
“Business-level strategies”.
Customers
Suppliers
Porter (1985) was the first to offer a classification of business-
level strategies using a value chain analysis, which is based on
three alternative generic sources of strategic advantage – value,
cost and focus. As illustrated in Exhibit 2.x, Porter’s framework
offered a model of how businesses receive materials as inputs,
add value to them through various functions, and sell value-
added products to customers.
Customers
Suppliers
In Porter’s framework, there are two broad categories in a
firm’s value chain: primary and secondary. Primary activities

are directly involved in transforming inputs into outputs,
delivery and after-sales support. Thus they include:
● inbound logistics—material handling and warehousing;
● operations—transforming inputs into the final product;
● outbound logistics—order processing and distribution;
● marketing and sales—communication, pricing and channel
management; and
● service—installation, usage guidance, maintenance, parts, and
returns.
The secondary or support activities are ones backing up the
primary activities, and include:
● procurement—purchasing of raw materials, supplies and other
consumable items as well as assets;
● technology development—research and development,
procedures and technological inputs
● human resource management—selection, promotion and
placement; appraisal; rewards; management development; and
labor/employee relations; and
● firm infrastructure—general management, planning, finance,
accounting, legal, government affairs and quality management.
The concept of value chain is not without limitations. It
assumes a sequential chain of activities in a physical world, for
transforming material inputs into products that have value at
each intermediate stage of process. Upstream suppliers provide
inputs that pass through the downstream to the next sequential
link, and eventually to the customer. Such a worldview is
appropriate for traditional manufacturing firms, operating in
fairly stable to moderately dynamic environments. Such a
worldview however, contributes to the commoditization of
functions by promoting similarities in what firms do. It takes a
static view of firm’s capabilities, target markets, and competitor
dynamics. It thus may obscure dynamic capabilities and a firm’s
ability to survive and grow a business by exploiting alternative

market opportunities.
Generic Sources of Strategic Advantage in Value Chains
One of the major purposes of Porter’s framework is to explicate
three generic sources of strategic advantage for the businesses
of a firm. Strategic advantage of any business derives from the
difference between the value it offers to customers and the cost
of creating that customer value. Therefore, the strategic
advantage of a business may derive from two generic sources:
1) Value, referred to as offering or differentiation advantage. If
customers perceive a product or service as superior, they are
willing to pay a premium relative to the price they will pay for
competing offerings. A firm may achieve differentiation
advantage by making investments that generate a
disproportionate increase in both the value accrued from the
customers as well as the proportion of this value it is able to
capture. This is illustrated in Exhibit 2.x
Exhibit 2.x: An illustration of how a firm may develop
differentiation advantage
Total Value
Firm’s share
Investment in a process (A)
$100
Original value accrued from customer (B)
$1000
$500 (50.0%)
New value accrued from customer (C)
$1150
$650 (56.5%)
Increased value accrued from customer (C-B=D)
$150
Increased value/ Investment (D/A)

$150/$100
= 1.5 > 1
2) Cost, referred to as operating or cost leadership advantage. If
a firm gains a cost advantage for performing activities in its
value chain at a cost lower than its major competitors, then it
has flexibility to undercut competitors and offer greater value
for money to its customers. A firm achieves cost leadership
advantage by making investments that improve the cost
structure of its value chain. This is illustrated in Exhibit 2.x
Exhibit 2.x: An illustration of how a firm may develop cost
leadership advantage
Total Value
Firm’s share
Investment in a process (A)
$100
Original value accrued from customer (B)
$1000
$500 (50.0%)
New value accrued from customer (C)
$750
$250 (33.3%)
Reduced value accrued from customer (B-C= D)
$250
Reduced cost from process investment (E)
$400
Net cost reduction benefits retained by the firm (E-D=F)
$150
Net benefits retained/ Investment (F/A)

$150/$100
= 1.5 > 1
For both the differentiation advantage and the cost leadership
advantage, investments may be made in one or more of the
primary or secondary activities. The advantage tends to be more
significant, when the impacted activity (or activities) accounts
for a substantial part of the value for the customers. Exhibit 3.x
illustrates this in the context of smartphone market.
Xiaomi and Lenovo of China and Micromax of India are the
leaders among the many emerging market firms that have
entered the smartphone market. These firms are growing rapidly
because of their capability to offer smartphones at a cost more
than a third less than the Apple’s iphone. They are using a
specialized chip designed for smartphones by MediaTek, a
Taiwanese semiconductor company based on in Hsinchu science
park, the Taiwanese Silicon Valley. Until 2011, MediaTek
designed chips only for the older feature phones. Its chips took
care of most of the design work, allowing its customers to
manufacture low-cost feature phones without having to spend
much time or money on research and development. These
feature phones available at dramatically low prices
revolutionized the mobile markets in emerging markets, such as
of China and India. In 2011, MediaTek introduced chips
designed for smartphones, allowing entry of many new
smartphone firms in the emerging markets.
A second major factor in the low-cost advantage of the new
entrants is Google’s Android operating system. Google offers
the open code for the Android operating system free of cost, as
it seeks to accrue value from the online ads when customers
search and consume Web content. As Google handles more
online advertising than any place else, a rising online tide
benefits its bottom line. Android accounts for more than 80% of

the smartphone market in terms of volumes, as mobile firms
such as Samsung have used it for high-end smartphones as well.
In 2008, Apple had the mobile marketplace to itself, but now it
is no longer the volume leader. The new entrants have targeted
emerging markets like China and India, where the demand for
expensive smartphones is more limited, as compared to the
demand for the lower cost smartphones. In 2011, after four
years of effort, Apple was selling only 10 million iPhones in
China. Xiaomi founded in 2011, was able to offer a smartphone
at a cost of only 2,000 yuan (US$327) – 37 percent of the cost
of an Apple iPhone in China. Like other low-cost mobile
handset providers, Xiaomi has razor-thin profit margins.
Apple, on the other hand, lacks strategic advantage relative to
the high-volume cost-conscious customers. Its advantage is
with the brand-conscious customers who value usability and
simplicity of design. Tim Cook, Apple’s CEO, said, “There’s a
segment of the market that really wants a product that does a lot
for them, and I want to compete like crazy for those
customers,…I’m not going to lose sleep over that other market,
because it’s just not who we are. Fortunately, both of these
markets are so big, and there are so many people that care and
want a great experience from their phone or their tablet, that
Apple can have a really good business.”
Source: Adapted from Einhort (2013) and Grobart (2013).
The Protection View of Value Chain Hypothesis
As noted above, a firm may invest in its value chain to develop
three different types of generic advantages: value, cost, and
focus. How should it make this investment decision? Value
chain hypothesis is concerned with the type of investments a
firm should make to develop most competitive and sustainable
strategic advantage.

Conventionally, in static markets, firms have been most
concerned with the protection of their strategic advantage. As
noted in the previous chapter, firms may strive to protect their
advantage by investing in strengthening of isolating forces,
thereby making it even more difficult for other firms to copy or
substitute their valuable resources, capabilities, and core
competencies. According to Porter (1985), the most effective
way to do so is for firms to make consistent, persistent and
dedicated investments in either differentiation or cost
leadership, either broadly or in a focus area. The firms who seek
to invest in both cost leadership as well as differentiation
advantages are likely to be ‘stuck-in-the-middle”, and find it
difficult to protect and sustain their advantage. This view is
based on three implicit assumptions.
a) Knowledge processes/ routines assumption: firms who
strategically focus all their investments in either cost reduction
or in differentiation are likely to develop deep, strong
knowledge processes or routines to undergird their competitive
advantage, as compared to those who strive to do both.
b) Motivational processes/ culture assumption: firms who
strategically strive to promote either cost reduction or
differentiation only, are likely to develop deep, strong
motivational processes, or culture, to undergird their
competitive advantage. A culture of cost leadership is likely to
make it difficult to be an effective differentiator, and a culture
of differentiation is likely to make it difficult to be an effective
cost leader as well.
c) Reputational processes/ credibility assumption: firms who
strategically position themselves as capable of cost reduction or
differentiation are likely to develop deep, strong reputation, or
credibility, to undergird their competitive advantage. Customers
are likely to expect these firms to have the ability to
reconfigure processes to either achieve dramatic cost
reductions, or command dramatic value premiums. Whereas in
reality, the firms may have these abilities either in broad
domains (generic cost leadership or generic differentiation), or

in focus domains (focus cost leadership or focus
differentiation).
Thus, the Protection View postulates that firms that pursue
either differentiation or cost leadership business strategy will
outperform those who pursue a mixed or hybrid strategy
combining both. Overall, the Protection view offers a typology
of three pure business strategies for the firms to choose from
based on the three generic sources of strategic advantage
discussed earlier. These pure business strategies are: cost
leadership, differentiation, and focus. It is important to note
that focus is not a truly pure business strategy, because the
fundamental choice for the firms is either cost leadership or
differentiation, but for either of these, the firm may additionally
choose to focus on a specific set of customers.
(a) Differentiation strategy is based on strategic concentration
and persistence of investments in linkages that accrue value
premium. The strategy involves offering superior product
features to customers. In here, persistence of investments is
critical, as the features that differentiate a firm or some of its
product lines may no longer act as differentiators, if these
become industry standard.
In the 1920s, General Motor’s CEO Alfred Sloan merged many
smaller auto firms whose survival was threatened by the rapid
growth of Ford as a cost leader. GM then designed the
pioneering differentiation strategy of “a car for every purse and
purpose.” Sloan rationalized GM’s cars into five price-quality
segments, generating a hierarchy-of-models for the rising
economic status of the customers through their life. The young,
upwardly-mobile first-time customer was invited to choose the
moderately-priced Chevrolet, over the least-costly mass-
produced Ford. When the customer got promotion and some
more income, the first thing he did after buying a bigger house
for the family was to buy an Oldsmobile. The next step up
brought a Pontiac, then a Buick. At the top of the ladder, he

would acquire a Cadillac (Mantle, 1995). This strategy allowed
GM to displace Ford as a market leader, and to dominate the US
market until early 1980s with a total market share as high as
50%.
In Consumer Reports, for the model years through 1982, in non-
luxury full-sized, midsize, and compact cars categories, GM
scored first and second in virtually every year. These categories
of cars represented the biggest and most profitable segments of
cars in the U.S. Ford and Chrysler followed GM in introducing
cars for different segments, but because of their lower market
share were unable to match GM’s cost structure for the higher-
end segments - paradoxically earning GM a cost leader moniker
(Porter, 1980). But, over a period of time, as the features
offered by GM became an industry norm in the US, European
rivals out-differentiated GM by adding new premium luxury
features. Japanese rivals out-competed GM by adding features
that were standard on higher-end models into their base models
at low costs. This sharply eroded GM’s market share and pushed
it into red by the late 1980s, and forced it to find new ways to
differentiate.
(b) Cost leadership strategy is based on strategic concentration
and persistence of investments in linkages that reduce costs.
The strategy involves making a fairly standardized product,
combined with aggressive underpricing all rivals (Porter, 1980:
36). Standardized products are referred to as commodities,
because they are undifferentiated; when these products are
stripped down to bare functional basics, then they are referred
to as no-frill products. The strategy requires “heavy up-front
capital investment in state-of-the-art equipment” (Porter, 1980:
36), and is based on three major categories of cost reducing
efforts: (1) reducing unit manufacturing costs through higher
unit volume, efficient scale facilities, and experience curve; (2)
exercising strict cost control over engineered costs and on
exchanged costs (purchased inputs and logistics) ; and (3) a
discriminating approach to discretionary costs like R&D,

service, sales force, and advertising. When the strategy is based
on the reduction of unit manufacturing costs, engineering costs
and exchanged costs, then it may result in cut-throat price wars.
The cost leaders rely on some elements of discretionary costs to
aggressively build market share for their commodity-like
products.
For example, Sears has been historically known for its
customary dedication to cost control, offering value at a decent
price. But in the appliance business, it had to combine that with
a commitment to service in order to succeed (Rothschild, 1979:
95). Therefore, these discretionary costs allow cost leaders to
partially alleviate the customer price sensitivity for the
standardized products they offer.
Let’s consider another example: the sheet metal firms commit to
exceedingly tight technical specifications, delivery schedules,
and responsiveness in reordering, in order to gain preferred
marketing arrangements with the auto firms (Levitt, 1980). It is
imperative to note that persistence of cost-reducing efforts is
critical for a cost-leadership strategy.
A firm competing solely on the basis of differentiation
advantage may successfully use new product designs or process
technologies to reduce costs, at times below the industry
standards. Robust state technology in the TV Set industry
allowed firms to achieve both higher reliability and lower cost,
as compared to firms that used the older vacuum tube
technology (Porter, 1983: 482-503). However, one-time or ad
hoc cost reduction efforts do not constitute a cost leadership
strategy, which as a matter of fact requires a deep culture of
tight cost control.
Differentiation, Cost-Leadership, and Firm Performance
There are three different sub-hypotheses on the relationship
between cost leadership and differentiation strategies.

· Singularity hypothesis: the first view is that both cost
reduction and value addition are integral to any business
strategy, and are not distinct but singular. Businesses have only
two generic strategic choices: how much to differentiate and
what scope to decide (Mintzberg, 1988). In marketing, a
differentiated product is one that “is perceived by the customer
to differ from its competition on any physical or nonphysical
product characteristic including price (Dickson and Ginter,
1987: 4). Mintzberg (1988) opines that cost leadership is just
an element of differentiation strategy in which the basis of
differentiation is not higher quality, but lower price. For
instance, in the US, within the economy segment of the
hotel/motel industry, Motel 6 differentiates itself by positioning
the brand with a claim of offering “the lowest prices of any
national chain” (Thomson and Strickland, 2008).
· Lifecycle hypothesis: a second view is that at different phases
of product and organizational lifecycles, different strategies are
appropriate, depending on what will allow a firm to outpace its
competitors (Gilbert & Strebel, 1987). While a differentiation
strategy leads to a low-cost position in the later stage of a
product lifecycle due to an increase in sales volumes, the
learning curve, and economies of scale and scope (Hill, 1988), a
cost leadership strategy enables firms in their later
organizational lifecycle to develop a premium positioning using
their accumulated experiences and knowledge development. In
the 1990s, the Korean automaker, Hyundai was known to be a
cost leader, with its midsize Sonata car. During the 2000s,
Hyundai continuously improved its quality, and in 2008,
launched the moderately priced Genesis, costing $38,000. This
was followed by the Equus in 2010 within the $55,000 to
$60,000 range, at the low-end of the luxury segment. Hyundai
thus enjoyed a 20% annual growth in its revenues, and became
the fifth largest automaker in the world. In 2011, it repositioned
itself as “modern premium” – offering high-end features at
affordable costs for the mass-market consumers.
· Mutually-exclusive hypothesis: Porter (1980: 38) contends

that a differentiation strategy often requires a perception of
exclusivity, which is incompatible with high market share. He
further notes that a firm must make a choice among generic
strategies, otherwise it will become “stuck in the middle”
(Porter, 1985: 11). This is so because each generic strategy
requires a different culture, different resources, different
organizational structures, different management styles, and
radically different philosophies (Porter, 1985: 24, 99). For
instance, the Gap Corporation started with a flagship business
unit The Gap. To deepen its cost advantage, it developed a
lower-end business unit Old Navy. To deepen its differentiation
advantage, it developed a higher-end business unit Banana
Republic. To improve its focus, it further created new business
units – The Gap for Men, The Gap for Women, and The Gap for
Children. Similarly, many airlines have a first-class product line
and an economy product line. For each of these product lines,
they offer different reservation numbers, customer service
counters, boarding times and procedures, seating, food and in-
flight service and entertainment.
Similarly, there are three different hypotheses on the
relationship between cost leadership and differentiation
strategies and a firm’s performance.
· Differentiation hypothesis: many scholars assert that firms
using differentiation strategy outperform those using a cost-
leadership strategy. Peters and Waterman (1982: 186) report
that high-performing firms tend to be focused more to customer
value than the cost “side of the profitability equation”. Thereby,
such companies “tend to be driven more by close-to-the-
customer attributes than by either technology or cost.”
· Equivalency hypothesis: Porter (1980: 35) asserts that cost
leadership and differentiation strategies offer an equally
successful and profitable path to strategic advantage. This may
be true in a highly cyclical economic environment. Cost leaders
tend to be better positioned to compete during economic

downturns, while differentiators often seek cost reduction to
avoid losses. For instance, during the economic downturn in the
late 2000s, Ohio-based Marco’s Pizza negotiated lower
transportation costs from the freight firms, and began
contracting with vendors situated near its distribution centers to
further reduce its logistics costs. It eliminated small pizza
boxes, and put small pizzas in Cheesy Bread boxes, to save
more than $150,000 across its 170 store chain. Similarly,
differentiators tend to be better positioned to compete during
economic upturns with customers having more discretionary
incomes. JetBlue Airways for example offers an economy class
service to fly between a few US cities, but has added features
such as new planes, on-board television, and leather seating to
achieve a high-load factor (i.e. average percentage of filled
seats) in economic upturns as well.
· Contingency hypothesis: firms from different nations may
have different capabilities for cost leadership vs. differentiation
advantage (Baack & Boggs, 2008). Firms operating in emerging
markets where the cost structures are lower, and a limited
percentage of customers have high purchasing power, cost
leadership strategy tends to be more profitable. In contrast,
firms operating from industrial markets where customers can
afford to be more discriminating, higher quality resources are
more accessible, and the differentiation strategy is more
profitable. For example, Baack & Boggs (2008) found that the
industrial market firms are less successful using cost leadership
strategy in China, which is an emerging market in world
economy.
Risks of Pure Business Strategies
Research shows a lack of support for the Protection view in
highly dynamic and turbulent markets. Firms that pursue only
cost leadership or differentiation, may not be as successful in
such markets because of the risks from the following three
factors:
a) Risks of diminishing returns: firms investing only in cost

reducing linkages eventually encounter the law of diminishing
returns, which states that, as one invests progressively in one
object alone (i.e. cost reduction), the cost reduction benefits
become regressive. In other words, the sum amount of cost
reduction generated will eventually become less than the
amount of investment made in building cost reducing process
capabilities.
b) Risks of diminishing demand: firms investing only in
differentiation enhancing linkages, eventually encounter the law
of diminishing demand, which states that as one invests
progressively in accruing a value premium (i.e. differentiation),
the willingness and the ability of the customers to accept that
value premium diminishes. In other words, the size of the
market interested in its products shrinks.
c) Risks of competitive interplay: firms investing in either one
of the factors, i.e. differentiation enhancing or cost reducing
linkages for their focus strategy, eventually encounter law of
competitive interplay as well, which states that as a firm gains
dramatic cost advantage over other firms, or commands
dramatic value premium over other firms, new set of firms are
inspired to challenge the firm’s rising monopoly. These new
firms in turn often ride on favorable macro market shifts, such
as technological breakthroughs or new customer segments. They
design, produce, deliver and/or service alternative products that
offer a different and better value to the customers, and render
the older firm’s cost or differentiation focus advantage
inconsequential. Or, they overcome isolating mechanisms, and
acquire relevant resources and capabilities through trade,
imitation, or substitution to offer similar products at a much
lower cost, with better differentiation, and/or with finer focus.
Exhibit 2.x illustrates how Lego – who has traditionally
invested only in differentiation – has suffered losses because of
the above risks.
Exhibit 2.x Lego’s Differentiation Faces a Challenge

The Lego offers construction blocks for children. Their blocks
are known for their bright colors, durability, good appearance,
uniformity, and highest quality parts. They have rights to
several exciting themes, including Star Wars, Harry Potter, and
Jurrasic Park, allowing them to offer several popular pieces and
sets. Its larger bricks aimed at younger children are compatible
with the smaller bricks targeted at the older children, allowing
its products to grow with children.
Several firms around the world have challenged Lego’s
monopolistic tendencies as a market leader, and its high product
prices. Lego has suffered both loss in market share as well as
losses, as the rivals have targeted customers whose priorities
include price factor as well. One of the most successful rivals is
Megabloks, a Canadian brand established in 1967. Its products
are of lower quality, are duller, but are offered at low costs –
some of them at one fourth the cost. It also has taken rights to
several popular themes. Its bricks work well on a small scale,
but are slightly misaligned on a large scale, creating structural
instability in large structures. Megabloks even has a line of
product whose pieces are compatible with the leading market
brand (i.e. Lego). Megabloks has enjoyed profitability and
growth, as the Courts have set aside Lego’s claim that
Megabloks has copied its studs and tubes interlocking brick
system because Lego’s patents on the design have long expired.
Source: Adapted from Thomas (2014).
Exhibit 2.x summarizes the pros and cons of the Protection
view.
Exhibit 2.x: Pros and Cons of the Protection View
Benefits of a Hybrid Business Strategy
Research shows that in highly dynamic markets, firms pursuing

a hybrid strategy, based on the integration of linkages for cost
leadership as well as differentiation, tend to outperform those
pursuing a pure strategy (Campbell-Hunt, 2000). This has been
found even for the small and medium enterprises, which tend to
use focus cost leadership or focus differentiation strategies
(Leitner & Guldenberg, 2010). Three factors may explain the
benefits of a hybrid business strategy in dynamic conditions:
a) Benefits of increasing demand: as firms invest in cost
reducing linkages, they gain an additional operating surplus. If
they invest this additional operating surplus in differentiation
linkages, then they gain the added capacity of offering
differentiation to this target group. This improves their
competitiveness relative to both cost leaders as well as
differentiators. Such a strategy may also help focus-in on non-
consumers, if they find value in the more differentiated, yet
cost-effective, product offerings.
b) Benefits of increasing returns: as firms invest in
differentiation enhancing linkages, they gain deeper insights
and knowledge about the latent and unmet needs of the market.
By investing in cost reducing linkages as well, firms gain an
additional capability to serve these needs cost-effectively. This
in turn allows them to generate increasing returns on their
differentiated knowledge about a large group of customers.
c) Benefits of competitive priorities: firms that invest in both
cost-reducing as well as differentiation enhancing linkages,
benefit from the law of competitive priorities, which states that
when firms must decide among competing priorities under
conditions of resource constraints, then their decisions tend to
be guided by a sense of what priorities their target market puts
on cost reduction vs. differentiation enhancement. Thereby,
these firms develop a more flexible agile capability to monitor
and adapt to shifts in market priorities of different groups of
customers. The shifts may be more or less constant, for
instance, when the per capita income in an emerging market is
rising, or when the market of interest is in a protected industrial

market that is now subject to cost competition from the
emerging market rivals. Or, the shifts may be periodic, for
instance, when markets tend to be become cost-sensitive during
recession or differentiation-seeking during economic upturn.
Exhibit 2.x illustrates how British Airways has shifted
successfully from a differentiation strategy to a hybrid strategy,
and tapped the above three benefits. Similarly, McDonald’s has
shifted successfully from a cost leadership strategy to a hybrid
strategy.
Exhibit 2.x: British Airways and McDonald’s – Different Paths
to Hybrid Strategy
After 9/11, sensing greater customer priorities for lower prices,
British Airways – traditionally known for its differentiation
strategy – began investing in cost reducing efforts. It cut the
total number of planes in its portfolio, and ordered replacement
planes without special custom features. It limited menu choices
for the customers, cut fees for the agents, and eliminated 13,000
jobs. It passed on some of the cost-savings to its customers in
the form of lower fares; and invested the rest into new sources
of differentiation while also being attentive to costs. In a
meeting organized in the emerging luxury capital Dubai, its
business and first-class customers told that they looked for ‘re-
energization’, ‘comfort’, and ‘well-being’. Most importantly, on
long-haul flights, they wanted to have a good night’s sleep.
British Airways set the design challenge of creating a more
comfortable seating arrangement – the flat beds, without any
loss of seating capacity so that it could maintain its fares. Its
R&D team developed a unique new armchair style seat, which
transforms into a 6-foot, fully flat bed, that transformed the face
of business travel. The innovation was soon copied by Virgin,
Singapore and many other carriers, but BA followed up with
other innovations such as sophisticated entertainment options,
personal lockers, 10-inch flat screens and personal privacy to

their customers, without any added costs. Thus, it was able to
increase both its demand as well as returns.
On the other hand, in the late 2000s, sensing greater customer
priorities for healthy and gourmet food, McDonald’s –
traditionally known for its cost leadership strategy – began
investing in differentiation efforts. In 2008, it installed McCafe
coffee bars featuring cappuccinos, lattes, and gourmet coffee,
offering a value similar to that of high-end Starbucks but
without the same cost. It also invested in new product lines,
such as fresh, premium salads, again offering the same at low
costs. The move proved very successful, allowing McDonald’s
to improve its demand as well as returns in the US, as well as
internationally.
Source: Synaticsworld (2010)
With globalization and growing use of information and
communication technologies and knowledge analytics, many
firms are successfully deploying ‘focused hybrid’ strategy
combining cost leadership and differentiation advantages for
specific needs of the target customer groups. In dynamic
markets, some specific needs, such as sustainability
consciousness, wellness, or smart design, have quite broad-
based appeal. In these conditions, focus hybrid strategy can be
a door to rapid growth. Next we look into this growth view of
value chain hypothesis.
The Growth View of Value Chain Hypothesis
In dynamic markets, benefits of investing in isolating
mechanisms diminish, while the costs of protection rise. Firms
face competitive pressures from a more diverse types of rivals,
using more diverse alternative sets of resources, capabilities,
and core competencies. Growth, more so than protection of cost
leadership or differentiation advantage, becomes a more
attractive business strategy. Growth, as a business strategy,
requires executives to clearly articulate how it will help create

value in terms of the organizational purpose and mission. In
static markets, growth is related with greater economies of
scale, and generates efficiencies that contribute to higher
profitability. It is also related with greater economies of scope,
generating more differentiated value, and thereby higher
profitability. In dynamic markets, however, growth by itself
may not generate efficiencies or differentiated value. On the
contrary, efficient differentiated strategy may be a precondition
for growth to take place in the first place.
Before learning about how to go about growth strategy, it is
useful to first ask should the firms care about growth strategy in
dynamic markets. In dynamic markets, pressures of survival
often lead firms to compromise on social inclusion and
environmental impacts, in their pursuit of growth without any
intentional strategy. Sustainable growth strategy is based on
three pillars – economic, environmental, and social
sustainability. With continued growth in world’s population,
especially in developing nations, growth strategy is becoming
even more important to ensure that children, especially girls,
and mothers receive the care, nutrition, schooling, and
employment opportunities they need. It is also becoming
imperative that this growth be green, so that the environment is
not degraded and resources are not depleted to jeopardize the
current and future pursuit of growth strategy by the vulnerable
children of this world.
The countries where firms have prioritized on growth strategy
have seen dramatic reductions in poverty levels, and
improvements in living standards, on indicators such as literacy,
education, life expectancy, malnutrition, and infant, child, and
maternal mortality. Firms often find it difficult to sustainably
pursue growth strategy, because of market failures and
unfavorable valuation of green and inclusive efforts. Non-
market strategies involving government actors are estimated to
give a support of about $1 trillion annually in energy, water,

materials and food subsidies that encourage firm behavior of
negative environmental impact. If the same amount were
invested in promoting green growth strategies, economic returns
are likely to be about $3.7 trillion annually (McKinsey &
Company, 2011). Reporting requirements on environmental
performance, for instance, have helped firms in China,
Indonesia, the Philippines and Vietnam discover opportunities
for growth-enabling investments that move them from being
noncompliant to becoming compliant, and to do so at low or
even negative costs (The World Bank, 2012).
Approaches to sustainable growth strategy
Sustainable growth strategy is based on three major approaches
(see, for instance, Liabotis, 2007):
a) Capability approach: stop protecting the less differentiated
parts of business – the parts that are not valued by the
ecosystem.
b) Value approach: increase the cost-effectiveness of the
differentiated parts of business – transforming them to meet the
different needs of diverse customer groups cost-effectively
using a common, a customized, or even a personalized platform.
c) Opportunity approach: invest in discovering of new
opportunities adjacent to the cost-effective parts of business –
particularly through new collaborative efforts that enhance the
firm’s capacity to innovate and incubate new prototypes.
Urbany and Davis (2012) offer a three-circle model of growth
strategy, where they refer capability approach as the company
circle, value approach as the customer circle, and opportunity
approach as the competitor circle.
Figure 2.x: The Three Circles Model of Growth Strategy
Source: Urbany and Davis (2012)
Finally, digging even deeper, the firm is able to identify the

‘white space’ – the non overlapping attributes in the customer
circle. It is the value desired by the customers that is not being
served (or not being served effectively) by either the firm or its
competitor. These needs may be currently known or unknown
(latent). Focusing on this white space opens up new uncontested
market opportunity for the firm.
Note that a firm may not have the resources, the capabilities, or
the core competencies inside its organization to cost-effectively
develop the attributes in the unmet needs white space.
Sustainable growth strategy, in this case, is based on developing
collaborative networks, going beyond the industry boundaries.
For instance, a theater firm may be a greater collaborator for
complementing a firm’s capability in circus shows, to fulfill the
possibly unmet customer needs of artistic performance in a
circus show. By doing so, a firm goes beyond its own value
chain, or even the industry’s value chain, and invests in
developing linkages with the value chains of firms that have
complementary sets of capabilities – the capabilities that could
be integrated or combined together with those of the firm into
innovations that elevate the customer experience.
What should a firm do if other firms are unwilling or unable to
collaborate, or if making such collaboration work requires
unusual investment of time and resources of the firm? In that
case, the firms may consider an option to strategically acquire
those firms, or if that is not feasible, seek to acquire the critical
resources that will enable offering the value desired by the
customers in the most cost-effective manner.
To summarize, firms have four major ways to pursue an organic,
sustainable growth strategy:
a) Improvement: to invest in improving the capabilities that
offer differentiated value to the customer groups
b) Scaling: to scale up the value that is cost-effective for
different target customer groups
c) Innovations: to collaborate with other firms to develop white

space opportunities that elevate the customer experience
d) Strategic acquisitions: to acquire other firms that have
complementary resources, in case the collaborative innovations
option risks diffusing your differentiated values.
Blue Ocean Strategy – Developing white space opportunities
In a global environment, where about 80% of the world’s
population is waiting to be connected fully with the global
markets, truly dramatic growth opportunity is not with the
existing customers of a firm, but with the non-customers – the
entirely new groups of customers not being served by it or its
industry competitors. Kim and Mauborgne (2005) refer to this
space as a blue ocean opportunity – where firms at least have
some water to themselves. This space is contrasted from the one
associated with current customers, which is referred to as ‘Red
oceans.’ In Red Oceans, firms compete vigorously with their
rivals, seeking to outsmart others and copy their moves.
Therefore, it becomes difficult for the firms to truly sustain
their growth, once they have done all reasonable efforts to meet
the unserved or under-served needs of their target customers.
From that point, the only sustainable growth option is to reach
out to unserved or under-served customer groups, who are not
currently being served by any firm in the industry. Doing so
allows a firm to enhance its differentiation, while also
improving its cost position.
In a study of profit and growth impacts of product launches of
108 companies (Kim and Mauborgne, 2005) have found 86% of
firms were aimed at competing in red oceans. As shown in
Exhibit 2.x, the other 14% were aimed at creating blue oceans,
and they accounted for 38% of total revenues and 61% of total
profits.
Kim and Mauborgne (2005) suggest using the Four Actions
framework (illustrated in Exhibit 2.x) to formulate the blue

ocean strategy; they are as follows:
1. Start with an offering experiencing a red-ocean scenario in
relation to a particular target group of customers, and particular
factors of value.
2. Find an alternative target group of customer, that may
currently be using less desired alternatives or be a non-
customer, who does not care about some of the current factors
of value, but cares of some other factors.
3. Design a new product that eliminates, or reduces well below
market standards, factors of value of less interest to new target
customers. This step unlocks and eliminates costs that are not of
much interest to these customers.
4. Increase the new product range by creating entirely new, or
raise well above market standards the existing one, enhancing
factors of value of more interest to new target customers.
Exhibit 2.x: Four Action Steps to Blue Ocean Strategy
Once value factors (attributes) have been identified for a new
group of customers, to implement steps 3 and 4, Kim, and
Mauborgne (2005) provide two additional tools. A 2x2
Eliminate-Reduce-Raise-Create Table for the value factors, and
a Strategy Canvas that maps the value factors. Each value factor
is assigned a performance rating from 0 to 10 (0-2 = very low;
3-4 = low; 5-6 = medium; 7-8 = high; 9-10 = very high), and
mapped as a curve on the Strategy Canvas. These performance
ratings can also be mapped against one or more baselines, such
as the original curve and/or the curves of the strongest
competitors.
Exhibit 2.x illustrates how Cirque de Soleil successfully
implemented a blue ocean strategy in the circus market. In
Exhibit 2.x, the strategy is portrayed on the Eliminate-Reduce-
Raise-Create Table, and Exhibit 2.x shows the Strategy Canvas
for the same.

Exhibit 2.x: Cirque de Soleil Leaps Forward into a Blue Ocean
In the 1980s, traditional circus market was experiencing a red-
ocean scenario, in relation to its children target market. Cirque
de Soleil decided to focus on an alternative target group, i.e.
adult audience that had abandoned traditional circus. This group
of non-customers was using alternative forms of entertainment,
such as sporting events and home entertainment systems, that
were relatively inexpensive and on the rise. This group did not
value two of the key factors of differentiation that were an
industry standard in the traditional circus market – animals and
star performers, but problematic for the participating firms. The
traditional circus industry was facing increasing pressures from
the animal rights groups for their treatment of animals, and
management of animals was becoming very costly. It also had to
fight to retain a diminishing number of individual star
performers, with fame for their thrilling and dangerous stunts.
The acts of jokers, with knack for fun and humor, were also
becoming banal.
Cirque du Soleil designed a new product – circus theatre, which
eliminated the animals and high-priced concessions, and
reduced the importance of individual stars – the three very high
cost elements. It augmented this new product by introducing an
entirely new form of entertainment based on the intellectual
sophistication of theatre shows that combined dance, music and
athletic skill – thus furthering its differentiation appeal for both
circus customers and non-customers. Each show, like a theater
production, had its own unique theme and storyline; allowing
customers to return to the show more frequently. Instead of
requiring multiple show venues to be near to the customers, it
was now possible to have limited number of unique show
venues where the customers were willing to come. This blue
ocean strategy using a hybrid focus approach helped Cirque du
Soleil gain a significant strategic advantage and grow very

rapidly by redefining circus.
Source: Adapted from Kim and Mauborgne (2005)
Exhibit 2.x: Eliminate-Reduce-Raise-Create Table of Value
Factors for Cirque du Soleil
Eliminate
Start Performers
Animal Shows
Aisle concession sales
Multiple show arenas
Raise
Unique venue
Reduce
Fun and humor
Thrill and danger
Create
Theme
Refined watching environment
Artistic music and dance
Exhibit 2.x: Mapping Value Factors for Cirque du Soleil as a
Curve on a Strategy Canvas
Assignment: Choose a real product that is already on the market
(such as tablet), brainstorm the value factors of the product and
develop the Strategy Canvas.
To summarize, the Growth view of Value Chain, as represented
by the three-circle model or the blue-ocean strategy, holds that
in dynamic environments, a strategy built on investments in cost
reduction or differentiation enhancement for existing, known
market spaces will only erode a firm’s strategic advantage. In
existing known market spaces, referred to as red oceans, firms
try to outperform their rivals to grab a greater share of market.

These red ocean market spaces are crowded, and prospects for
profits and growth are low. Conversely, an integrated approach
can allow the firm to create new demand, instead of fighting for
it. In this new yet unexplored space, referred to as blue oceans,
there is sufficient opportunity for growth that is both profitable
and rapid.
Concluding comments
Traditional value chain analysis, represented by the seminal
work of Porter (1985), was motivated by the strategic emphasis
on protection. The goal was to sustain a firm’ strategic
advantage by protecting its foundations; this in turn meant
creating a condition where the competitors aren’t able to attack
the firm, what it does, and how it does that. The fundamental
guiding principle in business strategy was to target as much of
the target market as possible, as that alone would enable a firm
to generate the deepest understanding of what the customers are
willing to pay a premium, allowing them to attain
differentiation advantage. Alternatively, to generate greatest
economies of scale for achieving least cost, or cost leadership
position in the market. Of course, not all firms could be the
largest, and attain either the least cost or meaningful
differentiation position for this large group.
The new growth-based view of the value chain hypothesis offers
firms an opportunity to strengthen their hybrid advantage based
on differentiation and cost-leadership through collaborative
partnerships. Starting point of the growth-based view is not the
firm capability that needs to be protected somehow, but the
market opportunity that has not yet been discovered or
exploited. Though the inside-firm value chain may not hold the
resources, capabilities or core competencies to pursue this
market opportunity, firm may still be successful if it is able to
find complementary linkages between its own value chain and
the value chains of other firms who do have the resources,
capabilities, or core competencies that would allow exploiting

the market opportunity.
Besides a firm’s capability and market opportunity, the growth-
based view also emphasizes on the stakeholder value. Existing
customers are an obvious stakeholder, but it is important for the
firms not to limit their opportunity based on the needs of
existing customers alone. Rather, they may create even greater
value for an entirely new set of customers, who are non-
customers for the industry currently. To identify appropriate set
of customers, it is important for the firms to also consider their
own constituent stakeholders – such as the values and the
aspirations of their current or potential new investors, leaders,
employees, vendors, and community members.
Once the firm identifies appropriate target customers to unlock
its growth potential, it is important to be conscious of the need
to be as cost-effective as possible, and to be as unique as
possible. If a firm is not concerned about cost-effectiveness,
then it would not accrue as much value for the target customers
or for itself to support further growth or other priorities. If a
firm is not concerned about being unique, then it would not be
as attractive to the target customers and will not be as
successful in realizing its strategic intent. Cost leadership and
differentiation, then, is more of an aspirational goal and guiding
principle for the firms pursuing the growth business strategy. It
is not the foundation for their business strategy, nor is the
foundation of the success or failure of their business strategy.
Thus, the Growth view represents an additional type of generic
source of strategic advantage for firms, which is different from
the other two types covered in the first part of this chapter –
value and cost.
References:
Campbell-Hunt, C.C. (2000), What have we learned about
generic competitive strategy? A metaanalysis, Strategic
Management Journal, 21, pp. 27–154

Daniel W. Baack, David J. Boggs, (2008) "The difficulties in
using a cost leadership strategy in emerging markets",
International Journal of Emerging Markets, Vol. 3 Iss: 2, pp.125
– 139.
Dickson, P. R., & Ginter, J. L. (1987). Market segmentation,
product differentiation, and marketing strategy. Journal of
Marketing, April, pp. 1-10.
Doherty, D. (February 16. 2012). “Nestlé's Bespoke Chocolate”
Accessed http://www.businessweek.com/articles/2012-02-
17/nestl-s-bespoke-chocolate
Einhort, B (September 10, 2013). Apple Really Needs That
Cheaper IPhone, Business Week, Accessed
http://www.bloomberg.com/news/articles/2013-09-10/apple-
really-needs-that-cheaper-iphone
Gilbert, X., & Strebel, P. (1987). Strategies to outpace the
competition. Journal of Business Strategy, 8 (1), 28-36.
Grobart, S. (September 20, 2013). Apple Chiefs Discuss
Strategy, Market Share—and the New iPhones, Business Week,
Accessed http://www.bloomberg.com/news/articles/2013-09-
19/cook-ive-and-federighi-on-the-new-iphone-and-apples-once-
and-future-strategy
Kaplinsky, R. and Morris, M. 2012. A handbook for value chain
research. Accessed: http://hdl.handle.net/10568/24923.
Kim, W. C., & Mauborgne, R. (2005). Blue ocean strategy: How
to create uncontested market space and make the competition
irrelevant. Boston, Mass: Harvard .Publishing.
Leitner, K.L. & Guldenberg ,S. (2010), Generic strategies and

firm performance in SMEs: a
longitudinal study of Austrian SMEs, Small Business
Economics, 35, pp. 169-89.
Liabotis, B. (2007). Three Strategies for Achieving and
Sustaining Growth, Ivey Business Journal, July/August 2007,
Accessed http://iveybusinessjournal.com/publication/three-
strategies-for-achieving-and-sustaining-growth/
Mantle, J. (1995). Car Wars: Fifty Years of Backstabbing,
Infighting, and Industrial Espionage in the Global Market. NY:
Arcade Publishing.
McKinsey and Company. 2011. “Resource Revolution: Meeting
the World’s Energy, Materials,
Food, and Water Needs.” McKinsey Global Institute.
Mintzberg, H. (1988). Generic strategies: Toward a
comprehensive framework. In R. Lamb, & P. Shrivastava (Eds.),
Advances in strategic management (Vol. 5). Greenwich, CT: JAI
Press.
Miskell, P. (January 17, 2005). How Crest Made Business
History, Harvard Business School Working Knowledge,
http://hbswk.hbs.edu/archive/4574.html
Nestle (2011). Buitoni targets foodies with new premium range,
Press Release,
http://www.nestle.com/media/newsandfeatures/buitoni-targets-
foodies-with-new-premium-range
Peppard, J & Rylander, A. (2006). From value chain to value
network: insights for mobile operators. European Journal of
Management, 24(2-3): 128-141.
Porter, M. E. (1980). Competitive strategy. New York: Free

Press.
Porter, M.E. (1983). Cases in competitive strategy. New York:
Free Press.
Porter, M.E. (1985). Competitive Advantage. NY: The Free
Press.
SynaticsWorld (2010). http://synecticsworld.com/british-
airways-traveling-in-comfort-and-style/#
The World Bank (2012). Inclusive Green Growth - The
Pathway to Sustainable Development, Washington DC: The
World Bank.
Thomas, M.A., (February 28, 2014). Mattel to buy Mega Brands
to build up against Lego. Accessed
http://www.reuters.com/article/us-megabrands-offer-mattel-
idUSBREA1R0QB20140228
Thompson, A. A., Jr., & Strickland, J. (2008). Crafting and
executing strategy: The quest for competitive advantage. New
York: McGraw-Hill Irwin.
Urbany, J, & Davis, J.H. (2012). Grow by Focusing on What
Matters: Competitive Strategy in 3-circles (Strategic
Management Collection). Business Expert Press.
Network equipment and spectrum
Infrastructure and operations
Billing

Retail distribution
Portals and resellers
Design
Production
Marketing
Support
Delivery
Inbound logistics
operations
Outbound logistics
marketing and sales
Service

PROS
* Knowledge (routines)
* Motivation (culture)
* Reputation (credibility)
CONS
* Diminishing returns
* DIminishing demand
* Competitive Interplay
Alternate target customers,
with alternate value factors
Reduce:
What factors should be reduced well below hte industry
standard?
Create:
What factors should be created that the industry has never
offered?
Raise:
What factors should be raised well above the industry standard?
Eliminate:
What factors should be eliminated from what hte industry has
taken for granted?

Cullinary Foods
Maggi
Le Creazioni di Casa Buitoni
Beverages
Nescafe
Nespresso
confectionary
Kitkat
Maisen Cailer
Milk products
Nutrition

Cerelac
Nestle Haagen Dazs
Babynes
Growth and Profit Impact of
Blue Ocean Strategy
Launches with Red Ocean Profit Impact Revenue Impact
Business Launch 31 62 86 Launches with Blue
Ocean Profit Impact Revenue Impact Business Launch
69 38 14 Cirque du Soleil Star peformers Animal
shows Aisle concessions Multiple show arenas Fun
and humor Thrills and danger Unique venue Theme
Refined watching environment Artistic music and dance
Price0 0 0 0 6 6 9 9 9 9 8
Smaller Regional circus Star peformers Animal shows
Aisle concessions Multiple show arenas Fun and
humor Thrills and danger Unique venue Theme Refined
watching environment Artistic music and dance Price6 8
8 6 7 7 2 0 0 0 3 Strongest
National Circus Star peformers Animal shows Aisle
concessions Multiple show arenas Fun and humor Thrills
and danger Unique venue Theme Refined watching
8 8 3 0 0 0 4
2
Theories of Business Strategy
A case study of GreenSky – the Master of FinTech Mediation

Remember PitchVantage
Professor Vipin Gupta
Learning Objectives
Understanding Greensky’s strategic programming process
Major steps in the strategic programming process
Cost-effective differentiation
Focused blue ocean
Descalable growth
Critical Reflection – What can we really learn from the case of
Greensky?
1. Understanding the Strategic Programming Process
Leverage cost-effective organization and differentiated
community to design technological value added
Focused blue ocean
Deliver a better solution and decide the focus for servicing
Descalable growth
Discover growth pathways and descale entropy pathways
2. Alternative Strategic Programming Process in a Global
Context
VUCA makes strategic planning challenging
Instead of starting with an intent, the firms may seek to start
with a programmed technological solution

Thus, the steps for strategic programming may be adjusted as
follows
3. Major Steps in the Strategic Programming Process
Discover organizational stakeholders for whom our
technological solution can become a cost-effective
differentiator
Focused blue ocean
Deliver the technological solution by targeting groups who
allow us to be a cost-effective differentiator
Descalable growth
Develop additional growth poles, while descaling poles that
make us less of a cost-effective differentiator for additional
growth
4. Case Study: Greensky – The Master of FinTech Mediation
a. Cost-effective differentiation
Customers who gain Differentiation + Cost Leadership -
Contractors
Differentiation
Offer a range of promotional zero interest and low interest
financing, replacing credit card or second mortgage financing
typical in the traditional home improvement projects

Especially attractive to creditworthy consumers
Sell projects now and with added options - 40% vs. 30% deal
closing; 20% higher deal value; 60% higher revenues
Disproportionate value accrual; alleviates purchasing power
concerns
Cost Leadership
Consumers offered most cost-effective financing for their credit
rating and payment preference, with competitive offerings from
a group of 14 lenders
Instant loan approval (95%) and funding (by next business day)
b. Focused Blue Ocean – Becoming cost-effective differentiator
Four Actions Framework for Blue Ocean
Reduce costs of servicing customers
Use merchants (incl. Home Depot) as motivated salesforce, who
give 6% fee for each sales, instead of receiving commission
Eliminate cost-escalating customers
Eliminate merchants with deceptive practices, using end-
consumer rating
Create new value-adding customers
Offer credit collection service to the lenders, generating 1% fee
on annual balance
Elevate value added by value-adding customers
Invite a major lender (Fifththird Bank) to become an investor
and market the Greensky platform to its network of merchants
c. Deciding Focus vs. Growth Poles
Home improvement vs. Additional Poles – Healthcare and
specialty retail
Customers targeting creditworthy consumers vs. subprime
consumers

Market the platform to additional lenders, within or outside
Greensky network
Develop the Greensky technology to include hybrid financing –
convertible into mortgage financing
Descaling Poles that are cost-escalating and differentiation
eroding
Third party for vetting merchants a priori, besides consumer
ratings
Third party for vetting informed consent at POS, besides
consumer signatures
Summary – perpetually dynamic strategy
strategy
advantage
Strategic profiting: netw
strategy
functional value addition

Critical Reflection
Business Ecosystem Value (Strategy) Assessment
What can we really learn from the case of Greensky?
Can you help understand the issue?
It is the same manpower, material power, and marketing power
Subcontractors profit by not only providing quality service as
SHEENY manpower, but also enhancing customer material
purchasing power by marketing competitive loan products.
Lenders profit by working with subcontractors as their GUIDER
manpower, and helping enhance subcontractor marketing power.
Lenders also had the capability to invest in a technological
(machine) platform individually or collectively
Subcontractors (as well as lenders) lose business if they are not
able to provide timely competitive financing for credit worthy
customers
Lenders have to set aside provisions for bad debts, in case the
subcontractors do false marketing or customers do not pay.
Yet only Green Sky saw the opportunity for an innovative
method power
Lenders profit only from lending when dealing directly with
subcontractors, but Green Sky profits also from helping
subcontractor differentiation advantage as well.
Yet, lenders do not try to be cost leaders, by investing into a
system for timely processing of credit worthy customers found
by the subcontractors, and for the voluntary customer feedback
on subcontractors.

Can you help understand the issue?
Greensky’s approach to strategic programming of business
ecosystem value differs from the lender’s approach.
Lenders are ignoring opportunities for differentiating by helping
their customers differentiate
Lenders are ignoring opportunities for cost leadership by
helping their customers’ customers evaluate the cost-
effectiveness of their customers
This is a blue ocean opportunity for any firm! Profit from the
differentiation advantage being created for the customers, and
eliminate customers who escalate your cost.
Greensky’s approach to its business strategy adds more value as
compared to even Chobani!
Chobani’s business strategy is about value creation through
SHEENY and GUIDER values, without creating SHEENY or
GUIDER costs
Greensky’s business strategy is about value innovation through
reduction of pre existing SHEENY and GUIDER costs
Its focus is on reducing the costs of networking, exchange, and
workforce
It accrues a share of the differentiation advantage by visioning
subcontractors as its workforce, and a share of the cost
leadership advantage through its mission to network financial
institutions with surplus funds. It creates a blue ocean
advantage by exchanging both cost leadership and
differentiation value with the customers.
What is Chobani’s approach to strategically program its
business ecosystem value?
Supplementary values model
Program business strategy as a sequence of differentiated values

Understand the social benefits of ascending human, ecological,
economic, national and psychological benefits.
Understand the global worker and social benefits of ascending
uniqueness, inclusion, diversity, engagement and responsibility
benefits
Ascend cost leadership of business ecosystem value by
capturing SHEENY benefits and creating GUIDER benefits
Why is Greensky’s approach for strategic programming business
ecosystem value? (does it have one?)
Complementary values model
Program business strategy as a sequence of blue ocean
opportunities
Understand the social benefits of descending human, ecological,
economic, national and psychological costs
Understand the global worker and social benefits of descending
uniqueness, inclusion, diversity, engagement and responsibility
costs
Grow business ecosystem value by reducing the costs of
GUIDER organizing and SHEENY managing, even without
strategic programming
e.g. unfilled human aspiration – solar panel
Ecological cost – more fossil electricity
Economic cost – more electric bill
National cost – more inflation
Psychological cost – more unfilled aspirations
e.g. unique aspirations – high returns
Inclusion cost – more customers excluded as not credit worthy
Diversity costs – more risky customers added
Engagement costs – more credit collection costs
Responsibility costs – higher risk adjusted returns expected
18

A white ocean approach to strategic programming
White-ocean approach comprises of two values
Add blue ocean benefits using alternative SHEENY values for
differentiation
Reduce red ocean costs using alternative GUIDER values for
cost leadership
Allocate this white ocean value for innovative programming of
additional GUIDER and SHEENY approaches
What questions Greensky founders had while trading-off direct
servicing of low influence stakeholders (i.e. subcontractors)?
Can low influence stakeholders make it useful?
Can low influence stakeholders make it a better solution?
Who has the capability to be that valuable low influence
stakeholder? (what can we do to empower them to add all three
strategic values to our value chain – differentiation, cost
leadership, and focus on desired target market, and thereby
create a blue ocean for themselves and a white ocean for us)
��
��
��
��
��
�� ! ��"��#��$� ��
��%�$��
�&&��'(��)��' ��&��*��
��+��+�� ,)��
��,

��
,-��,��,�� &,�� .�)
/�01�/
� ��
2 � 34567894:�
;<==>?94:[email protected]=6CDE�FG�HIJK�L�IMNOP�CQ
� HIGRPF�S�T T
UVWXYZ[�]Ŵ_àbc4defc4g7�b6=h6ij�bAk�li664mneg7�oc
59dpc=9n�mn9hh6d�b9:?�mq?AA=�r4�b97�sce�>At6qAf9
4:�<�t9==9A4c9i6
uvwxyz�Eyz{|yx�}�~��~~��
��Duu��WY��
�¡¢¢£¡��¤��£�¥£¢�£¦§£��̈©�ª«¬��®£��̄�°
��§£�±�¥®§�²��§£³A4894́6d�µiAf�hc:6�¶@A78�Aµ�?9
7�·̧
�̧6fh=Ae667�kAin�94�?97�sA4nc59==6�c4d�c8�c4�Á8h
A78�94�¹648́qneº64:c:94:�94�A=d»7q?AA=�78́µµ�=9n6�=
Ac4�76i59q94:�c4d�qA48icq8Ai�i6qí9894:¼�mAf6µ9486q?
�=64d6i7�́76�8?Á7c4d7�Aµ�dc8c�hA9487º�µiAf�i689i6f
648�7c594:7�c4d�́4956i798ed6:i667�8A�7Aq9c=�f6d9c�94
86icq89A47º�8A�½́d:6�8?6�i97n94677�Aµ�kÁ=d»B6�BAi
iAk6i7¾766�BA¿º�B6=AkÀ¼�li664mneg7�́4d6iki9894:�97
�Bc76d�A4�8?6�7cf6�94qAf6º�Á3³r�7qAi67c4d�qi6d98�
B́ i6ć�i6hAi87�8?c8�Bc4n7�?c56�́76d�µAi�d6qcd67¼�Âs6
gi6�56ie�A=d»µc7?9A46d¼�>?6i6g7�4A8?94:�6¿A89qºÂ�
pc=9n�7ce7¼�Â38�?c7�8A�B6�7cµ6�c4d�hi6d9q8cB=6�
µAi
ÃÄÅÆÇÆ�ÈÉÊËÌÇÍ�ÎÏÐÊÑ��ÆÒÒÌÓ�ÔÆÉ�~ÆÉÕÊÖ×
��
��
��

��
��
�� ! ��"��#��$� ��
��%�$��
�&&��'(��)��' ��&��*��
��+��+�� ,)��
��,
��
,-��,��,�� &,�� .�)
/�01�/
� ��
234�5678�964:7;4<=>�[email protected]�B9;7C;D�:E;�[em
ail protected];F�<:46:;GH�[email protected];4�6:�[email prot
ected]:E�[email protected]�C27C34<K>L;�<6M�;H;�:2�;H;
�[email protected]:E�N4;;7B8H�6<�@:�4;O6:;J�:2�:E;�C
E646C:;4�2F�:E;�52442M;4=>P72:E;4�9;48K�N4;;7B8H�2
FF;4<�:E;�5678�7;M�4;O6:@27<[email protected]<�[email
protected]:E�J;<@465O;�C27<3A;4<:2�ME2A�@:�C67�[e
mail protected]:CE�2:E;4�942J3C:<=QF�:E;�[email protecte
d]:;[email protected]�64;�<@A9O;D�:E;�;R;C3:@27�[email
protected]:�5;�A24;�<2=�N4;;7B8HS<�@772T6:@T;A2J;O
�4;[email protected];<�27�<6O;<9;29O;�27�:E;�G4237J�M
E2�<924:�:22O�5;O:<�67J�[email protected];4O67J<D�72:
U=V=P=<=�?E3<D�[email protected]<�[email protected];�67
J�X2HD�:E;�N4;;7B8H�[email protected];�699D�;A9O2H<
�ME6:�:E;F237J;4�C6OO<�:E;�>F6:�:E3A5�43O;>YY;T;4
H�F37C:@27�C67�5;�J27;�27�6�<A64:9E27;�24:65O;:�3
<@7G�27;�O64G;�[email protected]@:=P�C27:46C:24�24�
[email protected]<�<6O;<A67�[email protected]:�5;�<@::@7
G�6:�6�92:;7:@6O�C3<:2A;4S<�[email protected]@7G�:65
O;[email protected]<C3<<@7G�7;M�[email protected]<�24�
6�<[email protected]@7G�922O=�?2�<;6O�:E;�J;6OYY24
�9;4<36J;�6�[email protected];7:E;�C67�6FF24J�<2A;�;R:
46<YYE;�2FF;4<�[email protected]@7G=�Z;�<C67<�:E;�[

email protected];7:S<�[email protected];4S<�[email protected]
;7<;@7:2�:E;�699D�:E;7�E67J<�2T;4�[email protected]<�
J;[email protected];�67J�6<8<�[email protected]�24�E;4�:2
�;7:;4�X3<:�:E4;;@:;A<K�@7C2A;D�[email protected]�B;[
email protected]:H�73A5;4�67J�9E27;�73A5;4=�B2A;�[]�
2F�92:;7:@6O52442M;4<�G;:�6�J;[email protected]<@27�2
7�:E;�<92:=�P9942T;J�O267<�G2�39�:2�̂_D̀ `̀D�[email p
rotected]:E�:E;;R6C:�:;4A<�J;:;[email protected];J�5H�:E;�
52442M;4S<�C4;[email protected]:D�:E;�29:@27<�:E;�C27
:46C:24�;O;C:<�:22FF;4�67J�<35<@[email protected];D�67
J�:E;�29:@27<�:E;�C27<3A;4�[email protected]<=
��
��
��
��
��
�� ! ��"��#��$� ��
��%�$��
�&&��'(��)��' ��&��*��
��+��+�� ,)��
��,
��
,-��,��,�� &,�� .�)
/�01�/
� 0��
234�56789:5869�;<�:=<6�;7�53:9>4�6?�@69A;7>�6B8�:
�C:DE478�<534FB=4�@;83�5=;478<G�234H9447IAD�=6:
7�E674D�;<�F4=;J494F�86�834�56789:5869�=;A4�:�769
E:=�594F;8�5:9FC:DE478K�J;:�L:<849M:9F�9:;=<K�:7F�
834�56789:5869�5:7�8:C�834�?B7F<[email protected];83�[
email protected]<�567<478NN?69�:�F4C6<;8K�?69�<BCC=

D�CB953:<4<�69�@347�J:9;6B<�56EC=48;678:9>48<�:94
�E48G�QI44�O6RK�CG�SSGT234�O;>>4<8�=B94�?69�
567<BE49<U�V496N;78494<8�?;7:75;7>�?69�:�C96E68;67
:=�C49;6F�6?�S86�WX�E6783<G�234�J:<8�E:Y69;8D�6
?�H9447IADP<�[email protected]<�F67P8�C:D�:�F;E4�;7;
78494<8�O45:B<4�834D�C:D�6??�834�O:=:754�FB9;7>�
83:8�<C:7G�ZB8�;?�834D�F67P8K�834DP9467�834�366
A�?69�834�F4?4994F�;78494<8K�:8�9:84<�9:7>;7>�?96
E�[]�86�Ŵ][email protected]<�@36�@699D�834D�5:7P8
�C:D�6??�834�=6:7�;7�834�C96E68;67:=�C49;6F�5:76C
8�;7<84:F�?69�:�[email protected]�?;R4F�9:84NN8DC;5:=
=D�̀]�86�]G�[email protected]<�:=<6�B<B:==D�C:D�:âb
�<48BC�?44K�@3;53�>64<�86�834�O:7A<Gc:=;AP<�56
789:5869�E6F4=�:[email protected]<�H9447IAD�86�:J6;F�
E:7D�6?�834�E:9A48;7>�56<8<�83:8OB9F47�68349�67=;
74�=47F49<K�<B53�:<�F;9458�E:;=G�d7F�;8<�O:7A�?
B7F;7>�3:<�:[email protected]�;886�:J6;F�:7D�?:==6B8�?
96E�e47F;7>�M=BOP<�:FE;<<;67�=:<8�D4:9�83:8�;8�<6
=F�=6:7<�86�:7;7J4<869�83:8�F;F7P8�E:853�834�OBD4
9P<�59;849;:GZB8�H9447IAD�<8;==�?:54<�834�A;7F�6?
�=4>:=�34:F:534<�83:8�:94�;74J;8:O=4�@347�834C49<6
7�@36�C;8534<�834�=6:7�:=<6�9454;J4<�834�C96544F
<G�f69�4R:EC=4K�@347�26FF:7F�ID=J;:�d=?698;<3�:>9
44F�86�CB8�<6=:9�C:74=<�67�834�966?�6?�834;9�e6
B;<;:7:�36E4�;7Wg[̀K�834D�<:D�834D�@494�86=F�;8�
@6B=F�[email protected]�834;9�E6783=D�B8;=;8D�O;==<
�:7F�[email protected]=F�O4�76�;78494<8�67�834;9�a[g
Kggg�=6:7�?69�834�?;9<8�[h�E6783<G�ZB8�834D�:==
4>4�;7:�?4F49:=�=:@<B;8�83:8�834D�@494�<B9C9;<4F
�86�=4:97NN:?849�834�56789:5869�3:F�:=94:FD8:CC4F�
834�?B7F<NN83:8�;?�834D�F;F7P8�C:D�6??�834�=6:7�
@;83;7�836<4�[h�E6783<K�[email protected]=F�[email pro
tected]�O:5A�;78494<8�?96E�F:D�674G�Q234�YBF>4�>
9:784F�H9447IADP<�94iB4<8�86A;5A�834�5:<4�86�:9O;
89:8;67K�:<�;8<�=6:7�:>944E478<�94iB;94G�H9447IADK
�@3;=4F45=;7;7>�86�56EE478�67�;7F;J;FB:=�5:<4<K�<:

D<�:==�5B<86E49<�j9454;J4�834;9�=6:7F65BE478<�;7�
834�kGIG�E:;=�:7F�5:7�:=<6�9454;J4�834E�67=;74GjTl
8349�B73:CCD�[email protected]<�<:D�834�56789:5869<�
4;8349�866A�:FJ:78:>4�6?�834E�6994iB4<84F�69�8:CC4
F�?B7F<�@;836B8�:B8369;V:8;67G�l74�56BC=4�94OB;=
F;7>�:�9478:=36E4�67�834�m49<4D�I3694�:?849�_B99;
5:74�I:7FD�:==4>4<�:�56789:5869�;7594:<4F�834:E6B78
�6?�834;9�=6:7�:7F�8347�9:7�6??�O4?694�56EC=48;7>
�834�@69AG�H9447IADF45=;74F�86�94?B7F�834�F;<C
B84F�:E6B78�O45:B<4�834�56789:5869�3:F7P8�C96E;<4
F�:94?B7F�;7�@9;8;7>K�:5569F;7>�86�56994<C67F4754
�@;83�H9447IAD�;75=BF4F�;7�834;9�<B;8GQH9447IAD
�<894<<4<�;8�34=C<�567<BE49<�CB9<B4�94?B7F<�;?
�834D�:947P8�<:8;<?;4FGTH9447IAD�;<�768�6O=;J;6B<
�86�834�F:7>49<�6?�jO:F�:CC=4j�56789:5869<G�n8<�J
488;7>C9654<<K�@3;53�;75=BF4<�:�94J;[email protected]
�6?�:�56789:5869P<�594F;8�:7F�3;<869D�6?�56EC=:;78
<:7F�=;8;>:8;67K�3:<�O456E4�E694�<89;7>478�6J49�83
4�D4:9<G�234<4�F:D<�67=D�Sg]�6?
��
��
��
��
��
�� ! ��"��#��$� ��
��%�$��
�&&��'(��)��' ��&��*��
��+��+�� ,)��
��,
��
,-��,��,�� &,�� .�)
/�01�/

� 2��
34567836479�:8;<�6=<�3>6?�@=49<�6=86�A4�:>96�34:
BC<6<�:85A8647D�678E5E5F?�G9H4CC4IJ>BK�L7<<5M;
D�98D9K�E6�38CC9�6=<�HE796�6=7<<�N4774I<79�<O
<7D�5<I�3456783647I47;9�IE6=�64�:8;<�9>7<�<O<7D6=
E5F�E9�4;8D�85A�9<O<79�6E<9�IE6=�34567836479�I=
4�87<>5344B<786EO<�E5�7<94COE5F�AE9B>6<9�47�=8
O<�P8�=EF=�34:BC8E56�786<P�47�P=EF=�9<O<7E6D34
:BC8E569?P�Q6�=89�<O<5�964BB<A�A4E5F�N>9E5<99
�IE6=�<56E7<�9<F:<569K�9>3=�89I86<7J67<86:<56�345
67836479K�I=<7<�E6�=89�9<<5�644�:85D�B74NC<:9?�
PR<�=8O<�858BB74B7E86<CD�B87854EA�3>C6>7<KP�S
8CE;�98D9?T<9K�N>6�8C94�45<�N>EC6�64�C>7<�345
67836479?�L7<<5M;DU9�678E5E5F�:86<7E8C9�A<937EN
<=4I�6=<D�385�PV6W>75�85�XYKZZZ�[4N�64�8�XZ
KZZZ�A7<8:�B74[<36P�ND�4HH<7E5FB74:46E458C�HE5
853E5F�64�3>964:<79�6=86�8CC4I9�6=<:�64�E537<89<
�6=<�P934B<P�4H�6=<B74[<36?�Q5�8�389<�96>AD�L
7<<5M;D�B74OEA<9�64�34567836479K�]ECC�L4AA87A
K�=<8A�4H98C<9�86�̂86E4�_53C49>7<9�5<87�̀C<O<C8
5AK�7<B4769�47A<79�87<�ab�C87F<7�45�8O<78F<54I
�6=86�E6�4HH<79�HE5853E5F?�P̂ <4BC<�C4O<�6=<�E
A<8�4H�>9E5F�4>7�:45<D�64�37<86<�6=<E7A7<8:�=4:
<�85A�;<<BE5F�6=<E7�389=�64�8AA�<c6789�47�:<<6
�46=<7�5<<A9KUU�=<�98D9?L7<<5M;D�8C94�<534>78
F<9�34567836479�64�9<8C�6=<�A<8C�PND�H43>9E5F
�45�C4I�:456=CDB8D:<569P�786=<7�6=85�6=<�6468C�
9Ed<�4H�6=<�C485K�I=E3=�:EF=6�B>6�4HH�N4774I<7
9K�<O<5I=EC<�E6�A<CEO<79�B74HE69�64�L7<<5M;D?
ef�ghi�fjk�figf�lk�egmekgen�S8CE;�9<66C<9�E564�8�
96>HH<A�7<A�87:3=8E7�86]45<9K�8�96<8;�=4>9<K�85
A�47A<79�8�AE76D�:876E5E�IE6=�85�<c678�4CEO<?
�o<:N<79�4H�=E998C<9�6<8:�67E3;C<�E5?�@=<D�=8
O<�N<<5�9EF5E5F�>B�YZZ�5<I�34567836479�8�:456=
K�85AS8CE;�E9�67<86E5F�6=<:�64�8�3<C<N78647D�A

E55<7?�P̂ 74:E9<�:<�I=<5�I<�F<6�64�XZNECCE45�VE
5�C4859WK�I<U7<�F4E5F�64�6=74I�8�B876DKP�S8CE
;�98D9�64�@E:�p8CEN85KL7<<5M;DU9�B7<9EA<56�85
A�3=E<H�7E9;�4HHE3<7?�PQ�I856�64�=E7<�8�:87E83
=E�N85A?Pq<85E5F�H47I87A�E5�=E9�3=8E7K�S8CE;�
N<FE59�64�68C;�8�NEF�F8:<?�rE796�4H�8CCK�=<�6
=E5;9L7<<5M;D�E9�[>96�937863=E5F�6=<�9>7H83<�E5
�=4:<JE:B74O<:<56�HE5853E5F?�Q6�E9�8C94BC466E5F
�8�:8[47�:4O<�E564�<J34::<73<?�S8CE;�<5OE9E459�E5
6<F786E5F�HE5853E5F�4HH<79IE6=�9<873=?�r47�<c8:B
C<K�EH�D4>�9<873=�45CE5<�H47�8�I89=E5F�:83=E5
<K�D4>UA�N<B7<9<56<A�IE6=�8�PN>D�54IP�N>6645
�IE6=�6=<�7<9>C69?�@=86�34>CA�N<�85�>B=ECC�N
866C<K9E53<�E6�IECC�H473<�L7<<5M;D�64�F4�=<8A
J64J=<8A�IE6=�BC8D<79�CE;<�̂8D
̂ 8C�̀7<AE6KGHHE7:�
85A�pC8758�E5�6=<�N866C<�64�HE5853<�NEF�45CE5
<�B>73=89<9?�G�L7<<5M;D�NEA�64HE5853<�45CE5<�
85A�E5J9647<�H>75E6>7<�B>73=89<9�=895U6�68;<5�4
HH?G�O<56>7<�E564�A436479U�85A�A<56E969U�4HH
E3<9�64�HE5853<�<C<36EO<�B743<A>7<9�CE;<qGMQp
�85A�6<<6=�9678EF=6<5E5F�C44;9�:47<�B74:E9E5FK�
8C6=4>F=�6=<7<U9�34:B<6E6E45=<7<K�644s�̀87<̀7<AE6
K�R<CC9�r87F4�85A�46=<79�=8O<�C45F�4HH<7<A�3
7<AE6�387A9�E5:<AE38C�85A�A<568C�4HHE3<9?�PG�
C46�4H�3459>:<79�A45U6�I856�8546=<7�37<AE6�387A
JJ6=<D[>96�I856�6=<�8NECE6D�64�B8D�H47�6=E9�<
BE94A<�4H�387<KP�98D9�t<55E9�p<CCDK�B7<9EA<56
�4HL7<<5M;D�̂86E<56�M4C>6E459?�u<c6�D<87K�=E9�
AEOE9E45�E9�:4OE5F�E564�O<6<7E587E859U4HHE3<9�
64�HE5853<�6=<�NEF�NECC9�6=86�385�=E6�B<6�4I5
<79?
��
��

Session 2 Business Strategies based on Value ChainAg.docx

Session 2 Business Strategies based on Value ChainAg.docx

Recommended

Recommended

More Related Content

Similar to Session 2 Business Strategies based on Value ChainAg.docx

Similar to Session 2 Business Strategies based on Value ChainAg.docx (20)

More from klinda1

More from klinda1 (20)

Recently uploaded

Recently uploaded (20)

Session 2 Business Strategies based on Value ChainAg.docx