ILRHR4640 Lecture 4- Business Level Strategy Ch. 5

ILRHR4640 Lecture 4- Business Level Strategy Ch. 5 -...

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Unformatted text preview: Business Level Strategy Business Level Strategy Chapter 5 Dr. Daniel Cohen Key Learning Points Key Learning Points Be able to define business level strategy and understand its conceptual application Understand and be able to apply the five main strategic positions Understand the competitive risks of all five main strategies Business­Level Strategy (Defined) Business­Level Strategy (Defined) 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 Customers: Business­Level Strategic Customers: Issues Customers are the foundation of successful business­level strategy Who will be served by the strategy? What needs do those target customers have? How will those needs be satisfied by the strategy? Types of Potential Competitive Types of Potential Competitive Advantage Achieving lower overall costs than rivals Performing activities differently (drive down costs) Possessing the capability to differentiate the firm’s product or service and command a premium price Performing different (valuable) activities Two Targets of Competitive Scope Two Targets of Competitive Scope Broad Scope The firm competes in many customer segments (Vanguard) The firm selects a segment or group of segments in the industry and tailors its strategy to serving them at the exclusion of others (Ikea) Narrow Scope Five Business­Level Strategies Five Business­Level Strategies Cost Leader Focused Cost Leader Differentiation Focused Differentiation Integrated Cost Leader/Differentiation Approach Cost Leadership Strategy Cost Leadership Strategy An integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors with features that are acceptable to customers Relatively standardized products Features acceptable to many customers Lowest competitive price Competitive Risks Cost Leadership Strategy Cost Leadership Strategy (cont’d) Processes may become obsolete Competitors may imitate Price is only differentiator Differentiation Strategy Differentiation Strategy An integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them Non­standardized products Customers value differentiated features more than they value low cost Competitive Risks of Differentiation Competitive Risks of Differentiation The price differential becomes too large Differentiation ceases to meet unique needs Counterfeit goods replicate differentiated features of the firm’s products (Calloway/China) Focus Strategies Focus Strategies An integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment Particular buyer group (e.g. youths or senior citizens) Different segment of a product line (e.g. Jiffy Lube) Different geographic markets (e.g. East coast versus West coast or Carmike Theatres, different nations i.e. Starbucks) Large firms may overlook small niches. A firm may lack the resources Factors That Drive Focused Factors That Drive Focused Strategies A firm is able to serve a narrow market segment more effectively Focusing allows the firm to direct its resources to certain value chain activities to build competitive advantage Competitive Risks of Focus Competitive Risks of Focus Strategies A focusing firm may be “out­focused” by its competitors A large competitor may set its sights on a firm’s niche market Customer preferences in niche market may change to more closely resemble those of the broader market Integrated Cost Leadership/ Integrated Cost Leadership/ Differentiation 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 Risks of the Integrated Cost Risks of the Integrated Cost Leadership/ Differentiation Strategy Often involves compromises Becoming neither the lowest cost nor the most differentiated firm Lacking the strong commitment and expertise that accompanies firms following either a cost leadership or a differentiated strategy Becoming “stuck in the middle” Chapter 5 Chapter 5 Questions? ...
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This note was uploaded on 03/18/2009 for the course ILRHR 4640 taught by Professor Cohend during the Spring '09 term at Cornell University (Engineering School).

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