1. Business Level Strategy

2. Bases of competitive advantage
Three Generic Strategies – Michael E Porter
Overall cost leadership
Differentiation
Focus

3. Cost Leadership
In this strategy the ability to deliver the same goods/ services sold by rivals at a lower price
Generally suitable for commodity products
Wal-Mart, Vanguard Group,

4. Cost Leadership Experience Curve Effect
Aggressive construction of efficient scale facilities
Vigorous pursuit of cost reduction
Tight cost control
Avoidance of marginal customer accounts

5. Causes of Experience Curve Effects
Improved Productivity of labor
Increased specialization
Innovation in Production Methods
Value Engineering and Fine Tuning
Balancing Production line

6. Price based strategies
Products / services are commodity like
Price sensitive customers
Buyers have high power / low switching costs
Small number of providers with similar market shares
Avoid major competitors

7. Potential pitfalls of Low cost strategy
Margin reduction
Inability to reinvest
Low price strategy cannot be pursued without a low cost base
Price war

8. Differentiation strategies
Clear identification of the strategic customer
Who are the competitors

9. Need for Differentiation
To compete against rivals eg Southwest Airlines, eBay,
To create entry barriers for newcomers by building a unique product
To reduce threats arising out of substitutes
To develop a differentiation dvantage

10. Types of Differentiation
Tangible Differentiation – design , package, style, quality, composition
Intangible Differentiation – Image, Brand, Company reputation , customer preferences.,

11. Sources of Differentiation
Value Chain – Michael Porter
Uniqueness – as below.
Policy Choice – credit policy , ad spend
Links – within the value chain
Timing
Location – accessibility
Interrelationships – sales force in sister co

12. Cost of Differentiation
Increased Expenditure on training
Increased ad spend to promote
Cost of hiring
Use of more expensive material

13. Focus – a concept It is segment based and has narrow competitive scope
Also known as niche strategy
Focus strategy has two variants – cost focus & differentiation focus
Cost Focus – firms seek cost advantage in the target segment
Differentiation Focus – firms seeks differentiation in target segment

14. Focus strategy Market segment large enough
Market segment has good growth potential
Focuser has efficient resources
Focuser able to choose from different segments
Market segment is not significant to the success of major competitors

15. Risks of Generic Strategies
Cost Leadership
Differentiation
Focus
Not sustained
Imitated
Technology changes
Competitors imitate
Target become
unattractive
Bases for cost leadership erod
Bases for differentiation change
Demand disappears
Cost focuser achieves lower
Differentiation focuser achieve
Sub segment of industry

16. Distinctive approach of two competitive strategies
Aspect
Cost Leadership
Differentiation
Strategic Intent
Broad c/s of market
Basis of advantage
Lowest cost
Unique product
Product line
limited
Wide variety
Prod emphasis
Lo price hi Q
Innovative , diff
Marketing emph
Low price
Premium price

17. The Strategy Clock – D’Aveni
No frills
Low Price
Hybrid
Differentiated
Focused differentiation
6. Strategies destined for failure
7. Strategies destined for failure
8. Strategies destined for failure

18. Competitive Strategy options
No Frills
Low Price
Hybrid
Differentiation without price premium
Differentiation with price premium
Segment specific
Risk of price war
Low cost base
Perceived added value by user
Perceived added value sufficient to bear price premium

19. Competitive Strategy options
Focused Differentiation
Increased price/ standard value
Increased price / low value
Low value/ standard price
PAV to a segment warranting price premium
Higher margins if competitors do not follow
Feasible in monopoly situations
Loss of market share

20. Failure Strategy
A Failure strategy is one that does not provide perceived value for money in terms of product features , price or both

21. Sustaining competitive advantage
Sustaining price based advantage
Prepare to accept reduced margins
Sustain and win a price war
Organization specific capabilities eg excellent operation facilities, low raw material cost, low distribution cost etc
Focusing on market segments where low price is particularly valued

22. Sustaining competitive advantage
Sustain differentiation based advantage
Create difficulties in imitation
Imperfect mobility of resources
- Many intangible assets such as brand image reputation
- Switching costs
- Co specialization

23. Competitive strategy in fragmented industry
Low overall entry barriers
Absence of economies of scale
High transportation costs
High inventory costs
No advantage in dealing with suppliers or buyers
High level of creative content
High product differentiation

24. Strategy formulation in fragmented industry
Conduct industry wide analysis
Identify what causes fragmentation
Study causes of fragmentation
Assess new situation when industry overcomes fragmentation
Locate a defendable position and take advantage of industry consolidation

25. Competitive strategy in emerging industry
Technological uncertainty
Strategic uncertainty
High initial cost but steep cost reduction
Embryonic companies and spin offs
First time buyers
Short time horizon
Subsidies

26. Strategy formulation in fragmented industry
Shaping industry structure
Externalities in industry development
Changing roles of suppliers and channels
Shifting mobility barriers

27. Competitive strategy in maturing industry
Slowing growth rates
Firms sell to experienced repeat buyers
Competition is concentrated on cost and service
International competition increase
Manufacturing , marketing , research , distribution often undergo change
Industry profits fall

28. Strategy formulation in emerging industry
Sophisticated cost analysis
Rationalizing the product mix
Correct pricing
Process innovation
Competing internationally
Buy cheap assets
Increasing scope of purchases

29. Competitive strategy in declining industry
Conditions of demand
Exit barriers
Volatility of rivalry

30. Strategy formulation in declining industry
Leadership
Niche
Harvest
Quick divestment