business strg

8/8/2019 Business Strg

1/15

1

Business-Level StrategyBusiness-LevelStrategy


2/15

2

Business LevelBusiness Level

StrategyStrategy

SustainableSustainable

CompetitiveCompetitive

AdvantageAdvantage

External EnvironmentExternal Environment

Internal EnvironmentInternal Environment


3/15

3

CoreCore

CompetencCompetenc

yy

CoreCore

CompetencCompetencyy

TheThe resourcesresources andand

capabilitiescapabilities that have beenthat have been

determined to be a source ofdetermined to be a source ofcompetitive advantage for acompetitive advantage for a

firm over its rivals.firm over its rivals.

TheThe resourcesresources andand

capabilitiescapabilities that have beenthat have been

determined to be a source ofdetermined to be a source ofcompetitive advantage for acompetitive advantage for a

firm over its rivals.firm over its rivals.


4/15

4

StrategStrateg

yy

StrategStrateg

yy

An integrated and coordinatedAn integrated and coordinatedset of actions taken to exploitset of actions taken to exploit

core competencies and gain acore competencies and gain a

competitive advantage.competitive advantage.

An integrated and coordinatedAn integrated and coordinatedset of actions taken to exploitset of actions taken to exploit

core competencies and gain acore competencies and gain a

competitive advantage.competitive advantage.

Core

Competency

The resources and capabilities that have been

determined to be a source of competitive

advantage for a firm over its rivals.


5/15

5

Strategy

An integrated and coordinated set of

actions taken to exploit core competencies

and gain a competitive advantage.

BusinessBusinessLevelLevel

StrategyStrategy

BusinessBusinessLevelLevel

StrategyStrategy

Actions taken to provide value toActions taken to provide value to

customers and gain a competitivecustomers and gain a competitive

advantage by exploiting coreadvantage by exploiting core

competencies in specific,competencies in specific,

individual product markets.individual product markets.

Actions taken to provide value toActions taken to provide value to

customers and gain a competitivecustomers and gain a competitive

advantage by exploiting coreadvantage by exploiting core

competencies in specific,competencies in specific,

individual product markets.individual product markets.

Core

Competency

The resources and capabilities that have been

determined to be a source of competitive

advantage for a firm over its rivals.


6/15

6

Generic Business Level StrategiesGeneric Business Level Strategies

CostCost UniquenessUniqueness

Source of Competitive AdvantageSource of Competitive Advantage

Breadth ofBreadth of

CompetitiveCompetitive

ScopeScope

BroadBroad

TargetTarget

MarketMarket

NarrowNarrow

TargetTarget

MarketMarket

Focused

Differen-

tiation

Focused

Differen-

tiation

CostLeadership

CostLeadership

Differen-tiation

Differen-tiation

Focused

Low Cost

Focused

Low Cost

CostCostLeadershipLeadership


7/15

7

Key Criteria:Key Criteria:

Cost LeadershipLeadership Business Level StrategyCost LeadershipLeadership Business Level Strategy

Relatively standardized productsRelatively standardized products

Features acceptable to many customersFeatures acceptable to many customers

Lowest competitive priceLowest competitive price


8/15

8

Requirements:Requirements:Constant effort to reduce costs through:Constant effort to reduce costs through:

Building efficient scale facilitiesBuilding efficient scale facilities

State of the art manufacturing facilitiesState of the art manufacturing facilities

Simplification of processesSimplification of processes

Minimizing costs of sales, R&D and serviceMinimizing costs of sales, R&D and service

Monitoring costs of activities provided by outsidersMonitoring costs of activities provided by outsiders

Tight control of production costs and overheadTight control of production costs and overhead

Cost Leadership Business Level StrategyCost Leadership Business Level Strategy


9/15

9

Primary Activities

Support

Activities

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

Inbou n

d

Logistics

Oper

ations

Outbou

nd

Logis ti

cs

Mark

eting

&Sales

Servi c

e

MAR

GIN

MARG

IN

Value Creating ActivitiesValue Creating Activities Common to aCommon to a

Cost LeadershipCost Leadership Business Level StrategyBusiness Level Strategy


Cost LeadershipCost Leadership Business Level StrategyBusiness Level Strategy


10/15

10

Primary Activities

Support

Activities

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

Inbou n

d

Logistics

Oper

ations

Outbou

nd

Logis ti

cs

Mark

eting

&Sales

Servi c

e

MAR

GIN

MARG

IN

MIS SystemsRelatively Few

Management Layers toReduce Overhead

Consistent Policies to

Reduce Turnover Costs

Training & Development

Highly Efficient

Systems to Link

Suppliers

Products with the

Firms ProductionProcesses Timing of Asset

Purchases

Efficient Plant

Scale to Minimize

Manufacturing

Costs

Selection of LowCost Transport

Carriers

Delivery Schedule

that Reduces

Costs

National Scale

Advertising

Small, Highly

Trained Sales

Force

Effective Product

Installations to

Reduce Frequency

and Severity

of Recalls

Easy-to-Use Manufacturing

Technologies

[SOPHISTICATION]

Reduce Costs Associated with

Manufacturing Processes

Lowest Cost Products to Purchase

Raw MaterialsFrequent Evaluation Processes to

Monitor Suppliers Performances

Located in Close

Proximity with

Suppliers

Policy Choice of

Plant Technology

Organizational

Learning


Cost LeadershipCost LeadershipBusiness Level StrategyBusiness Level Strategy


Cost LeadershipCost LeadershipBusiness Level StrategyBusiness Level Strategy


11/15

11

How to Obtain a Cost AdvantageHow to Obtain a Cost Advantage

1. Determine and Control Cost Drivers1. Determine and Control Cost Drivers

2. Reconfigure the Value Chain as needed2. Reconfigure the Value Chain as needed

Alter production processAlter production process

Change in automationChange in automation

New distribution channelNew distribution channel

Direct sales in place ofindirect salesDirect sales in place ofindirect sales

New advertising mediaNew advertising media

New raw materialNew raw material

Backward integrationBackward integration

Forward integrationForward integration

Change location relativeto suppliers or buyersChange location relativeto suppliers or buyers


12/15

12

Choices That Drive CostsChoices That Drive Costs

Economies of scaleEconomies of scaleAsset utilizationAsset utilization

Capacity utilization patternCapacity utilization pattern

Value chain linkagesValue chain linkages

InterrelationshipsInterrelationships

- Advertising & Sales- Advertising & Sales

- Logistics & Operations- Logistics & Operations

- Seasonal, cyclical- Seasonal, cyclical

- Order processing- Order processingand distributionand distribution


13/15

13

Major Risks of Cost LeadershipMajor Risks of Cost Leadership

Business Level StrategyBusiness Level Strategy

Major Risks of Cost LeadershipMajor Risks of Cost Leadership

Business Level StrategyBusiness Level Strategy

DramaticDramatic technological changetechnological change could takecould take

away your cost advantageaway your cost advantage

Competitors may learn how toCompetitors may learn how to imitateimitate

Value ChainValue Chain

Focus on efficiency could cause Cost LeaderFocus on efficiency could cause Cost Leader

toto overlookoverlookchanges in customer preferenceschanges in customer preferences


14/15

14

Examples..

Retail Sector : Big Bazar

Telecom Sector : Nokia 1100, Hair,

Water Filter : SWACH [TATA]


15/15

15

Ref. Book

Michael A. HittR. Duane Ireland

Robert E. Hoskisson

Michael A. HittR. Duane Ireland

Robert E. Hoskisson

business strg

Documents