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business level strategy
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the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market
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strategic position
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strategic profile based on value creation and cost in a specific product market, a value and unique position which meets customers needs, maximizes product value, and lowest possible product cost
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strategic trade offs
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-choices between a cost or value position
-tension between value creation and pressure to keep cost in check
-purpose to maximize the firms economic value creation and profit margin
-tension between value creation and pressure to keep cost in check
-purpose to maximize the firms economic value creation and profit margin
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Generic Business Strategies
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cost leadership and differentiation
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differentiation
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-seeks to create higher value vs competitors
-offers unique features
-charges higher prices
-offers unique features
-charges higher prices
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cost leadership
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-seeks to create similar value to competitors
-charges lower prices
-charges lower prices
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focused differentiation
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narrow competitive scope
example of Mont Blanc: exquisite pens at several hundred dollars
example of Mont Blanc: exquisite pens at several hundred dollars
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focused cost leadership
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narrow competitive scope
example of BIC: disposable pens and lighters at low cost
example of BIC: disposable pens and lighters at low cost
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differentiation strategy
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unique features that increase value, so that consumers pay a higher price. competitive advantage achieved when value - cost > competitors
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economies of scale
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-decreases in cost per unit
-achieved as output increases
-achieved as output increases
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economies of scope
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-savings that come from producing two output at less cost
-shares the same resources or tech
-shares the same resources or tech
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3 drivers that increase perceived value
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-product features
-customer service
-complements
-customer service
-complements
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differentiation strategies summary
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-focused on adding vlaue
-can increase costs ex. r&d innovation needed
- customers willing to pay a premium
-can increase costs ex. r&d innovation needed
- customers willing to pay a premium
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cost leadership strategy goals
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1. reduce costs below competitors
2. offer adequate value
3. reduce prices for customers
4. optimize the value chain for low cost
2. offer adequate value
3. reduce prices for customers
4. optimize the value chain for low cost
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cost leadership strategy
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can achieve a competitive advantage as long as its economic value created (v-c) is greater than that of its competitors
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drivers that keep costs low
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-cost of input factors
-economies of scale
-learning curve effects
-experience curve effects
-economies of scale
-learning curve effects
-experience curve effects
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cost of input factors
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raw materials, capital, labor, IT services
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economies of scale
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decreases in cost per unit as output increases
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learning curve effects
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less time to produce output with experience
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experience curve effects
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improvements to technology and production processes
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diseconomies of scale
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-firms too big
-complexities of too much coordination
-inflexible and slow
-complexities of too much coordination
-inflexible and slow
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a successful business strategy
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-leverages the firm internal strengths
-mitigates internal firm weaknesses
-exploits external opportunities
-avoids external threats
-mitigates internal firm weaknesses
-exploits external opportunities
-avoids external threats
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ocean blue strategy
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a strategy that combines both differentiation and cost leadership activities, a firm offers a differentiatioed product/service at a low cost ex. trader joes, cirque de Soleil
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blue oceans represent
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-untapped market space
-creation of additional demand
-opportunities for highly profitable growth
-creation of additional demand
-opportunities for highly profitable growth
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red oceans
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the known market space of existing industries
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achieve successful value innovation
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lower costs: eliminate-which factors should be eilimanted? reduce- which factors should we reduce?
inc perceived consumer benefits: raise and create
inc perceived consumer benefits: raise and create
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the strategy canvas
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-graphical depiction of a company's relative performance relative to its competitors, shows focus or divergence
-viewed across the industry's factors of competition
-reveals key strategic insights
-viewed across the industry's factors of competition
-reveals key strategic insights
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