Download - Chapter 6- BPSM

7/31/2019 Chapter 6- BPSM

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Ch. 6-

Generic Strategies

Prof. Prashant B. Kalaskar


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Strategies Formulation

Strategies are formulated at 3 different levels Objectives are set at Corporate level. Rellocation of resources so as to nurture the portfolio

is the important objective Various strategies decided at corporate level may be- Stability Strategy Expansion Strategy Retrenchment Strategy Then individual business formulate their own stratgeies

so as to achieve the objectives set at corporate level.

Use of BCG matrix for rellocation of resourcesProf. Prashant B. Kalaskar


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The Central Role of Customers

In selecting a business-level strategy, the firmdetermines

1. who it will serve2. what needs those target customers have

that it will satisfy3. how those needs will be satisfied(Abells 3 dimentions of Business definition- Customer needs, Customer Groups

& Technology) Prof. Prashant B. Kalaskar


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Generic Strategies

M. Porter suggested 3 generic strategies tocompete in the environment of competition.

Company adopts any one of these 3 strategies, onthe basis of-

1) The entry point of the firm elative to theindustrys life cycle.

2) Its present position & the internal resourcecapabilities3) The structure of the industry (5 Forces) &4) The nature of forces driving the industry.



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Industry Life Cycle



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Industry Life-Cycle Stages:Strategic Implications



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Industry Life-Cycle Strategies

In the Introduction Stage: Products are unfamiliar to consumers

Market segments not well defined Product features not clearly specified Competition tends to be limitedStrategies for the Introduction Stage: Develop product and get users to try it Generate exposure so product becomes

standard Prof. Prashant B. Kalaskar


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The Growth Stage is: Characterized by strong increases in sales Attractive to potential competitors

Strategies for the Growth Stage: Brand recognition Differentiated products Financial resources to support value-chain activities



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In the Maturity stage: Aggregate industry demand slows

Market becomes saturated, few new adopters Direct competition becomes predominant Marginal competitors begin to exitFor the Maturity Stage: Efficient manufacturing operations and process

engineering Low costs (customers become price sensitive)



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In the Decline Stage: Industry sales and profits begin to fall Strategic options become dependent on the actions

of rivalsFor the Decline Stage Maintaining

Exiting the market Harvesting Consolidation



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Turnaround Strategies in the Life Cycle

Turnaround strategy a strategy that reverses a firms decline in

performance and returns it to growth andprofitability.

Asset and cost surgery Selective product and market pruning Piecemeal productivity improvements



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Current market position of Britannia biscuits

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Business Level Strategy

Business-level strategy : an integrated andcoordinated set of commitments andactions the firm (Business Unit) uses togain a competitive advantage by exploitingcore competencies in specific product

markets



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Generic Strategy

The generic strategies are nothing but theapproaches of the company to fight against

competitors ( In general/Commonstrategies. 3 Generic Strategies are-

- Low Cost Leadership- Differentiation- Focus



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Strategic Orientation Porters Three Generic Strategies

UniquenessLow CostPosition

Strategic Advantages

DifferentiationOverall CostLeadership

Focus

FocusDifferentiation

Focus Low Cost



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Three Generic Strategies

Overall cost leadership Low-cost-position relative to a firms peers Manage relationships throughout the entire

value chain Differentiation

Create products and/or services that areunique and valued

Non-price attributes for which customerswill pay a premium



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Three Generic Strategies

Focus strategy Narrow product lines, buyer segments, or

targeted geographic markets Attain advantages either through

differentiation or cost leadership



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Examples

Companies pursuing an overall costleadership strategy

McDonalds

Wal-Mart Companies pursuing a differentiation

strategy Harley Davison

Apple Companies pursuing a focus strategy

Rolex Lamborghini



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Strategic Orientation Porters Three Generic Strategies

UniquenessLow CostPosition

Strategic Advantages

Differentiation Overall CostLeadership

Focus

Focus Differentiation Focus Low Cost


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Cost Leadership Strategy

An integrated set of actions designed toproduce or deliver goods or services at thelowest cost, relative to competitors with

features that are acceptable to customers relatively standardized products features acceptable to many customers

lowest competitive priceEx- Toyota, are very good not only at producing high qualityautos at a low price, but have the brand and marketing skillsto use a premium pricing policy.



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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 byoutsiders simplifying production processes



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Overall Cost Leadership

Experience curve refers to how business learns to lower

costs as it gains experience with productionprocesses

with experience, unit costs of productiondecline as output

increases in mostindustries



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Differentiation

The Differentiation can be attained on thebasis of

Prestige or brand image Technology Innovation Features

Customer service Dealer network



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Differentiation

Firms may differentiate along severaldimensions at once

Successful differentiation requiresintegration with all parts of a firms valuechain

An important aspect of differentiation is

speed or quick response There is also the chance that any

differentiation could be copied bycompetitors



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Focus

Focus strategy involves concentratingon a-

Particular customer Product line Geographical area

Channel of distribution Niche market



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Focus

Focus strategy is that the firm isbetter able to serve its limited segment

than competitors serving a broaderrange of customers Firms may thus be able to differentiate

themselves based on meeting customerneeds through differentiation orthrough low costs and competitivepricing for specialty goods



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Focus

Focus is based on the choice of a narrowcompetitive scope within an industry

Firm selects a segment or group ofsegments (niche) and tailors its strategy toserve them

Firm achieves competitive advantages bydedicating itself to these segmentsexclusively



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Focus

Cost focus firm strives to create a cost advantage in its

target segment Differentiation focus

firm seeks to differentiate in its target market



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Focus: Improving Competitive Position

Focus Creates barriers of either cost leadership or

differentiation, or both Used to select niches that are least vulnerable

to substitutes or where competitors areweakest



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Title

P f P h B K l k

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