CORPORATE STRATEGY Decisions about what markets to compete in Competing in these markets via existing operations, diversification, repositioning, Business Strategy IMPLEMENTATION FORMULATION Decisions about how to compete in each market Competing by least cost, focus, differentiation Functional Strategy Decisions about the actions needed within each functional area Carry out strategy chosen for each function

Business Strategies

COST LEADRSHIP Differentiation COST FOCUS Focused Differentiation Competitive Advantage Base Lower Cost Differentiation Broad Target Narrow Target Competitive Scope Michael Porter’s Generic Strategies

Cost Leadership Skills & Resources n Sustained capital investment & access to capital n Process engineering skills n Intense supervision of labor n Products designed for ease of manufacture n Low-cost distribution Organizational Req’s n Tight cost control n Frequent, detailed control reports n Structured organization & responsibilities n Incentives based on meeting strict quantitative targets

Differentiation Skills & Resources n Strong marketing abilities n Product engineering n Creative flair n Strong capability in basic research n Corporate reputation for quality n Strong cooperation from channels Organizational Reqs. n Strong coordination among functions, esp. R&D, product development, & marketing n Subjective measurement & incentives n Amenities to attract highly skilled labor

Pure Cost Cost and Differentiation No Competitive Advantage Pure Differentiation Differentiation Position Low High Low High Cost Position