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BUSINESS-LEVEL/ GENERIC STRATEGIES

BUSINESS-LEVEL/ GENERIC STRATEGIES. Dr. Mark Fruin Business 290/291. WHAT IS BUSINESS-LEVEL STRATEGY?. A PLAN OF ACTION TO GAIN COMPETITIVE ADVANTAGE IN A MARKET OR INDUSTRY BASED ON CUSTOMER NEEDS OR PRODUCT DIFF CUSTOMER GROUPS OR MARKET SEG

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BUSINESS-LEVEL/ GENERIC STRATEGIES

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  1. BUSINESS-LEVEL/GENERIC STRATEGIES Dr. Mark Fruin Business 290/291

  2. WHAT IS BUSINESS-LEVEL STRATEGY? • A PLAN OF ACTION TO GAIN COMPETITIVE ADVANTAGE IN A MARKET OR INDUSTRY • BASED ON • CUSTOMER NEEDS OR PRODUCT DIFF • CUSTOMER GROUPS OR MARKET SEG • HAVING DISTINCTIVE COMPETENCE IN REACHING ONE AND/OR THE OTHER

  3. GENERIC STRATEGIES • COST LEADERSHIP • BROAD • NARROW • DIFFERENTIATION • BROAD • NARROW (FOCUS DIFFERENTIATION)

  4. ADVANTAGES & DISADVANTAGES OF C.L. • ADVANTAGES • USING 5 FORCES MODEL: COST LEADER HAS • MORE POWER RELATIVE TO SUPPLIERS • MORE POWER RELATIVE TO BUYERS • BETTER ABLE TO DETER ENTRY & BATTLE SUBSTITUTE PRODUCTS (BY LOWERING PRICES) • DISADVANTAGES • MORE LIKELY STUCK IN A PARTICULAR TECH • MORE LIKELY TO BE IMITATED • MORE LIKELY STUCK IN C.L. STRATEGY (POSSIBLY LOSE SIGHT OF CHANGING CUSTOMER TASTES)

  5. ADVANTAGES & DISADVAN-TAGES OF DIFFERENTIATION • ADVANTAGES • DIFFERENTIATORS DIFFERENTIATE IN MANY DIFFERENT WAYS • HARD TO IMITATE (IF DONE WELL) • BRAND LOYALTY HIGH IF ABLE TO CONVINCE BUYERS OF “UNIQUENESS” • DISADVANTAGES • MANY DIFFERENTIATION FACTORS ARE EASILY IMITATED • FOR HOW LONG CAN “UNIQUENESS” BE PROTECTED

  6. FOCUSED DIFFERENTIATION • FD MEANS CONCENTRATING ON • A PARTICULAR AREA (GEOGRAPHICALLY) • A PARTICULAR CUSTOMER (WELL EDUCATED, HOUSEHOLD INCOME>$200K, ETC. • PARTICULAR MARKET SEGMENT, SUCH AS DESIGNER CLOTHES, FAST CARS, SMALL FOOTPRINT APPLIANCES, ETC.

  7. GENERIC STRATEGIES • REQUIRE CAREFUL ATTENTION TO PRODUCT/TECH/MARKET CHOICES • IF DONE WELL, CAN PROTECT FIRMS FROM 5 FORCES RIVALRIES BY MAKING COSTS OF IMITATION TOO HIGH • REQUIRE CONTINUOUS UPGRADING OF INVESMENT CHOICES

  8. STRATEGIC GROUPS • WITHIN MOST INDUSTRIES, STRATEGIC GROUP EMERGE • A STRATEGIC GROUP IS DEFINED BY COMPANIES PURSUING THE SAME GENERIC STRATEGY • MOBILITY BARRIERS INHIBIT THE MOVEMENT OF COMPANIES FROM ONE STRATEGIC GROUP TO ANOTHER

  9. BUSINESS LEVEL INVESTMENT STRATEGIES • COMPETITIVE POSITION BASED ON • MARKET SHARE • STRENGTH OF DISTINCTIVE COMPETENCIES • PRODUCT LIFE CYCLE EFFECTS • EMBRYONIC, GROWTH, MATURE, DECLINE • INDUSTRY CYCLE EFFECTS • EMBRYONIC, GROWTH, MATURE, DECLINE

  10. GROWTH CYCLES(CONFUSION?) • EMBRYONIC MAY INCLUDE EMBRYONIC AND EMERGING • GROWTH MAY INCLUDE PLAIN OLD GROWTH AND SHAKEOUT GROWTH • MATURE MAY INCLUDE PRODUCT DIFFERENTIATION & PROLIFERATION • DECLINE ALSO INCLUDES CONSOLIDATION, CONCENTRATION & HARVEST (INCLUDE CASH COW STRAT)

  11. QUESTIONS • WHY DOES EACH GENERIC STRATEGY REQUIRE DIFFERENT SETS OF PRODUCT/MARKET/DIST COMPETENCY CHOICES? • HOW SHOULD DIFFERENTIATION INVESTMENT CHOICES DIFFER IF YOU ARE IN STRONG OR WEAK COMPETITIVE POSITION?

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