Final Prem Parthasarthy Ch05

8/13/2019 Final Prem Parthasarthy Ch05

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Chapter Five

Multimedia Slides by

Peter J. McAliney

Chenery & Company

Business-Level

Strategy


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Copyright Houghton Mifflin Company. All rights reserved. 5 | 2

Chapter Overview

Business-level strategy

Business-level strategy and competitive

performance

Generic business-level strategies

Combining business-level strategy choices

Strategic choices for differing industryconditions


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Strategy

Strong market

position

Exceptional

internal

capabilities

Strengths necessary and appropriateto overcome hurdles


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Characteristics of Business-Level

Strategy

1. Strategy for a single business

2. Main focus is competitive threats

3. Achieves business goals by building and

nurturing competitive advantage


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Business-Level Strategy Choices

Firm

Competencies

Firm

Strengths

Needs of

External

Environment


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Porters Model of Strategy (I)

Two Themes

Do what competition does but do it differently

Do entirely different activities compared to

competition


7/28Copyright Houghton Mifflin Company. All rights reserved. 5 | 7

Porters Model of Strategy (II)

Source: Adapted with the permission of The Free Press, A Division of Simon & Schuster Adult Publishing Group, from Competitive Strategy:

Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright 1980, 1998 by The Free Press.



Cost Leadership

Lowest possible cost position, industry wide

Industry Company

Retail Wal-Mart

Auto Hyundai

Steel Nucor

Watches TimexBanking ING

Restaurant McDonalds



Requirements to Pursue Cost

Leadership

Standard product designs

Economies of scale

Standard processes

Automation

Work standardization



Differentiation

Most unique and differentiated product, industry wide

Industry Company

Auto Service Jiffy Lube

Auto BMW

Clothing Ralph Lauren

Fast Food Dominos

Machinery Caterpillar

Computers Apple



Requirements to Pursue Differentiation

Continuous improvement

Product variety

Differentiated strengths

R & D

Defect-free manufacturing

Marketing and branding Innovation

Service



Cost Focus

Narrow product line or market segment,

differentiated on cost

Industry CompanyElectrical Fixtures Thomas & Betz

Golf Accessories golftees.com

Pharmaceuticals Marion LabsComputer Supply CompUSA

Consumer Electronics Best Buy



Differentiation Focus

Narrow product line or market segment,

differentiated on features

Industry Company

Watches Rolex

Jewelry Cartier

Auto Maserati

Food Dean & DeLuca

Restaurant In & Out Burger

Clothing Versace



Requirements to Pursue

Focus Strategies

Flexibility

Cost control

Minimized product variety



Porters Generic Strategies

One tool in a strategists toolkit

- Advantages

- Disadvantages



Conditions Driving Strategy Choice

Cost

Differentiation

Focus



Combined Strategies

Product-cost-service

offerings

Drivers Changing consumer

values

Dynamic industry

conditions Search for competitive

advantages

Cost

Differentiation



Miles and Snow Generic Strategies

Prospector

Defender

AnalyzerReactor


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Prospector

Explore and exploit new products or market opportunities for

high growth

Industry Company

Retail AmazonElectronics Sony

Consumer

Products

3M

Communication Research inMotion

Security Taser


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Defender

Maintain currentmarket positions,

prevent competitor

encroachment

Effectively serve

existing customers

Industry CompanyElectronics Lincoln

Electric

Auto General

MotorsAirline United

Computer

Software

Microsoft

Computer

Hardware

IBM


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Analyzer

Combined prospector

and defender

Industry Company

Beverage-

Theme Parks

Anheuser

Busch

Beverage-

Music

Starbucks

Retail- Service Home Depot

AirlinesMusic Virgin


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Reactor

No coherentstrategy

Industry Company *

Retail Kmart

Computer

Hardware

Digital

Equipment

Computer

Software

Visicalc

Auto American

Motors

Airline Pan Am

* All companies in this list either entered bankruptcy and/or were acquired


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Strategy and the Industry Life Cycle

Time

Deman

d

Emergence Growth Maturity Decline


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Time

Demand

Strategy in the Emergence Stage

Survival

Limited quantities,

high pricesAdd features

Invest in R&D and

marketing

Product

differentiation


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Time

Demand

Strategy in the Growth Stage

Rapid growth/market

share

Top line growth Prevent new entry

Improve product,

expand service

Differentiation


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Time

Demand

Strategy in the Mature Stage

Retain market share

Bottom line growth

Standardization Best at executing

selected genericstrategy

Cost Differentiation

Focus


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Time

Demand

Strategy in the Decline Stage

Maintain in a

shrinking market

Reduce assetbase

Acquire exiting

firms

Cost strategy

Focus strategy


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Chapter Summary

Business-level strategy

Business-level strategy and competitive

performance Generic business-level strategies

Combining business-level strategy choices

Strategic choices for differing industryconditions

Documents

Final Prem Parthasarthy Ch05