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Business level strategyCompetitive strategy and
industry environmentSession 11
Business level strategy• How to compete?• Generic business strategies• Choice of business strategy• Investment strategies
Business level strategy• Cost Leadership• 5-Forces model (protected
through low costs)• Disadvantages
– Cost competition from competitors– Imitation – Focus exclusively on efficiency
Business level strategy• Differentiation• 5-Forces model (protected through
differentiation, brand loyalty)• Disadvantages
– Need to maintain uniqueness– Imitation– Changes in consumer tastes and
demands
Business level strategy• Focus strategy• 5-Forces model (Protected by
either low costs or differentiation)• Disadvantages
– Smaller volumes, higher costs– Changes in technology or consumer
taste– Competition from differentiators
Business level strategy• Cost leadership and differentiation
– Production and process technology– Flexible manufacturing systems
• Stuck in the middle– Importance of FIT – capabilities and
strategy– Align product/technology/market
choices with strategy
Investment strategy• Supports competitive strategy (FIT)• Cost of strategy
– Resources required• Returns from strategy
– Firm competitive position– Stage of industry life cycle
We don’t like their sound, and guitarmusic is on the way out.
-Decca Recording Co., rejecting the Beatles, 1962
Investment Strategy• Strength of company competitive
position– Market share– Distinctive competency
• Industry life cycle– Opportunities– Threats
Competitive Strategy & Industry Environment• Managing industry environment
(FIT)• Fragmented Industries• Embryonic & Growth Industries• Mature Industries• Declining Industries
Fragmented Industries• Characteristics
– Many small/medium sized companies– Few economies of scale, High transport costs
• Strategic Focus– Niche, customization
• Consolidation Strategies– Chaining– Franchising– Horizontal Merger
Embryonic & Growth Industries• Characteristics
– Created by pioneers– Attract imitators
• Strategic focus– Exploit innovation
• Strategies– Go it alone– Enter into alliance– License innovation
Mature Industries• Characteristics
– Consolidated– Competitive interdependence
• Strategic focus– Deter entry– Manage rivalry– Supply and distribution strategy
Mature Industry• Deter entry
– Product proliferation/ Filling niches– Price cutting– Maintaining excess capacity
• Manage Rivalry– Price signaling– Price leadership– Product differentiation– Controlling industry capacity
• Preemptive• Co-ordination
Declining Industry• Characteristics
– Falling demand – Intense competition
• Strategic Focus– Dealing with decline
Strategies– Leadership– Niche– Harvest– Divestment