Strategic Focus Generic Strategy class

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Strategic FocusGeneric Strategyclass
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Core Strategy

• The core strategy of the organization is a
  statement of how it intends to achieve its
  objectives

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Core Strategy

• Expand the market

- Attraction of new users to the product or
service - Identifying new uses for the product
or developing new products and services to
stimulate the market
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Figure 2.10 Strategic focus
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Core Strategy

• Increase Share

-- Winning competitors customers -- Merging with
the competitors -- Entering into strategic
alliance with
competitors, suppliers, distributors
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Core Strategy

• Improving profitability

---- This is usually achieved through
increasing price, reducing costs ---- In the
multi-product firm through weeding of the product
line, removing poorly performing products
and concentrating effort on the more financially
viable
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Creation of the competitive positioning

• Market targets
• Differential advantage
• Cost leadership
• Differentiation

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Market targets

• A market will generally be more attractive
• - it is large
• - it is growing
• - contribution margins are high
• - competitive intensity and rivalry are low
• - there are high entry and low exit barriers
• - the market is not vulnerable to uncontrollable
  events

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Figure 2.11 Routes to competitive advantage
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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
1. Cost Leadership
2. Differen- tiation
Broad Target Market
Breadth of Competitive Scope
4. Focused Differen- tiation
3. Focused Low Cost
Narrow Target Market
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Differential advantage

• A differential advantage can be created out of
  any of the companys strength, or distinctive
  competencies relative to the competition
• The essential factors in choosing how to create
  the advantage
• Must be on a basis of value to the customer (
  lower prices, superior quality and better
  service)
• Using the skill of the company that competitors
  will find hard to copy

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Cost Leadership Strategy
Requirements
Constant effort to reduce costs through
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Cost Leadership Strategy

• The company seeks to obtain a cost structure
  significantly below that of competitors while
  retaining products on the market that are in
  close proximity to competitors offerings

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Cost Leadership Strategy
Key Criteria
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Cost Leadership Strategy
Unifi, Inc., one of the worlds largest
texturizers of filament polyester and nylon
fiber, makes significant investments in its
manufacturing technologies to drive its costs
lower even though prices for raw materials and
packaging supplies are rising.
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Differentiation Strategies

• Creating something that is seen as unique in the
  market
• The major advantage
• It create a reason why the customer should buy
  from the company rather than from its competitors
• Can command higher prices and margins and thus
  avoid competing on price alone

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Differentiation Strategies

• Keys to success
• Find ways to differentiate that create value for
  buyers that are not easily matched or cheaply
  copied by rivals
• Not spending more to achieve differentiation than
  the price premium that can be easily changed

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Differentiation

• Has many variations design/brand image
  (Mercedes) technology (Apple) customer service
  (Crown, Cork Seal) features (Jenn-Air) etc.
• Can create defensible position for coping with
  the five competitive forces
• May preclude gaining high market share
• Sensitive to cost of differentiation

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Differentiation Strategy
Key Criteria
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Differentiation Strategy
Requirements
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Differentiation Strategy
Effectiveness with Differentiation grows out of
Value Chain activities
Examples
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Pitfalls of Differentiation Strategies

• Uniqueness that is not valuable to customers
• Too much differentiation relative to price
• Too much price premium relative to
  differentiation
• Ignoring need to signal value
• Not knowing cost of differentiation
• Sole focus on differentiation of product as
  opposed to differentiation of other activities in
  the value chain
• Failure to recognize uniqueness segments among
  buyers

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Focus strategies

• Hybrid strategy (Can be low cost or
  differentiation in a particular segment)
  Essence Narrow target
• Limits market share achievable embodies a
  trade-off between profitability and volume
• Example Illinois Tool Works (Fasteners)

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Risks of focus strategies

• Cost differential between broad-range competitors
  and focus players widens offsetting the
  advantages of a focus strategy (Differentiation
  too expensive )
• Differences in desired product/service features
  across the entire market narrow
• Focus players are out-focused (sub-segmentation)
• Focus players outgrow their target segment(s)

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Understanding the organisational resource
base
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Figure 6.1 Understanding the organisational
resource base
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Figure 6.2 Value disciplines
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Figure 6.3 Competitive positioning
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Figure 6.4 Marketing resources
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Figure 6.5 Marketing assets
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Value Chain Analysis

• The premise behind value chain analysis is that
  customers demand value from goods and services
  they obtain
• Customer value
• Product is unique and different
• Product is low priced
• Quick response to specific or distinctive
  customer needs
• A value chain is a systematic way of examining
  organizations functional activities

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Figure 5.5 The value chain and direct product
costing
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Primary and Support Activities in the Value Chain

Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement
Operations
Service

MARGIN
Inbound Logistics
Marketing and Sales
Outbound Logistics
Primary Activities
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Value Chain Analysis
Assessing the PRIMARY Activities in the Value
Chain ( from Table 4-1)
Inbound Logistics

Materials control system Inventory control
system Raw material handling and warehousing
Operations

Equipment comparison to competitors Plant
layout Production control system Level of
automation in production processes
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Value Chain Analysis
Assessing the PRIMARY Activities in the Value
Chain (continued) ( from Table 4-1)
Outbound Logistics

Timeliness and efficiency of finished products
delivery Warehousing of finished products
Marketing and Sales

Marketing research Sales promotions and
advertising Alternative distribution
channels Competency and motivation of sales
force Organizations image of
quality Organizations reputation Brand
loyalty of customers Domination of various
market segments
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Value Chain Analysis
Assessing the PRIMARY Activities in the Value
Chain (continued) ( from Table 4-1)
Customer Service

Customer input for product improvements Handli
ng of customer complaints Warranty and
guarantee policies Employee training in
customer education service issues Replacement
parts and services
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Value Chain Analysis
Assessing the SUPPORT Activities in the Value
Chain ( from Table 4-2)
Procurement

Alternate sources for obtaining needed
resources Timeliness of resources
procurement Procurement of large capital
expenditure resources Lease-versus-purchase
decisions Long-term relationships with reliable
suppliers
Technological Development

RD activities in product and process
innovations Relationship between RD and other
departments Meeting deadlines in technological
development activities Quality of labs and
other research facilities Qualifications of lab
technicians and scientists Creativity and
innovation in organizational culture
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Value Chain Analysis
Assessing the SUPPORT Activities in the Value
Chain (continued) ( from Table 4-2)
Human Resource Management

Recruiting, selecting, orienting, and training
employees Employee promotion policies Reward
systems to motivate and challenge
employees Absenteeism and turnover Union-organ
ization relations Employee participation in
professional organizations Employee motivation,
job commitment, and satisfaction
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Value Chain Analysis
Assessing the SUPPORT Activities in the Value
Chain (continued) ( from Table 4-2)
Firm Infrastructure

Identification of external opportunities and
threats Accomplishing goals with strategic
planning system Coordination and integration of
value chain activities Low-cost capital
expenditures working capital funds IS support
for strategic and operational decisions Relation
ships with stakeholders Public image as a
responsible corporate citizen
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Table 6.1 The top ten brand names Source
Interbrand (1996, 2001, 2006)
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Figure 6.6 Marketing capabilities
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Figure 6.7 Dynamic marketing capabilities
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Figure 6.8 The resource portfolio
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Figure 6.9 Developing and exploiting
resources Source Adapted from Homel and
Prahalad, 1994