Slide 1Business-Level StrategyTypes of Business-Level StrategyFeatures of the Five Business-Level StrategiesCost Leadership StrategyCost Leadership Strategy – ImplementationSlide 7Cost Leadership Strategy and the Five Forces of CompetitionHow can Low Costs protect against…?Strategy and Organizational StructureCost Leadership Strategy and StructureRisks of Cost Leadership StrategyDifferentiation StrategyDifferentiationDifferentiation Strategy – ImplementationDifferentiation Strategy – Implementation (cont.)Differentiation (cont.)Slide 18Differentiation (cont.)Differentiation Strategy and StructureRisks of Differentiation StrategyDifferentiation Strategy and the Five Forces of CompetitionHow can Differentiation protect against…?Slide 24How has P&G responded?Focus StrategyFocus Strategy – Market SegmentsFocus Strategy – ReasonsFocus Strategy – TypesRisks of Differentiation StrategyIntegrated Cost Leadership/Differentiation StrategyIntegrated Strategy – AdvantagesIntegrated Strategy – Implementation BenefitsSlide 34Integrated Strategy and the Flexible StructureRisks of Integrated StrategySlide 37Model of Competitive RivalryPrisoner’s DilemmaCompetitive RivalryCompetitive RivalryFrom Competitors to Competitive DynamicsModel of Competitive RivalryIntensity of RivalryCompetitor DeterminantsMarket CommonalityResource SimilarityFramework of Competitive AnalysisDrivers of Competitive Actions and ResponsesLikelihood of AttackTiming of Competitive BehaviorTiming of Competitive BehaviorFirst Mover – CharacteristicsFirst Mover – BenefitsFirst Mover – RisksSecond Mover – CharacteristicsLate Mover – CharacteristicsOrganizational SizeOrganizational SizeQualityQualityLikelihood of ResponseActor’s ReputationDependence on the MarketCompetitive Dynamics – Three Market TypesSlow-Cycle MarketsSlow-Cycle MarketsSlow-Cycle MarketsFast-Cycle MarketsFast-Cycle MarketsFast-Cycle MarketsStandard-Cycle MarketsStandard-Cycle MarketsCompeting For AdvantagePart III – Creating Competitive AdvantageChapter 5 – Business-Level StrategyBusiness-Level StrategyKey TermsBusiness-Level Strategy – integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets –Types of Business-Level StrategyFeatures of the Five Business-Level StrategiesGeneric, can be used across industriesTwo distinct types of competitive advantage:Low CostDifferentiationChoice of scope:BroadNarrow (niche)Cost Leadership StrategyKey TermsCost Leadership Strategy – integrated set of actions designed to produce or deliver goods or services with features that are acceptable to customers at the lowest cost, relative to competitorsCost Leadership Strategy – ImplementationNo-frill, standardized goodsContinuously reduce costs of value chain activitiesValue-Creating Activities Associated with Cost Leadership StrategyCost Leadership Strategy and the Five Forces of CompetitionLow-cost position is a valuable defense against rivalsPowerful customers can demand reduced pricesCosts leaders are in a position to absorb supplier price increases and relationship demands, and to force suppliers to hold down their pricesContinuously improving levels of efficiency and cost reduction can be difficult to replicate and serve as significant entry barriers to potential competitorsCost leaders hold an attractive position in terms of product substitutes, with the flexibility to lower prices to retain customersHow can Low Costs protect against…?Low cost leadership does not eliminate any of these forces, it just allows the low costs firm to more easily deal with these forces, or offset the power of these forces, and potentially, remain profitable.Strategy and Organizational Structure Specialization CentralizationFormalizationCost Leadership Strategy and Structure Simple reporting relationshipsFew decision-making and authority layersCentralized corporate staffStrong operational focus on process improvementsLow-cost cultureCentralized staff decision-making authorityJobs specializationHighly formalized rules and proceduresRisks of Cost Leadership StrategyProcesses can become obsoleteFocus on cost reductions can come at the expense of understanding customer perceptions and needsStrategy could be imitated, requiring the firm to increase the value offered to retain customersDifferentiation StrategyKey TermsDifferentiation Strategy – integrated set of actions designed by a firm to produce or deliver goods or services at an acceptable cost that customers perceive as being different in ways that are important to themDifferentiationOffer attributes that customers want, and are willing to pay for. Leads to premium price, higher volume, loyaltyMaintaining uniqueness can be a challengeKodak, Wrigley’s, Campbell’s, Coca-Cola, Gillette, Del Monte, and Nabisco all leaders since 1923Marginal revenue must exceed the costs of differentiationPERCEIVED VALUE versusINCREMENTAL COSTSDifferentiation Strategy – ImplementationTarget customers – perceived product valueCustomized products – differentiating on as many features as possibleDifferentiation Strategy – Implementation (cont.)Unusual featuresResponsive customer serviceRapid product innovationsTechnological leadershipPerceived prestige and statusDifferent tastesEngineering designPerformanceDifferentiation (cont.)What firms pursue differentiation?How or on what basis do they achieve differentiation?Value-Creating Activities Associated with the Differentiation StrategyDifferentiation (cont.)Signalling important when:nature of differentiation difficult to quantifyfirst-time purchase – re-purchase infrequentbuyers unsophisticatedDifferentiation Strategy and StructureComplex and flexible reporting relationshipsCross-functional product development teamsStrong focus on marketing and product R&DDevelopment-oriented cultureDecentralized decision makingBroad job descriptionsInformal rules and proceduresRisks of Differentiation Strategyquick imitationno value in uniqueness over differentiationcell phonespremium price or costs are costs too highpoorly understood/changing customer needsMinivan, FAO Schwartzcosts/price become more important than uniquenessunwillingness to offer true