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many industries. The success of these companies is due to their commitment to keep investing and improving over time such that it is difficult for their competitors to catch up. Another approach is to aggressively expand capacity to discourage competitors from entering the market. First movers can also develop customer loyalty by creating switching costs. The idea is to help the customer in being familiar with the first mover's product or service so that there is no incentive for the customer to switch to something different. It can be achieved by tying down customers with long-term contracts or other schemes. Implementing the Preemptive Move First, a preemptive move means doing something novel. One cannot get there by copying and improving on strategies that are already in place. Innovation is thus required. Second, the preemptive move often involves substantial commitment of resources which implies substantial risk. It is such substantial commitment that renders the resulting advantage to be sustainable as competitors are deterred by the substantial investment to challenge the incumbent. Third, a successful first mover advantage assumes that a competitor will be inhibited from duplicating and countering. For example, a competitor's quality brand could be cannibalised and weakened if it introduced lower-priced brand as a reaction to a preemptive move at the low-end of the market. For example, if Ben and Jerry introduces new low priced ice creams to compete against a private label ice cream it would damage the brand of Ben and Jerry. A competitor might be committed to an existing distribution system or manufacturing process and thus be reluctant to follow a first mover. When new products are introduced, the prices tend to be high and the target markets are limited to small segments and specialised applications. The first video recorder was conceptualised by Ampex which sold it for $50,000. At such a high price, very few people could afford the same and the market size remains small. Pre-
BUS489 Introduction to Strategy SU8-16 empting the mass market with the same product will provide economies of scale, and companies can enter the market at a low price and enjoy first mover advantage. This was done by Sony and Matsushita who took the vision to mass market and sold them at $500 to capture the mass market. Other examples are the Timex in watches, Kodak in films, and Gillette in razors, which were sold the mass market. In conclusion, business level strategies are used by business units to develop competitive advantages. The generic business level strategies are cost leadership, differentiation focus and preemptive strategy. Lesson Recording Study Unit 8 Business Level Strategies Part 6
Study Unit 9 International and Global Strategy
BUS489 International and Global Strategy SU9-2 Learning Outcomes At the end of this unit, you are expected to: Appraise the need for international strategy Identify the issues in formulation of international strategy Distinguish between various types of international strategy