Business level strategy Competitive strategy and industry environment

1
Business level strategyCompetitive strategy and
industry environment

• Session 9

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Business-level strategy

• What is satisfied?
• Customer needs
• Differentiation
• Who is being satisfied?
• Customer groups
• Segmentation
• How are customer needs satisfied?
• Distinctive competencies
• Building blocks of competitive advantage

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Satisfying consumer needs
Compaq Nordstrom Oral B
A toothbrush that tells customers when they need
a new one.
User-friendly Installation video
No-questions asked return policy
Source MacMillan and McGrath
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Business level strategy

• How to compete?
• Generic business strategies
• Choice of business strategy
• Investment strategies

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Business level strategy
Strategic advantage
Uniqueness Low cost position
Industrywide
Strategic Target
FOCUS
Specific segment
Source Michael Porter
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Business level strategy

• Cost Leadership
• 5-Forces model (protected through low costs)
• Disadvantages
• Cost competition from competitors
• Imitation
• Focus exclusively on efficiency

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Business level strategy

• Differentiation
• 5-Forces model (protected through
  differentiation, brand loyalty)
• Disadvantages
• Need to maintain uniqueness
• Imitation
• Changes in consumer tastes and demands

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Business level strategy

• Focus strategy
• 5-Forces model (Protected by either low costs or
  differentiation)
• Disadvantages
• Smaller volumes, higher costs
• Changes in technology or consumer taste
• Competition from differentiators

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Business level strategy

• Cost leadership and differentiation
• Production and process technology
• Flexible manufacturing systems
• Stuck in the middle
• Importance of FIT capabilities and strategy
• Align product/technology/market choices with
  strategy

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Investment strategy

• Supports competitive strategy (FIT)
• Cost of strategy
• Resources required
• Returns from strategy
• Firm competitive position (market share and
  distinctive competencies)
• Stage of industry life cycle (opportunities and
  threats)

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• We dont like their sound, and guitar
• music is on the way out.
• Decca Recording Co., rejecting the Beatles, 1962

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Competitive Strategy Industry Environment

• Managing industry environment (FIT)
• Fragmented Industries
• Embryonic Growth Industries
• Mature Industries
• Declining Industries

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Fragmented Industries

• Characteristics
• Many small/medium sized companies
• Few economies of scale, High transport costs
• Strategic Focus
• Niche, customization
• Consolidation Strategies
• Chaining
• Franchising
• Horizontal Merger

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Embryonic Growth Industries

• Characteristics
• Created by pioneers
• Attract imitators
• Strategic focus
• Exploit innovation
• Crossing the competitive chasm
• Strategies
• Knowing customer groups (Innovators, early
  adopters, early majority, late majority and
  laggards)
• Role of complementary assets (Go it alone or
  enter into alliance or license innovation

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To lead or to follow?
Source Grant
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Mature Industries

• Characteristics
• Consolidated
• Competitive interdependence
• Strategic focus
• Deter entry
• Manage rivalry
• Supply and distribution strategy

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Mature Industry

• Deter entry
• Product proliferation/ Filling niches
• Pricing (price cutting and limit pricing)
• Maintaining excess capacity
• Manage Rivalry
• Price signaling
• Price leadership
• Non price competition (market penetration,
  product development, market development, product
  proliferation)
• Controlling industry capacity
• Preemptive
• Co-ordination

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Declining Industry

• Characteristics
• Falling demand
• Intense competition
• Strategic Focus
• Dealing with decline
• Strategies
• Leadership
• Niche
• Harvest
• Divestment