1. Strategy Formulation Business Unit Level Strategies (Competitive Strategies)

2. Strategy Formulation A Business Unit is defined as an organizational subsystem that has its own market, a set of competitors, and a mission distinct from those of the other subsystems in the organization

3. Strategy Formulation Competition amounts to the efforts of multiple organizations that are offering a similar product or service in obtaining desired customers, market share, ranking or resources

4. Strategy Formulation Strategic Group amounts to a set of firms competing within an industry that have similar strategies and resources.

5. Strategy Formulation zPrice zQuality zLevel of vertical integration zGeographic scope zLevel of diversification zR&D expenditures z Market Share z Profits z Product characteristics z Any other relevant strategic factor Potential Dimensions Used in Defining Strategic Groups

6. Strategy Formulation VIRO Framework for defining a Sustainable Competitive Advantage zValue - does it provide a comp advantage? zRareness - do other competitors have it? zImitability - Is it costly for others to imitate? zOrganization - is the firm organized to exploit the resource?

7. Porter’s Generic Competitive Business Unit Strategies It is critical to envision org’s that are determined to both: zServe a narrow or focused market niche versus a broad market (in terms of customers or product). zElect to to compete on the basis of having the lowest costs (not price) or by being distinctively different (or differentiated).

8. Generic Strategies for Small Businesses Niche-Low Cost Niche-Differentiation Niche-Low Cost/Differentiation Organization Strategy Product Customer Geographical

9. Generic Strategies for Small Businesses Niche-Low Cost Emphasizes keeping overall costs low while serving a narrow or focused segment (niche) of the market.

10. Niche-Low Cost Cost Differentiation Jet Blue

11. Generic Strategies for Small Businesses Niche-Low Cost Vulnerabilities zTechnological obsolescence and thus lose sight of shifting cust preferences zLow cost competencies imitated zCompetition intense in no frill environments & competition may successfully lower their costs more

12. Generic Strategies for Small Businesses Niche-Differentiation Emphasizes offering customers highly differentiated, need fulfilling products or services for a narrow or focused segment (niche) of the market.

13. Niche-Differentiation Cost Mikimoto Differentiation

14. Generic Strategies for Small Businesses Niche-Differentiation Vulnerability zOrg must seek to remain unique despite efforts by competitors to copy zCompetitors who also emphasize lowering of costs may be able to offer similar products at predatory prices.

15. Generic Strategies for Small Businesses Niche-Low Cost/Differentiation Emphasizes offering customers highly differentiated, need fulfilling products or services for a narrow or focused segment (niche) of the market while keeping costs low.

16. Generic Strategies for Small Businesses Niche-Low Cost/Differentiation zDedication to quality zProcess innovations zProduct innovations zLeverage through org’l expertise & image

17. Niche Low- Cost/Differentiation Cost Red Hook Differentiation Boston Brewing

18. Generic Strategies for Large Businesses Low Cost Differentiation Low Cost/Differentiation

19. Generic Strategies for Large Businesses Low Cost Emphasizes keeping overall costs low while serving a broad market industrywide.

20. Low Cost Strategy Cost Differentiation Wal Mart Neiman- Marcus

21. Generic Strategies for Large Businesses Low Cost Vulnerabilities zRemain vulnerable to price competition pressuring margins further aggravated by price wars zTechnological stability causing firms to avoid responding to new mrkt & product opportunities may become obsolete

22. Generic Strategies for Large Businesses Differentiation Emphasizes offering customers industrywide highly differentiated, need fulfilling products or services.

23. Differentiation Strategy Cost Apple Differentiation

24. Generic Strategies for Large Businesses Low Cost Vulnerabilities zNew competitors with similar products at lower costs (and prices) zRemaining unique in customer’s eyes

25. Generic Strategies for Large Businesses Multiple Strategies The use by an organization of more than one of the previously mentioned strategies

26. Mid Size Firms Perform Poorly z“Stuck in the Middle” zDon’t possess the advantages of either their smaller or larger competitors zBest they can hope for is to expand their operations over time & take advantage of economies of scale or retrench and become smaller

27. Selecting a Generic Strategy Industry Life Cycle Embryonic Growth Shakeout Maturity Decline

28. Getting “Stuck in the Middle” Finding oneself between a niche strategy and a broad target market strategy is a recipe for disaster... No competitive advantage and thus “below average” performance is the best that one can expect