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8/8/2019 Business Strg
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Business-Level StrategyBusiness-LevelStrategy
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Business LevelBusiness Level
StrategyStrategy
SustainableSustainable
CompetitiveCompetitive
AdvantageAdvantage
External EnvironmentExternal Environment
Internal EnvironmentInternal Environment
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CoreCore
CompetencCompetenc
yy
CoreCore
CompetencCompetencyy
TheThe resourcesresources andand
capabilitiescapabilities that have beenthat have been
determined to be a source ofdetermined to be a source ofcompetitive advantage for acompetitive advantage for a
firm over its rivals.firm over its rivals.
TheThe resourcesresources andand
capabilitiescapabilities that have beenthat have been
determined to be a source ofdetermined to be a source ofcompetitive advantage for acompetitive advantage for a
firm over its rivals.firm over its rivals.
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StrategStrateg
yy
StrategStrateg
yy
An integrated and coordinatedAn integrated and coordinatedset of actions taken to exploitset of actions taken to exploit
core competencies and gain acore competencies and gain a
competitive advantage.competitive advantage.
An integrated and coordinatedAn integrated and coordinatedset of actions taken to exploitset of actions taken to exploit
core competencies and gain acore competencies and gain a
competitive advantage.competitive advantage.
Core
Competency
The resources and capabilities that have been
determined to be a source of competitive
advantage for a firm over its rivals.
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Strategy
An integrated and coordinated set of
actions taken to exploit core competencies
and gain a competitive advantage.
BusinessBusinessLevelLevel
StrategyStrategy
BusinessBusinessLevelLevel
StrategyStrategy
Actions taken to provide value toActions taken to provide value to
customers and gain a competitivecustomers and gain a competitive
advantage by exploiting coreadvantage by exploiting core
competencies in specific,competencies in specific,
individual product markets.individual product markets.
Actions taken to provide value toActions taken to provide value to
customers and gain a competitivecustomers and gain a competitive
advantage by exploiting coreadvantage by exploiting core
competencies in specific,competencies in specific,
individual product markets.individual product markets.
Core
Competency
The resources and capabilities that have been
determined to be a source of competitive
advantage for a firm over its rivals.
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Generic Business Level StrategiesGeneric Business Level Strategies
CostCost UniquenessUniqueness
Source of Competitive AdvantageSource of Competitive Advantage
Breadth ofBreadth of
CompetitiveCompetitive
ScopeScope
BroadBroad
TargetTarget
MarketMarket
NarrowNarrow
TargetTarget
MarketMarket
Focused
Differen-
tiation
Focused
Differen-
tiation
CostLeadership
CostLeadership
Differen-tiation
Differen-tiation
Focused
Low Cost
Focused
Low Cost
CostCostLeadershipLeadership
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Key Criteria:Key Criteria:
Cost LeadershipLeadership Business Level StrategyCost LeadershipLeadership Business Level Strategy
Relatively standardized productsRelatively standardized products
Features acceptable to many customersFeatures acceptable to many customers
Lowest competitive priceLowest competitive price
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Requirements:Requirements:Constant effort to reduce costs through:Constant effort to reduce costs through:
Building efficient scale facilitiesBuilding efficient scale facilities
State of the art manufacturing facilitiesState of the art manufacturing facilities
Simplification of processesSimplification of processes
Minimizing costs of sales, R&D and serviceMinimizing costs of sales, R&D and service
Monitoring costs of activities provided by outsidersMonitoring costs of activities provided by outsiders
Tight control of production costs and overheadTight control of production costs and overhead
Cost Leadership Business Level StrategyCost Leadership Business Level Strategy
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Primary Activities
Support
Activities
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inbou n
d
Logistics
Oper
ations
Outbou
nd
Logis ti
cs
Mark
eting
&Sales
Servi c
e
MAR
GIN
MARG
IN
Value Creating ActivitiesValue Creating Activities Common to aCommon to a
Cost LeadershipCost Leadership Business Level StrategyBusiness Level Strategy
Value Creating ActivitiesValue Creating Activities Common to aCommon to a
Cost LeadershipCost Leadership Business Level StrategyBusiness Level Strategy
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Primary Activities
Support
Activities
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inbou n
d
Logistics
Oper
ations
Outbou
nd
Logis ti
cs
Mark
eting
&Sales
Servi c
e
MAR
GIN
MARG
IN
MIS SystemsRelatively Few
Management Layers toReduce Overhead
Consistent Policies to
Reduce Turnover Costs
Training & Development
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms ProductionProcesses Timing of Asset
Purchases
Efficient Plant
Scale to Minimize
Manufacturing
Costs
Selection of LowCost Transport
Carriers
Delivery Schedule
that Reduces
Costs
National Scale
Advertising
Small, Highly
Trained Sales
Force
Effective Product
Installations to
Reduce Frequency
and Severity
of Recalls
Easy-to-Use Manufacturing
Technologies
[SOPHISTICATION]
Reduce Costs Associated with
Manufacturing Processes
Lowest Cost Products to Purchase
Raw MaterialsFrequent Evaluation Processes to
Monitor Suppliers Performances
Located in Close
Proximity with
Suppliers
Policy Choice of
Plant Technology
Organizational
Learning
Value Creating ActivitiesValue Creating Activities Common to aCommon to a
Cost LeadershipCost LeadershipBusiness Level StrategyBusiness Level Strategy
Value Creating ActivitiesValue Creating Activities Common to aCommon to a
Cost LeadershipCost LeadershipBusiness Level StrategyBusiness Level Strategy
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How to Obtain a Cost AdvantageHow to Obtain a Cost Advantage
1. Determine and Control Cost Drivers1. Determine and Control Cost Drivers
2. Reconfigure the Value Chain as needed2. Reconfigure the Value Chain as needed
Alter production processAlter production process
Change in automationChange in automation
New distribution channelNew distribution channel
Direct sales in place ofindirect salesDirect sales in place ofindirect sales
New advertising mediaNew advertising media
New raw materialNew raw material
Backward integrationBackward integration
Forward integrationForward integration
Change location relativeto suppliers or buyersChange location relativeto suppliers or buyers
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Choices That Drive CostsChoices That Drive Costs
Economies of scaleEconomies of scaleAsset utilizationAsset utilization
Capacity utilization patternCapacity utilization pattern
Value chain linkagesValue chain linkages
InterrelationshipsInterrelationships
- Advertising & Sales- Advertising & Sales
- Logistics & Operations- Logistics & Operations
- Seasonal, cyclical- Seasonal, cyclical
- Order processing- Order processingand distributionand distribution
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Major Risks of Cost LeadershipMajor Risks of Cost Leadership
Business Level StrategyBusiness Level Strategy
Major Risks of Cost LeadershipMajor Risks of Cost Leadership
Business Level StrategyBusiness Level Strategy
DramaticDramatic technological changetechnological change could takecould take
away your cost advantageaway your cost advantage
Competitors may learn how toCompetitors may learn how to imitateimitate
Value ChainValue Chain
Focus on efficiency could cause Cost LeaderFocus on efficiency could cause Cost Leader
toto overlookoverlookchanges in customer preferenceschanges in customer preferences
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Examples..
Retail Sector : Big Bazar
Telecom Sector : Nokia 1100, Hair,
Water Filter : SWACH [TATA]
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Ref. Book
Michael A. HittR. Duane Ireland
Robert E. Hoskisson
Michael A. HittR. Duane Ireland
Robert E. Hoskisson