BUSINESSLEVEL GENERIC STRATEGIES

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BUSINESS-LEVEL/GENERIC STRATEGIES

• Dr. Mark Fruin
• Business 290/291

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WHAT IS BUSINESS-LEVEL STRATEGY?

• A PLAN OF ACTION TO GAIN COMPETITIVE ADVANTAGE IN
  A MARKET OR INDUSTRY
• BASED ON
• CUSTOMER NEEDS OR PRODUCT DIFF
• CUSTOMER GROUPS OR MARKET SEG
• HAVING DISTINCTIVE COMPETENCE IN REACHING ONE
  AND/OR THE OTHER

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GENERIC STRATEGIES

• COST LEADERSHIP
• BROAD
• NARROW
• DIFFERENTIATION
• BROAD
• NARROW (FOCUS DIFFERENTIATION)

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ADVANTAGES DISADVANTAGES OF C.L.

• ADVANTAGES
• USING 5 FORCES MODEL COST LEADER HAS
• MORE POWER RELATIVE TO SUPPLIERS
• MORE POWER RELATIVE TO BUYERS
• BETTER ABLE TO DETER ENTRY BATTLE SUBSTITUTE
  PRODUCTS (BY LOWERING PRICES)
• DISADVANTAGES
• MORE LIKELY STUCK IN A PARTICULAR TECH
• MORE LIKELY TO BE IMITATED
• MORE LIKELY STUCK IN C.L. STRATEGY (POSSIBLY LOSE
  SIGHT OF CHANGING CUSTOMER TASTES)

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ADVANTAGES DISADVAN-TAGES OF DIFFERENTIATION

• ADVANTAGES
• DIFFERENTIATORS DIFFERENTIATE IN MANY DIFFERENT
  WAYS
• HARD TO IMITATE (IF DONE WELL)
• BRAND LOYALTY HIGH IF ABLE TO CONVINCE BUYERS OF
  UNIQUENESS
• DISADVANTAGES
• MANY DIFFERENTIATION FACTORS ARE EASILY IMITATED
• FOR HOW LONG CAN UNIQUENESS BE PROTECTED

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FOCUSED DIFFERENTIATION

• FD MEANS CONCENTRATING ON
• A PARTICULAR AREA (GEOGRAPHICALLY)
• A PARTICULAR CUSTOMER (WELL EDUCATED, HOUSEHOLD
  INCOME200K, ETC.
• PARTICULAR MARKET SEGMENT, SUCH AS DESIGNER
  CLOTHES, FAST CARS, SMALL FOOTPRINT APPLIANCES,
  ETC.

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GENERIC STRATEGIES

• REQUIRE CAREFUL ATTENTION TO PRODUCT/TECH/MARKET
  CHOICES
• IF DONE WELL, CAN PROTECT FIRMS FROM 5 FORCES
  RIVALRIES BY MAKING COSTS OF IMITATION TOO HIGH
• REQUIRE CONTINUOUS UPGRADING OF INVESMENT CHOICES

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STRATEGIC GROUPS

• WITHIN MOST INDUSTRIES, STRATEGIC GROUP EMERGE
• A STRATEGIC GROUP IS DEFINED BY COMPANIES
  PURSUING THE SAME GENERIC STRATEGY
• MOBILITY BARRIERS INHIBIT THE MOVEMENT OF
  COMPANIES FROM ONE STRATEGIC GROUP TO ANOTHER

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BUSINESS LEVEL INVESTMENT STRATEGIES

• COMPETITIVE POSITION BASED ON
• MARKET SHARE
• STRENGTH OF DISTINCTIVE COMPETENCIES
• PRODUCT LIFE CYCLE EFFECTS
• EMBRYONIC, GROWTH, MATURE, DECLINE
• INDUSTRY CYCLE EFFECTS
• EMBRYONIC, GROWTH, MATURE, DECLINE

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GROWTH CYCLES(CONFUSION?)

• EMBRYONIC MAY INCLUDE EMBRYONIC AND EMERGING
• GROWTH MAY INCLUDE PLAIN OLD GROWTH AND SHAKEOUT
  GROWTH
• MATURE MAY INCLUDE PRODUCT DIFFERENTIATION
  PROLIFERATION
• DECLINE ALSO INCLUDES CONSOLIDATION,
  CONCENTRATION HARVEST (INCLUDE CASH COW STRAT)

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QUESTIONS

• WHY DOES EACH GENERIC STRATEGY REQUIRE DIFFERENT
  SETS OF PRODUCT/MARKET/DIST COMPETENCY CHOICES?
• HOW SHOULD DIFFERENTIATION INVESTMENT CHOICES
  DIFFER IF YOU ARE IN STRONG OR WEAK COMPETITIVE
  POSITION?