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8/8/2019 Ch05 Discussion Blue
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2004 by South-Western/Thomson Learning 1
Business-Level StrategyBusiness-Level Strategy
Robert E. Hoskisson
Michael A. Hitt
R. Duane Ireland
Chapter 5Chapter 5
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Chapter 2Chapter 2
Strategic LeadershipStrategic Leadership
Chapter 4Chapter 4
The InternalThe Internal
OrganizationOrganization
Chapter 6Chapter 6
Competitive Rivalry andCompetitive Rivalry and
Competitive DynamicsCompetitive Dynamics
Chapter 9Chapter 9
International StrategyInternational Strategy
Chapter 1Chapter 1
Introduction toIntroduction to
Strategic ManagementStrategic Management
Chapter 3Chapter 3
The ExternalThe External
EnvironmentEnvironment
Chapter 5Chapter 5
Business-LevelBusiness-Level
StrategyStrategy
Chapter 8Chapter 8Acquisition andAcquisition and
Restructuring StrategiesRestructuring Strategies
Chapter 11Chapter 11
Corporate GovernanceCorporate Governance
Strategic IntentStrategic Intent
Strategic MissionStrategic Mission
Chapter 7Chapter 7
Corporate-Level StrategyCorporate-Level Strategy
Chapter 10Chapter 10
Cooperative StrategyCooperative Strategy
Chapter 12Chapter 12
Strategic EntrepreneurshipStrategic Entrepreneurship
Strategic
Analysis
Strategic
Thinking
Creating
Competitive
Advantage
Monitoring
And Creating
EntrepreneurialOpportunities
The Strategic Management ProcessThe Strategic Management Process
Chapter 5Chapter 5
Business-LevelBusiness-Level
StrategyStrategy
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Discussion QuestionsDiscussion Questions
1. What role does the organizationsconcern for customers play in shapingits strategy?
2. What is business level strategy? Whatare some types of business levelstrategy?
3. What type of customers are necessary
to pursue a cost leadership strategy?How is a cost leadership strategydeveloped?
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Here
ClickHere
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Here More discussion questions
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Here
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Discussion Questions (cont.)Discussion Questions (cont.)
4. How does establishing the cost leadershipposition deal with the five competitive forces?What are the risks of pursuing costleadership?
5. What type of customers are necessary topursue a differentiation strategy? How is adifferentiation strategy developed?
6. How does establishing differentiation help a
firm fend off threats from the five forces?What are the risks of pursuing differentiation?
Click
Here
Click
Here
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Here
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Discussion Questions (cont.)Discussion Questions (cont.)
7. When should a focus strategy beimplemented? What are the risksof a focus strategy?
8. What is the integrated low-costdifferentiation strategy? What arethe arguments as to why it is
increasing in importance? Whatare the risks associated with theintegrated strategy?
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Here
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Discussion Question 1Discussion Question 1
What role does the organizationsconcern for customers play inshaping its strategy?
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Managing Relationships WithManaging Relationships With
CustomersCustomersCustomer relationships are strengthened byCustomer relationships are strengthened by
offering them superior valueoffering them superior value
help customers to develop a new competitivehelp customers to develop a new competitive
advantageadvantage
enhance the value of existing competitiveenhance the value of existing competitive
advantagesadvantages
Successful companies chart newSuccessful companies chart newcompetitive space in order to serve newcompetitive space in order to serve new
customers as they simultaneously try tocustomers as they simultaneously try to
find new ways to better server existingfind new ways to better server existing
customerscustomers
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Managing Relationships WithManaging Relationships With
CustomersCustomers Establish a competitive advantage alongEstablish a competitive advantage along
these dimensions:these dimensions:
ReachReach
the firms access and connection to customersthe firms access and connection to customers
RichnessRichness
the depth and detail of the two-way flow ofthe depth and detail of the two-way flow of
information between the firm and customersinformation between the firm and customers
AffiliationAffiliation
facilitating useful interactions with customersfacilitating useful interactions with customers
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The Central Role of CustomersThe Central Role of Customers
In selecting a business-levelIn selecting a business-level
strategy, the firm determinesstrategy, the firm determines
1.1. whowho it will serveit will serve2.2. whatwhat needs those target customersneeds those target customers
have that it will satisfyhave that it will satisfy
3.3. howhow those needs will be satisfiedthose needs will be satisfied
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CustomersCustomers
Basis for Customer SegmentationBasis for Customer Segmentation
ConsumerConsumer
MarketsMarkets
IndustrialIndustrial
MarketsMarkets
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Market Segmentation:Market Segmentation: Consumer MarketsConsumer Markets
Demographic factorsDemographic factors
ConsumerConsumer
MarketsMarkets
Socioeconomic factorsSocioeconomic factors
GeographicGeographic
factorsfactorsPsychological factorsPsychological factors
Consumption patternsConsumption patterns
Perceptual factorsPerceptual factors
Dem.
Soc.
Geo.Psy.
Con.
Per.
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Market Segmentation:Market Segmentation: Industrial MarketsIndustrial Markets
IndustrialIndustrial
MarketsMarkets
End-use segmentsEnd-use segments
Product segmentsProduct segments
Geographic segmentsGeographic segments
Common buying factorCommon buying factor
segmentssegments
Customer size segmentsCustomer size segments
End
Pro.
Geo.
Buy.
Size
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Discussion Question 2Discussion Question 2
What is business level strategy?What are some types of businesslevel strategy?
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Business-Level StrategyBusiness-Level Strategy
Business-level strategyBusiness-level strategy: an integrated and: an integrated and
coordinated set of commitments and actionscoordinated set of commitments and actions
the firm uses to gain a competitivethe firm uses to gain a competitive
advantage by exploiting core competenciesadvantage by exploiting core competencies
in specific product marketsin specific product markets
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Key Issues of Business-LevelKey Issues of Business-Level
StrategyStrategyWhat good or service to offer customersWhat good or service to offer customers
How to manufacture or create the good orHow to manufacture or create the good or
serviceservice
How to distribute the good or service inHow to distribute the good or service in
the marketplacethe marketplace
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Types of Business-Level StrategiesTypes of Business-Level Strategies
Business-level strategies are intended toBusiness-level strategies are intended to
create differences between the firmscreate differences between the firms
position relative to those of its rivalsposition relative to those of its rivals
To position itself, the firm must decideTo position itself, the firm must decide
whether it intends to perform activitieswhether it intends to perform activities
differently or to perform different activitiesdifferently or to perform different activities
as compared to its rivalsas compared to its rivals
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Five Generic StrategiesFive Generic Strategies
Competitive AdvantageCompetitive Advantage
Compe
tit i
veS
co
pe
Compe
tit i
veS
co
pe
CostCost UniquenessUniqueness
Bro
ad
Broad
targe
t
tar
ge
t
Narrow
Narrow
targe
t
targe
t
CostCost
LeadershipLeadership
DifferentiationDifferentiation
Focused CostFocused Cost
LeadershipLeadership
FocusedFocused
DifferentiationDifferentiation
Integrated CostIntegrated Cost
Leadership/Leadership/
DifferentiationDifferentiation
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Discussion
Questions
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Discussion Question 3Discussion Question 3
What type of customers are
necessary to pursue a costleadership strategy? How is a cost
leadership strategy developed?
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Cost Leadership StrategyCost Leadership Strategy
An integrated set of actions designed toAn integrated set of actions designed to
produce or deliver goods or services at theproduce or deliver goods or services at the
lowest costlowest cost,, relative to competitorsrelative to competitors withwith
features that are acceptable to customersfeatures that are acceptable to customers
relatively standardized productsrelatively standardized products
features acceptable to many customersfeatures acceptable to many customers
lowest competitive pricelowest competitive price
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Cost Leadership StrategyCost Leadership Strategy
Cost saving actions required by this strategy:Cost saving actions required by this strategy:
building efficient scale facilities
tightly controlling production costs and
overhead
minimizing costs of sales, R&D and service
building efficient manufacturing facilities
monitoring costs of activities provided byoutsiders
simplifying production processes
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How to Obtain a Cost AdvantageHow to Obtain a Cost Advantage
Cost DriversCost Drivers Value ChainValue Chain
Determine andDetermine and
controlcontrolReconfigure, ifReconfigure, if
neededneeded
Alter production process Alter production process
Change in automation Change in automation
New distribution channelNew distribution channel
Direct sales in place ofindirect sales
Direct sales in place ofindirect sales
New advertising mediaNew advertising media
New raw materialNew raw material
Backward integration Backward integration
Forward integration Forward integration
Change locationrelative to suppliers or
buyers
Change locationrelative to suppliers or
buyers
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q Product featuresq Performanceq Mix & variety of
productsq Service levelsq Small vs. large buyersq Process technologyq Wage levelsq Product featuresq Hiring, training,
motivation
Factors That Drive CostsFactors That Drive Costs
q Economies of scaleq Asset utilizationq Capacity utilization
pattern Seasonal, cyclical
q Interrelationshipsq Order processing
and distributionq Value chain linkages
Marketing & sales Logistics &
operations
Service
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Questions Leading to Lower CostsQuestions Leading to Lower Costs
1.1. How can an activity be performedHow can an activity be performed
differently or even eliminated?differently or even eliminated?
2.2. How can a group of linked value activitiesHow can a group of linked value activities
be regrouped or reordered?be regrouped or reordered?
3.3. How might coalitions with other firmsHow might coalitions with other firms
lower or eliminate costs?lower or eliminate costs?
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Discussion Question 4Discussion Question 4
How does establishing the costleadership position deal with thefive competitive forces? What arethe risks of pursuing costleadership?
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Cost Leadership Strategy and theCost Leadership Strategy and the
Five Forces of CompetitionFive Forces of Competition
Rivalry Among CompetingRivalry Among Competing
FirmsFirms
Can use cost leadershipCan use cost leadership
strategy to advantage since:strategy to advantage since:q competitors avoid pricecompetitors avoid price
wars with cost leaders,wars with cost leaders,
creating higher profits forcreating higher profits forthe entire industrythe entire industry
RivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
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Cost Leadership Strategy and theCost Leadership Strategy and the
Five Forces of CompetitionFive Forces of Competition
Bargaining Power ofBargaining Power of
BuyersBuyers
Can mitigate buyers power by:Can mitigate buyers power by:q driving prices far belowdriving prices far below
competitors, causing themcompetitors, causing them
to exit and shifting powerto exit and shifting power
with buyers back to thewith buyers back to thefirmfirm
RivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
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Cost Leadership Strategy and theCost Leadership Strategy and the
Five Forces of CompetitionFive Forces of Competition
Bargaining Power ofBargaining Power of
SuppliersSuppliers
Can mitigate suppliers powerCan mitigate suppliers power
by:by:q being able to absorb costbeing able to absorb cost
increases due to low costincreases due to low cost
positionpositionq being able to make very largebeing able to make very large
purchases, reducing chancepurchases, reducing chance
of supplier using powerof supplier using power
RivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
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Cost Leadership Strategy and theCost Leadership Strategy and the
Five Forces of CompetitionFive Forces of CompetitionRivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
Threat of New EntrantsThreat of New Entrants
Can frighten off new entrantsCan frighten off new entrants
due to:due to:q their need to enter on a largetheir need to enter on a large
scale in order to be costscale in order to be cost
competitivecompetitiveq the time it takes to movethe time it takes to move
down the learning curvedown the learning curve
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Cost Leadership Strategy and theCost Leadership Strategy and the
Five Forces of CompetitionFive Forces of Competition
Threat of SubstituteThreat of Substitute
ProductsProducts
Cost leader is well positionedCost leader is well positioned
to:to:q make investments to bemake investments to be
first to create substitutesfirst to create substitutesq
buy patents developed bybuy patents developed bypotential substitutespotential substitutesq lower prices in order tolower prices in order to
maintain value positionmaintain value position
RivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
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Structure for Cost LeadershipStructure for Cost Leadership
StrategyStrategy
Office of the PresidentOffice of the President
Centralized StaffCentralized Staff
MarketingMarketing PersonnelPersonnel
EngineeringEngineering OperationsOperations AccountingAccounting
Operations is main functionOperations is main function Process engineering isProcess engineering is
emphasized over R&Demphasized over R&D
Large centralized staffLarge centralized staff
Formalized proceduresFormalized procedures Structure is mechanical, jobStructure is mechanical, job
roles highly structuredroles highly structured
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Risks of Cost Leadership StrategyRisks of Cost Leadership Strategy
Processes used by the cost leader to produceProcesses used by the cost leader to produceand distribute its good or service couldand distribute its good or service couldbecome obsolete because of competitorsbecome obsolete because of competitors
innovationsinnovations Too much focus by the cost leader on costToo much focus by the cost leader on cost
reductions may occur at the expense of tryingreductions may occur at the expense of tryingto understand customers perceptions ofto understand customers perceptions ofcompetitive levels of differentiationcompetitive levels of differentiation
Competitors may learn how to successfullyCompetitors may learn how to successfullyimitate the cost leaders strategyimitate the cost leaders strategy
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Discussion Question 5Discussion Question 5
What type of customers are
necessary to pursue a differentiationstrategy? How is a differentiation
strategy developed?
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Differentiation StrategyDifferentiation Strategy
An integrated set of actions designed by aAn integrated set of actions designed by a
firm to produce or deliver goods or servicesfirm to produce or deliver goods or services
(at an acceptable cost) that customers(at an acceptable cost) that customers
perceive as being different in ways that areperceive as being different in ways that areimportant to themimportant to them
price for product can exceed what the firmsprice for product can exceed what the firms
target customers are willing to paytarget customers are willing to pay
nonstandardized productsnonstandardized products
customers value differentiated features morecustomers value differentiated features more
than they value low costthan they value low cost
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Differentiation StrategyDifferentiation Strategy
Value provided byValue provided by unique features andunique features and
value characteristicsvalue characteristics
Command premium priceCommand premium price
High customer serviceHigh customer service
Superior qualitySuperior quality
Prestige or exclusivityPrestige or exclusivity
Rapid innovationRapid innovation
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Differentiation StrategyDifferentiation Strategy
Differentiation actions required by this strategy:Differentiation actions required by this strategy:
developing new systems and processesdeveloping new systems and processes
shaping perceptions through advertisingshaping perceptions through advertising
quality focusquality focus
capability in R&Dcapability in R&D
maximize human resource contributionsmaximize human resource contributions
through low turnover and high motivationthrough low turnover and high motivation
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How to Obtain a DifferentiationHow to Obtain a Differentiation
AdvantageAdvantage
Cost DriversCost Drivers Value ChainValue Chain
Control ifControl if
neededneededReconfigure toReconfigure to
maximizemaximize
customer perceptions of uniquenesscustomer perceptions of uniquenesscustomer perceptions of uniquenesscustomer perceptions of uniqueness
customer reluctance to switch to non-unique productcustomer reluctance to switch to non-unique productcustomer reluctance to switch to non-unique productcustomer reluctance to switch to non-unique product
Raise performance of product or serviceRaise performance of product or service
Lower buyers costsLower buyers costs
Create sustainability through:Create sustainability through:
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Factors That Drive DifferentiationFactors That Drive Differentiation
Unique product featuresUnique product featuresUnique product performanceUnique product performance Exceptional servicesExceptional servicesNew technologiesNew technologiesQuality of inputsQuality of inputs Exceptional skill or experienceExceptional skill or experience
Detailed informationDetailed information Extensive personal relationships withExtensive personal relationships with
buyers and suppliersbuyers and suppliers
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Differentiation Strategy and theDifferentiation Strategy and the
Five Forces of CompetitionFive Forces of CompetitionRivalry Among CompetingRivalry Among Competing
FirmsFirms
Can defend againstCan defend against
competition because:competition because:q brand loyalty tobrand loyalty to
differentiated productdifferentiated product
offsets price competitionoffsets price competition
RivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
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Discussion Question 6Discussion Question 6
How does establishing differentiation
help a firm fend off threats from thefive forces? What are the risks of
pursuing differentiation?
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Differentiation Strategy and theDifferentiation Strategy and the
Five Forces of CompetitionFive Forces of CompetitionBargaining Power of BuyersBargaining Power of Buyers
Can mitigate buyer powerCan mitigate buyer power
because:because:
q well differentiated productswell differentiated productsreduce customer sensitivityreduce customer sensitivity
to price increasesto price increases
RivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
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Differentiation Strategy and theDifferentiation Strategy and the
Five Forces of CompetitionFive Forces of CompetitionBargaining Power ofBargaining Power of
SuppliersSuppliers
Can mitigate suppliers powerCan mitigate suppliers power
by:by:q absorbing price increasesabsorbing price increases
due to higher marginsdue to higher marginsq
passing along higherpassing along higher
supplier prices becausesupplier prices because
buyers are loyal tobuyers are loyal to
differentiated branddifferentiated brand
RivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
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Differentiation Strategy and theDifferentiation Strategy and the
Five Forces of CompetitionFive Forces of CompetitionThreat of New EntrantsThreat of New Entrants
Can defend against newCan defend against new
entrants because:entrants because:
q new products must surpassnew products must surpassproven products or,proven products or,
q new products must be atnew products must be at
least equal to performanceleast equal to performance
of proven products, butof proven products, but
offered at lower pricesoffered at lower prices
RivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
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Differentiation Strategy and theDifferentiation Strategy and the
Five Forces of CompetitionFive Forces of CompetitionThreat of SubstituteThreat of Substitute
ProductsProducts
Well positioned relative toWell positioned relative to
substitutes because:substitutes because:q brand loyalty to abrand loyalty to a
differentiated product tendsdifferentiated product tends
to reduce customers testingto reduce customers testing
of new products orof new products or
switching brandsswitching brands
RivalryAmong
RivalryAmong
CompetingFirms
CompetingFirms
Bargainin
gPow
er
Bargainin
gPow
er
ofB
uyers
ofB
uyers
Bargaining PowerBargaining Power
of Suppliersof Suppliers
Threato
fNew
Threato
fNew
Entrants
Entrants
Thre
atof
Thre
atof
Subs
titut
ePro
ducts
Subs
titut
ePro
ducts
Five Forces ofFive Forces ofCompetitionCompetition
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OperationsOperations HumanHumanResourcesResources
Structure for DifferentiationStructure for Differentiation
StrategyStrategyPresident andPresident and
Limited StaffLimited Staff
MarketingMarketing
New ProductNew ProductR&DR&D
Marketing is the main function for tracking new product ideasMarketing is the main function for tracking new product ideas New product R&D is emphasizedNew product R&D is emphasized Most functions are decentralizedMost functions are decentralized Formalization is limited to foster change and promote new ideasFormalization is limited to foster change and promote new ideas
Overall structure is organic; job roles are less structuredOverall structure is organic; job roles are less structured
R&DR&D
FinanceFinanceMarketingMarketing
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Major Risks of DifferentiationMajor Risks of Differentiation
StrategyStrategy
Customers may decide that the priceCustomers may decide that the price
differential between the differentiateddifferential between the differentiated
product and the cost leaders product isproduct and the cost leaders product is
too largetoo largeMeans of differentiation may cease toMeans of differentiation may cease to
provide value for which customers areprovide value for which customers are
willing to paywilling to pay
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Major Risks of DifferentiationMajor Risks of Differentiation
StrategyStrategy
Experience may narrow customersExperience may narrow customers
perceptions of the value of differentiatedperceptions of the value of differentiated
features of the firms productsfeatures of the firms products
Makers of counterfeit goods may attemptMakers of counterfeit goods may attempt
to replicate differentiated features of theto replicate differentiated features of the
firms productsfirms products
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Discussion Question 7Discussion Question 7
When should a focus strategy be
implemented? What are the risksof a focus strategy?
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Focused Business-LevelFocused Business-Level
StrategiesStrategiesA focus strategy must exploit a narrowA focus strategy must exploit a narrowtargets differences from the balance oftargets differences from the balance of
the industry by:the industry by:
isolating a particular buyer groupisolating a particular buyer group
isolating a unique segment of a productisolating a unique segment of a product
lineline
concentrating on a particularconcentrating on a particulargeographic marketgeographic market
finding their nichefinding their niche
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Factors That May Drive FocusedFactors That May Drive Focused
StrategiesStrategies Large firms may overlook small nichesLarge firms may overlook small niches
Firm may lack resources to compete in theFirm may lack resources to compete in the
broader marketbroader market
May be able to serve a narrow marketMay be able to serve a narrow market
segment more effectively than can largersegment more effectively than can larger
industry-wide competitorsindustry-wide competitors
Focus may allow the firm to directFocus may allow the firm to directresources to certain value chain activitiesresources to certain value chain activities
to build competitive advantageto build competitive advantage
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Major Risks of Focused StrategiesMajor Risks of Focused Strategies
Firm may be outfocused by competitorsFirm may be outfocused by competitors
Large competitor may set its sights onLarge competitor may set its sights on
your niche marketyour niche market
Preferences of niche market may changePreferences of niche market may change
to match those of broad marketto match those of broad market
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Discussion Question 8Discussion Question 8
What is the integrated low-costdifferentiation strategy? What are
the arguments as to why it isincreasing in importance? Whatare the risks associated with theintegrated strategy?
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Advantages of Integrated StrategyAdvantages of Integrated Strategy
A firm that successfully uses anA firm that successfully uses an
integrated cost leadership/differentiationintegrated cost leadership/differentiation
strategy should be in a better position to:strategy should be in a better position to:
adapt quickly to environmental changesadapt quickly to environmental changes
learn new skills and technologies morelearn new skills and technologies more
quicklyquickly
effectively leverage its coreeffectively leverage its corecompetencies while competing againstcompetencies while competing against
its rivalsits rivals
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Benefits of Integrated StrategyBenefits of Integrated Strategy
Successful firms using this strategy haveSuccessful firms using this strategy have
above-average returnsabove-average returns
Firm offers two types of values toFirm offers two types of values to
customerscustomers
some differentiated features (but lesssome differentiated features (but less
than a true differentiated firm)than a true differentiated firm)
relatively low cost (but now as low asrelatively low cost (but now as low asthe cost leaders price)the cost leaders price)
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Using the Functional StructureUsing the Functional Structure
The integrated form of the functional
structure
must have decision-making patterns that are
partially centralized and partially decentralized will have semi-specialized jobs and rules and
procedures that call for some formal and some
informal job behavior
Strategic flexibility is obtained via flexible manufacturing systems
information networks
total quality management systems
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Major Risks of Integrated StrategyMajor Risks of Integrated Strategy
An integrated cost/differentiation businessAn integrated cost/differentiation business
level strategy often involves compromiseslevel strategy often involves compromises
(neither the lowest cost nor the most(neither the lowest cost nor the most
differentiated firm)differentiated firm) The firm may become stuck in theThe firm may become stuck in the
middle lacking the strong commitmentmiddle lacking the strong commitment
and expertise that accompanies firmsand expertise that accompanies firms
following either a cost leadership or afollowing either a cost leadership or a
differentiated strategydifferentiated strategy