Business Level Strategies: - Rutika Saini

BUSINESS LEVEL
STRATEGIES
-RUTIKA SAINI
HOW THE COMPANY OR ITS UNITS SHOULD
COMPETE OR COOPERATE IN EACH INDUSTRY.
WHEN YOU ARE OPERATING IN SAME INDUSTRY WHERE
OTHERS ARE ALSO THERE, U WANT TO ACHIEVE CA. HOW??
• Competitive strategies
• Cooperative strategies
BUSINESS LEVEL STRATEGY
• Business strategies are course of action adopted by an organization for each of its business
separately, to serve identified customer groups and provide value to the customers by satisfaction
of their needs
ABELL’S FARAMEWORK
PORTER’S GENERIC FRAMEWORK
COST LEADERSHIP STRATEGY
• •When CA of the firm lies in lower cost of product / service compared to what the
competitors have to offer.
• •It aims at broad mass market.
• •Standardised products
RYANAIR TAKES CONTROL OVER THE SKY IN EUROPE
• Ryanair imitated and improved on the cost-leadership strategy pioneered by Southwest

Airlines and thus, become a leading player in European air travel market.
• The average cost of Ryanair ticket within Europe is £19, compared to £150 on British
Airways and £133 on Lufthansa.
• They use only 1 plane, selling tickets directly to consumers, eliminating free in-flight
meals, eliminated free blankets, pillows, snacks, etc.
• They are increasing their revenue by getting customers to spend as much as possible
while they are on flights.
• Ryanair and Southwest have together shown that the cost leadership strategy helps to
achieve CA.
APPLICABILITY
• When market is composed of:

• Price- based competition is vigorous
• Product/service is standardized
• many price-sensitive buyers,
• when buyers do not care much about differences from brand to brand
• when there are a large number of buyers with significant bargaining power.
WAYS TO ACHIEVE COST ADVANTAGE
• To successfully employ a cost leadership strategy, firms must ensure that total costs
across the value chain are lower than that of the competition.This can be accomplished
by: -
• performing value chain activities more efficiently than competitors, and - eliminating
some cost-producing activities in the value chain.
• Cost drivers:
• Economies of scale
• Learning and experience curve effects
BENEFITS
• Protection from competition

• Effective entry barrier for potential entrant
• If there are powerful buyers, then this firm will be less affected by any fall in price.
• less affected by powerful suppliers.
• Threat of cheaper substitute can be offset
RISKS
• Cost advantage is ephemeral.

• Severe cost reduction can dilute customer focus and limit experimentation.
• Technological shifts are greater threat to cost leader
DIFFERENTIATION STRATEGY
• When the CA of an organization lies in special features incorporated into the

product/service which is demanded by the customers, who are willing to pay for it..
• Differentiation lies not in physical level but in eyes of customers.
• Viable strategy to earn above normal profits in the industry.
FACTORS THAT DRIVE DIFFERENTIATION
CONDITIONS UNDER WHICH DIFFERENTIATION CAN
BE USED
• When there are different ways to differentiate products and services and many buyers
perceive those differences as being of value to them.
• Market is too large to be catered by a standardized products.
• Customer needs and preferences are too diversified.
• The nature of the product/service is such that brand loyalty is possible to generate and
sustain.
• Technological changes and product innovations are at fast pace
BENEFITS
• Rivalry - brand loyalty to differentiated products reduces price competition

• Creates higher entry barriers due to customer loyalty
• Charging premium price enable the firm to deal with supplier power
• Reduces buyer power because buyers lack suitable alternative
• Establishes customer loyalty and hence less threat from substitutes
RISKS
• Uniqueness that is not valuable

• Too much differentiation
• Price too high
• Differentiation that is easily imitated
FOCUSED BUSINESS-LEVEL STRATEGIES
• A firm attempting to implement a focus strategy is serving the needs of a limited group
or segment very well.
• A firm with a focus strategy must carefully consider its target market and what they
desire.
• Types:
• • A low-cost focus strategy
• Focused differentiation
CONDITIONS
• Unique segment
• Niche segment is big enough to be profitable
• Major players are not interested in niche
• Focusing organization has necessary skills and expertise
• Firm may lack resources to compete in the broader market
RISKS
• The focus strategy is imitated

• A major risk lies in the Cost configuration for the focused organization.
• Niches may become attractive for bigger players.
• Niches are often transient.
EXPLAIN THE KIND OF BUSINESS LEVEL STRATEGIES
WHICH MIGHT BE USED IN THE FOLLOWING CASES:
• Small pizza place in crowded college

• Detergent manufacturing seeking to bring out new product in an established market
• New mobile phone company

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BUSINESS LEVEL

• Ryanair imitated and improved on the cost-leadership strategy pioneered by Southwest

• When market is composed of:

• Protection from competition

• Cost advantage is ephemeral.

• When the CA of an organization lies in special features incorporated into the

• Rivalry - brand loyalty to differentiated products reduces price competition

• Uniqueness that is not valuable

• The focus strategy is imitated

• Small pizza place in crowded college

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