Business Level Strategy PORTER: GENERIC AND INTEGRAED STRATEGIES EARLY MOVER ADVANTAGES HYPERCOMPETITION & THREATS OTHER ALTERNATIVES

2 Competitive Advantage Competitive Scope Cost Uniqueness Broad Focus Narrow Focus Four Generic Strategies Fifth  Integrated Cost Leadership/ Differentiated Strategy Cost Leadership Differentiation Focused Cost Leadership Focused Differentiation

3 Cost Leadership Produce or Deliver Goods & Services at the Lowest cost – with Acceptable features “Cut costs  Provide Excellent Service” Effective Implementation of the Cost Leadership Strategy Allows Firms to earn Supernormal Profits Why!! & How!!

4 Differentiation Strategy Unique Attributes and features of a product “ Customer Value” Differentiation  Unique Needs  Premium Price Ways of Differentiation Superior customer service Product Design Product Innovation State of the art Technology – Quality Different Ambience e.g. PVR Priya Village road Show Eating Shopping Watching Movies

5 Ability to Blend and Combine the cost leadership and Differentiation Approach “Critical to Sustain Competitive Advantage” Differentiation  Premium Price Cost Leadership  Low Costs Integrated Cost Leadership/ Differentiation Strategy Higher Profits Difficult to Differentiate Substantially and Drop Prices Substantially “Firms Need Strategic Flexibility to use the Integrated Cost Leadership/ Differentiated Strategy”

6 3 Common Approaches 1.Flexible Manufacturing Systems Flexibility of human, physical & information resources Produce Variety of Products Low Cost Advantage Quickly Responding to changes in Buyers Needs Technology New Less Manual Intervention

7 Common Approaches 2. Information Network Information network linking suppliers, Producers, distributors, and Customers Invest heavily in ERP Software Systems to improve Firms Efficiency Link and Connect various departments & Data/ Knowledge Transfer Exchange of Data between operators in the entire supply chain SAP Users  Differentiate your products more sharply & drive costs

8 3.Total quality Management (TQM) Increase Product quality Improve Productivity Differentiate  High Price  Market Share Cost of Poor Quality  Enormous Cost of Poor Quality Workforce  Train & Develop Integration of Decision Process  Participation from all functional areas Design Organizations  Use T Q M systems & work effective - SUPPORT

9 The Likelihood of Attack and Responses: RIVALRY Drivers of Competition Awareness Motivation Common Market Similar Resources Inter Firm Rivalry Likelihood of Attack Likelihood of Response Type of Action Resource Access Out come of Rivalry Competitive Market Competitive Outcomes Evolutionary Outcomes Size Speed Innovation Product & Process Quality Ability to Attack & Respond Competitive Rivalry  Two or more Firms jockey with one another to seek an advantageous Market Position Awareness: Attacking firm being aware of the Mkt Commonality & Resource Similarity Motivation: Incentive to Attack and respond

10 FIRST MOVER, SECOND AND LAST MOVER: FIRST MOVER  Firm initiating a competitive move WHAT DOES IT DO?? Fund Allocation for R & D Aggressive Advertising Introductory Price The more difficult and costly an advantage to imitate the longer the firm receives the benefit High risks due to uncertain nature of the markets & high development costs SECOND MOVER  Firm reacting to a first mover’s competitive action

11 LATE MOVER  Responds to a competitive action, but after time has elapsed after first movers action and second movers response Are they always at a Disadvantage? No!! No Blueprints for first mover success Late entrants conduct market research Improve on offerings to meet desires/ needs More time to perfect & develop innovative goods

12 FIRMS ABILITY TO ATTACK AND RESPOND: Resource Availability and ability to respond affect the probability of firm’s response to actions The four forces influencing interaction are: (i)Size of the firm (ii)Action & Response Speed (iii)Innovation Ability (iv)Product & Process Quality Sustaining Actions & Outcomes WALMART FIRM SIZE SPEED INNOVATION QUALITY + (MARKET POWER) + (ORDER OF ENTRY) + (MARKET LEADER) + (TQM)  MEET AND * EXCEED CUSTOMER NEEDS * TQM  TOTAL COMMITMENT TO IMPROVE EVERY PROCESS

13 COMPETITIVE OUTCOMES GRADUAL EROSION OF COMPETITIVE ADVANTAGE SLOW CYCLE MARKETS Profit from Competitive Advantage COUNTER ATTACK EXPLOIT LAUNCH TIME e.g. Monopolist  Core competencies, Resources and capabilities difficult to copy. Protected Environment  High Returns Over Time.

14 FAST CYCLE Returns from Replicable Actions DROP PRICES SUSTAIN THE MOMENTUM BY OFFERING NEW PRODUCTS & CAPTURING NEW MARKETS TIME SUDDEN EROSION IN COMPETITIVE ADVANTAGE AS FIRMS ATTEMPT TO OBTAIN TEMPORARY ADVANTAGE FIRM  ADVANTAGE AGAIN

15 ALTERNATIVE STRATEGY OPTIONS FRONTAL ATTACK: Attacking the competitors in their core areas of strength and capabilities BYPASS ATTACK: Doing something radically different and opposite as compared to what rival firms have been doing OUTFLANKING: Designing action plans which leads to attacking rivals in their weakest areas of operations ENCIRCLEMENT STRATEGIES: This is an innovative move and requires access to financial resources and commitments as firms tend to attack rivals in all areas. GUERILLA ATTACK: This is a strategy – where firms adopt the “HIT AND RUN” Policy – i.e. constant hypercompetitive moves