BUSINESS LEVEL STRATEGY

PREPARED BY:

CHANAKYA GROUP

Business-Level Strategy
Business-level strategy: an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets

The Central Role of Customers

In selecting a businesslevel strategy, the firm determines 1. who it will serve 2. what needs those target customers have that it will satisfy 3. how those needs will be satisfied 4. Example:

Managing Relationships With Customers

Customer relationships are strengthened by offering them superior value help customers to develop a new competitive advantage enhance the value of existing competitive advantages Example:

Five Generic Strategies

Competitive Advantage
Cost Uniqueness Differentiation Cost Leadership

Competitive Scope

Broad target

Integrated Cost Leadership/ Differentiation Narrow target

Focused Cost Leadership

Focused Differentiation

Cost Leadership Strategy

An integrated set of actions designed to produce or deliver goods or services at the lowest cost, relative to competitors with features that are acceptable to customers relatively standardized products features acceptable to many customers lowest competitive price Example:

Cost Leadership Strategy

Cost saving actions required by this strategy: building efficient scale facilities tightly controlling production costs and overhead minimizing costs of sales, R&D and service building efficient manufacturing facilities monitoring costs of activities provided by outsiders simplifying production processes

Cost leadership with respect to five force model

Example: Nano There is threat of new entrant to Nano in the long run. There is threat of rivalry for Nano car. There is a high threat of substitutes for Nano as electric cars trying to keep prices lower, less cost of running as a product differentiation. Currently no substitute , less bargaining power of buyers. Suppliers are supporting large in numbers , less bargaining power.

Differentiation Strategy
An integrated set of actions designed by a firm to produce or deliver goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them price for product can exceed what the firms target customers are willing to pay Non standeredlised products customers value differentiated features more than they value low cost

Differentiation Strategy

Value provided by unique features and value characteristics Command premium price High customer service Superior quality Prestige or exclusivity Rapid innovation Example:

Differentiation Strategy
Differentiation actions required by this strategy: developing new systems and processes shaping perceptions through advertising quality focus capability in R&D maximize human resource contributions through low turnover and high motivation

Differentiation Strategy of Apple

Rivalry is there , but apple is still on the top. Apple have joined hands with several suppliers (movies: Disney & fox, music: BMG & Warner.) Faster product refresh cycle. There are many substitutes but the differentiation is so unique that cant be copy easily. (brand name)

Focus cost leadership strategy:

Cost leadership in focused (niche) market. It is quite similar to cost leadership strategy. Example: IKEA, A global furniture retailer. Young buyers want stylish and cheaper furniture. IKEA target this segment.

Focused Differentiation Strategy

Here, the firm focuses on particular group of customers with differentiated products. Generally, it may not happen that firm uses both focus strategies. Example: Archie's.

Integrated Strategy
A firm that successfully uses an integrated cost leadership/differentiation strategy should be in a better position to: adapt quickly to environmental changes learn new skills and technologies more quickly effectively leverage its core competencies while competing against its rivals Example: Zara

Benefits of Integrated Strategy

Successful firms using this strategy have above-average returns Firm offers two types of values to customers some differentiated features (but less than a true differentiated firm) relatively low cost (but not as low as the cost leaders price)

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