Week 4-Business Level Strategies

Week 4-Business Level Strategies - Business Level...

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Business Level Strategies Instructor: Mahka Moeen M&O Department Spring 2012 1
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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.
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Potential Competitive Advantage Cost Advantage Similar products at lower costs Performing activities differently (cheaper process) Differentiation Advantage Price premium from a unique product Possessing the capability to differentiate the firm’s product or service and command a premium price Performing different (valuable) activities
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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
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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 by outsiders Simplifying production processes
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Competitive Risks of Cost Leadership Processes used to produce and distribute good or service may become obsolete due to competitors’ innovations Focus on cost reductions may occur at expense of customers’ perceptions of differentiation Competitors, using their own core competencies, may successfully imitate the cost leader’s strategy
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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 Non-standardized products Customers value differentiated features more than they value low cost
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Differentiation: Value-Creating Activities
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Week 4-Business Level Strategies - Business Level...

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