Focus strategy Lecture No. By Salman Shahid

Business Level Strategy An organization strategy that seek to determine how an organization should compete in each of its businesses

Example Waves and Dawlance

Waves and Dawlance deep freezer

Business Level Strategy Competitive advantages  Business-level strategies are intended to create differences between the firm’s position relative to differences between the firm’s position relative to those of its rivals. those of its rivals.

Business Level Strategy An organization’s major value creating skills. Capabilities, and resources that determine its competitive weapons Corecompetencies Strategy Business-levelstrategy Core Competencies and Core Competencies and Strategy An integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage Actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product markets

Example of Nestle water VS Aqua water

Nestle noodles VS Knorr noodles

Nestle VS Cadburys

PORTER'S FIVE FORCES

Competitive Advantage

Business Level Strategy Competitive Advantage Low-cost Differentiation Competitive Scope Broad Target Narrow Target Cost leadershipDifferentiation Cost FocusDifferentiation Focus

Business Level Strategies Generic Strategy Commonly Required Skills & Resources Common Organizational Requirements Overall Cost Leadership Sustained capital investment & access to capital Process engineering skills Intense supervision of labor Products designed for ease in manufacturing Low cost distribution system Tight cost control Frequent detailed control reports Structured Firm and responsibilities Incentives based on meeting strict quantitative targets DifferentiationStrong marketing abilities Product engineering Creative flair Strong capability in basic research Reputation for quality or technological leadership Long tradition in the industry or unique combination of skills drawn from other businesses Strong cooperation from channels Strong coordination among functions in R&D, product development, and marketing Subjective measurement and incentives instead of quantitative measures Amenities to attract highly skilled labor, scientists, or creative people FocusCombination of the above policies directed at the particular strategic target Combination of the above policies directed at the particular strategic target

Business Level Strategy  A business level strategy in which the organization is the lowest cost producer in its industry Cost Leadership Strategy:

Business Level Strategy Cost Leadership Strategy:  Alternative cost reduction strategies include: Building efficient scale facilities. Cost reductions through experience. Establish tight cost and overhead controls. Cost minimization in R&D, service, and sales forces.  Requirements for usage: High relative market share (economies of purchasing). Favorable access to raw materials. Design of products towards ease of manufacturing.

Business Level Strategies Cost Leadership Strategies:  Defense against 5 competitive forces: Competitors - Low cost position allows return after competitors have competed away their profits. Suppliers - Allows more flexibility to cope with input cost increases. Buyers - Buyers can at best force your prices down to that of the next lowest competitor (if they exit leaves firm as primary supplier). New-entrants - Scale economies or cost advantages usually provide substantial barriers to entry. Substitutes - Low cost position allows reduction in prices to maintain price/value relationship.

Differentiation strategy A business-level strategy in which a company offers unique products that are widely valued by customer. Business Level Strategies

Differentiation Strategy:  Goal is to provide value to customers through unique features and characteristics of a firm’s products.  Differentiators focus or concentrate on product innovation and developing product features that customers value. Products generally cost more (offset cost of differentiation).  Can’t completely ignore costs.

Business Level Strategies Differentiation Strategy:  Can differentiate based on: Superior quality Customer service (IBM ) Engineering design (HP) Unique features Image of prestige Package design  Requirements for usage: Use may require a high market share initially. Implies a trade-off with low-cost (i.e., costs to differentiate). Generally leads to a lower market share than in the low-cost approach.

Business Level Strategies Differentiation Strategy:  Defense against 5 competitive forces: Competitors - Decreases rivalry due to brand loyalty and resulting lower sensitivity to price. Suppliers - Allows an increase in price margins (customers willing to pay more, can withstand supplier price changes). Buyers - Removes buyer power due to a lack of comparative alternatives. New-entrants & Substitutes - Requires others to overcome customer loyalty and product uniqueness.

Business Level Strategy Focus strategy A business level strategy in which a company pursues a cost or differentiation advantage in a narrow industry segment. A business level strategy in which a company pursues a cost or differentiation advantage in a narrow industry segment.

Business Level Strategy Focus Strategy:  Firms can also use core competencies to serve a narrow segment of the market or a particular customer group.  Primary goals of a focused strategy: Focus on a particular buyer group, segment of the market, etc. To serve a narrow target or market segment more effectively than broad-based competitors can due to core competencies.

Business Level Strategies Focus Strategy:  Two primary focused strategies: Focused differentiation:  Requirements for usage similar to differentiation strategies.  Defense against the five forces similar to differentiation strategies.  Examples: Waves and Dawlance - waves cool bank (prestige, quality, engineering design). - Dawlance

Business Level Strategy Focus Strategies: Focused low-cost strategies:  Requirements for usage similar to low-cost strategies.  Defense against the five forces similar to differentiation strategies.