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MGT489 - Lecture 05

The document discusses different business-level strategies that companies can pursue, including lowering costs, differentiation, and value innovation. It explains that lowering costs allows companies to gain market share and profitability in commodity markets by undercutting rivals' prices. Differentiation involves distinguishing a company's offerings through superior attributes and features to command premium prices and capture more market share. The document also notes that business-level strategies are implemented through functional strategies and organizational structures that align incentives and culture.

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Farha Elvy
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77 views17 pages

MGT489 - Lecture 05

The document discusses different business-level strategies that companies can pursue, including lowering costs, differentiation, and value innovation. It explains that lowering costs allows companies to gain market share and profitability in commodity markets by undercutting rivals' prices. Differentiation involves distinguishing a company's offerings through superior attributes and features to command premium prices and capture more market share. The document also notes that business-level strategies are implemented through functional strategies and organizational structures that align incentives and culture.

Uploaded by

Farha Elvy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Business-Level Strategy

Chapter 5
Business-level Strategy
§  Overall competitive theme of a business
§  Way a company positions itself in the
marketplace to gain a competitive advantage
§  Different positioning strategies that can be
used in different industry settings

Ø Lowering Cost
Ø Differentiation
Lowering Cost
§  Enable a company to:
ü  Gain a competitive advantage in commodity
markets
ü  Undercut rivals on price
ü  Gain market share
ü  Maintain or increase profitability
Differentiation
§  Distinguishing oneself from rivals by offering
something that they find hard to match
§  Product differentiation is achieved through:
ü  Superior reliability, functions, and features
ü  Better design, branding, point-of-sale service,
after sales service, and support
§  Advantages
ü  Allows a company to charge a premium price
ü  Helps a company to grow overall demand and
capture market share from its rivals
Options for Exploiting Differentiation
Differentiation – Low Cost Tradeoff
Value Innovation
§  Occurs when innovations push out the
efficiency frontier in an industry, enabling
greater value to be offered through superior
differentiation
ü  At a lower cost than was thought impossible
§  Enable a company to outperform its rivals for
a long period of time
Value Innovation in the PC Industry
Who are the customers?
Market Segmentation
§  Decision of a company to group customers
based on important differences in their needs
to gain a competitive advantage
ü  Standardization strategy: Producing a
standardized product for the average customer,
ignoring different segments
ü  Segmentation strategy: Producing different
offerings for different segments, serving many
segments or the entire market
ü  Focus strategy: Serving a limited number of
segments or just one segment
Generic Business Level Strategies
Strategy is implemented through Function and Organization
Lowering Cost Through Functional
Strategy and Organization
§  Achieve economies of scale and learning
effects
§  Adopt lean production and flexible
manufacturing technologies
§  Implement quality improvement
methodologies to produce reliable goods
§  Streamline processes
§  Use information systems to automate
business process

Lowering Cost Through Functional
Strategy and Organization
§  Implement just-in-time inventory control
systems
§  Design products with a focus on reducing
costs
§  Increase customer retention
§  Ensure that the organization’s structure,
systems, and culture reward actions that lead:
ü  Higher productivity
ü  Greater efficiency
Differentiation through Functional
Level Strategy and Organization
§  Customize product offering and marketing mix
to different market segments
§  Design product offerings that have a high
perceived quality regarding their:
ü  Functions
ü  Features
ü  Performance
ü  Reliability
§  Handle and respond to customer queries and
problems promptly
Differentiation through Functional
Level Strategy and Organization
§  Focus marketing efforts on:
ü  Brand building
ü  Perceived differentiation from rivals
§  Ensure employees act in a manner consistent
with the company’s image
§  Create the right organizational structure,
controls, incentives, and culture
§  Ensure that the control systems, incentive
systems, and culture align with the strategic
thrust
Competing Differently:
Searching for Blue Ocean
How to redefine the market and craft a new
business level strategy?
ü Eliminate
ü Reduce
ü Raise
ü Create
Competing Differently:
Searching for Blue Ocean

Last Slide

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