Embed Size (px)
Citation preview
Business-Level Strategy:
How do we compete?How do we compete?Business-Level Strategy:
How do we compete?How do we compete?
Breadth of Breadth of Competitive Competitive
ScopeScope
Source of Competitive AdvantageSource of Competitive Advantage
BroadBroadTargetTargetMarketMarket
NarrowNarrowTargetTargetMarketMarket
CostCost
CostLeadership
CostLeadership
Generic Business Level StrategiesGeneric Business Level Strategies
UniquenessUniqueness
Breadth of Competitive
Scope
Source of Competitive Advantage
BroadTargetMarket
NarrowTargetMarket
Cost
Cost Leadership
Cost Leadership DifferentiationDifferentiation
Generic Business Level StrategiesGeneric Business Level Strategies
Uniqueness
Breadth of Competitive
Scope
Source of Competitive Advantage
BroadTargetMarket
NarrowTargetMarket
Cost
CostLeadership
CostLeadership DifferentiationDifferentiation
Generic Business Level StrategiesGeneric Business Level Strategies
Focused Differentiation
Focused Differentiation
Focused Low Cost
Focused Low Cost
Uniqueness
Breadth of Competitive
Scope
Source of Competitive Advantage
BroadTargetMarket
NarrowTargetMarket
Cost
CostLeadership
CostLeadership
Differen-tiation
Differen-tiation
Generic Business Level StrategiesGeneric Business Level Strategies
Focused Differen-
tiation
Focused Differen-
tiation
Focused Low CostFocused
Low Cost
Integrated Low Cost/
Differentiation
Integrated Low Cost/
Differentiation
Uniqueness
Profit = (P – C) × Q
The Experience CurveThe Experience Curve
The “Law of Experience”
The unit cost value added to a standard product declines by a constant %
(typically 20-30%) each time cumulative output doubles.
Cost per unit of output
Cumulative Output
1994
1995
1996
1997
19981999 2000
Examples of Experience CurvesExamples of Experience Curves
100K 200K 500K 1,000K 5 10 50 Accumulated unit production Accumulated units
(millions) (millions)
1960
Yen
15K
20K
30
K
Pri
ce In
dex
50
100
20
0 3
00
70% slope
75%
Japanese clocks & watches, 1962-72 UK refrigerators, 1957-71
Choices that Drive CostsChoices that Drive Costs
Economies of scaleEconomies of scale
Asset utilizationAsset utilization
Capacity utilization patternCapacity utilization pattern
Value chain linkagesValue chain linkages
Product featuresProduct features
InterrelationshipsInterrelationships
- Advertising & Sales- Advertising & Sales
- Logistics & Operations- Logistics & Operations
- Seasonal, cyclical- Seasonal, cyclical
- Order processing and distribution- Order processing and distribution
Product featuresProduct features
PerformancePerformance
Mix & variety of productsMix & variety of products
Service levelsService levels
Small vs. large buyersSmall vs. large buyers
Process technologyProcess technology
Wage levelsWage levels
Hiring, training, motivationHiring, training, motivation
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inb
oun
d
Log
isti
cs
Op
erat
ion
s
Ou
tbou
nd
Log
isti
cs
Mar
ket
ing
& S
ales
Ser
vice
MARG
IN
MARGIN
Value Chain of Firm ActivitiesValue Chain of Firm Activities Value Chain of Firm ActivitiesValue Chain of Firm Activities
Value Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level StrategyValue Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level Strategy
Primary Activities
Su
pp
ort
Act
ivit
ies
Inb
oun
d
Log
isti
cs
Inbound LogisticsInbound LogisticsHighly Efficient Systems to Link Suppliers’ Products with the Firm’s Production Processes
Highly Efficient Systems to Link Suppliers’ Products with the Firm’s Production Processes
Located in Close Located in Close Proximity with Proximity with SuppliersSuppliers
Located in Close Located in Close Proximity with Proximity with SuppliersSuppliers
Value Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level StrategyValue Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level Strategy
Primary Activities
Su
pp
ort
Act
ivit
ies
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inb
oun
d
Log
isti
cs
Op
erat
ion
s
Ou
tbou
nd
Log
isti
cs
Ser
vice
MARG
IN
MARGIN
Relatively Few Management Layers to Reduce Overhead
Effective Training Programs to Improve Worker Efficiency and Effectiveness
Timing of Asset Purchases
Efficient Plant Scale to Minimize Manufacturing Costs
Selection of Low Cost Transport Carriers
Delivery Schedule that Reduces Costs
Products Priced to Generate Sales Volume
Small, Highly Trained Sales Force
Investments in Technology in order to Reduce Costs Associated with Manufacturing Processes
Frequent Evaluation Processes to Monitor Suppliers’ Performances
Policy Choice of Plant Technology
Organizational Learning
Efficient Order SizesO
per
atio
ns
OperationsOperationsEfficient Plant Efficient Plant Scale to Minimize Scale to Minimize Mfg. CostsMfg. Costs
Efficient Plant Efficient Plant Scale to Minimize Scale to Minimize Mfg. CostsMfg. Costs
Timing of Asset PurchasesTiming of Asset Purchases
Policy Choice of Plant TechnologyPolicy Choice of Plant Technology
Organizational Organizational LearningLearningOrganizational Organizational LearningLearning
Value Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level StrategyValue Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level Strategy
Primary Activities
Su
pp
ort
Act
ivit
ies
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Ou
tbou
nd
Log
isti
cs
Mar
ket
ing
& S
ales
Ser
vice
MARG
IN
MARGIN
Selection of Low Cost Transport Carriers
Delivery Schedule that Reduces Costs
National Scale Advertising
Products Priced to Generate Sales Volume
Small, Highly Trained Sales Force
Effective Product Installations to Reduce Frequency and Severity of Recalls
Frequent Evaluation Processes to Monitor Suppliers’ Performances
Efficient Order Sizes
Interrelationships with Sister Units
Ou
tbou
nd
Log
isti
cs
Outbound Logistics
Outbound Logistics
Selection of Low Cost Transport Carriers
Selection of Low Cost Transport Carriers
Delivery Schedule that Reduces CostsDelivery Schedule that Reduces Costs
Efficient Order SizesEfficient Order Sizes
InterrelationshipInterrelationships with Sister s with Sister UnitsUnits
InterrelationshipInterrelationships with Sister s with Sister UnitsUnits
Value Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level StrategyValue Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level Strategy
Primary Activities
Su
pp
ort
Act
ivit
ies
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inb
oun
d
Log
isti
cs
Op
erat
ion
s
Ou
tbou
nd
Log
isti
cs
Mar
ket
ing
& S
ales
Ser
vice
MARG
IN
MARGIN
Mar
ket
ing
& S
ales
National Scale National Scale AdvertisingAdvertisingNational Scale National Scale AdvertisingAdvertising
Products Priced to Generate Sales Volume
Products Priced to Generate Sales Volume
Small, Highly Trained Sales ForceSmall, Highly Trained Sales Force
Marketing & Sales
Marketing & Sales
Primary Activities
Su
pp
ort
Act
ivit
ies
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inb
oun
d
Log
isti
csO
per
atio
ns
Ou
tbou
nd
Log
isti
cs
Mar
ket
ing
& S
ales
Ser
vice
MARG
IN
MARGIN
Ser
vice
ServiceServiceEffective Product Effective Product Installations to Installations to Reduce Reduce RecallsRecalls
Effective Product Effective Product Installations to Installations to Reduce Reduce RecallsRecalls
Value Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level StrategyValue Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level Strategy
Primary Activities
Su
pp
ort
Act
ivit
ies
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inb
oun
d
Log
isti
csO
per
atio
ns
Ou
tbou
nd
Log
isti
cs
Mar
ket
ing
& S
ales
Ser
vice
MARG
IN
MARGIN
Procurement
Systems and Procedures to Find Systems and Procedures to Find the Lowest Cost Products to the Lowest Cost Products to Purchase Raw MaterialsPurchase Raw Materials
Systems and Procedures to Find Systems and Procedures to Find the Lowest Cost Products to the Lowest Cost Products to Purchase Raw MaterialsPurchase Raw Materials
Frequent Evaluation Processes to Monitor Suppliers’ Performances
Frequent Evaluation Processes to Monitor Suppliers’ Performances
ProcurementProcurement
Value Creating Activities common to a Cost Leadership Business Level Strategy
Value Creating Activities common to a Cost Leadership Business Level Strategy
Primary Activities
Su
pp
ort
Act
ivit
ies
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inb
oun
d
Log
isti
cs
Op
erat
ion
s
Ou
tbou
nd
Log
isti
cs
Mar
ket
ing
& S
ales
Ser
vice
MARG
IN
MARGINTechnological Development
Technological DevelopmentTechnological DevelopmentEasy-to-Use Manufacturing Technologies
Easy-to-Use Manufacturing Technologies
Investments in Technology in Investments in Technology in order to Reduce Costs order to Reduce Costs Associated with Manufacturing Associated with Manufacturing ProcessesProcesses
Investments in Technology in Investments in Technology in order to Reduce Costs order to Reduce Costs Associated with Manufacturing Associated with Manufacturing ProcessesProcesses
Value Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level StrategyValue Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level Strategy
Primary Activities
Su
pp
ort
Act
ivit
ies
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inb
oun
d
Log
isti
cs
Op
erat
ion
s
Ou
tbou
nd
Log
isti
cs
Mar
ket
ing
& S
ales
Ser
vice
MARG
IN
MARGIN
Human Resource Management
Human Resource ManagementHuman Resource ManagementConsistent Policies to Consistent Policies to Reduce Turnover CostsReduce Turnover CostsConsistent Policies to Consistent Policies to Reduce Turnover CostsReduce Turnover Costs
Effective Training Programs to Improve Worker Efficiency and Effectiveness
Effective Training Programs to Improve Worker Efficiency and Effectiveness
Value Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level StrategyValue Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level Strategy
Primary Activities
Su
pp
ort
Act
ivit
ies
Technological Development
Human Resource Management
Firm Infrastructure
Procurement
Inb
oun
d
Log
isti
cs
Op
erat
ion
s
Ou
tbou
nd
Log
isti
cs
Mar
ket
ing
& S
ales
Ser
vice
MARG
IN
MARGIN
Firm Infrastructure
Firm InfrastructureFirm InfrastructureCost Effective MIS SystemsCost Effective MIS Systems
Relatively Few Relatively Few Management Layers Management Layers to Reduce Overheadto Reduce Overhead
Relatively Few Relatively Few Management Layers Management Layers to Reduce Overheadto Reduce Overhead
Simplified Planning Practices to Reduce Planning Costs
Simplified Planning Practices to Reduce Planning Costs
Value Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level StrategyValue Creating ActivitiesValue Creating Activities common to a common to a
Cost Leadership Cost Leadership Business Level StrategyBusiness Level Strategy
Threat of Threat of New New
EntrantsEntrants
Bargaining Bargaining Power of Power of SuppliersSuppliers
Threat of Threat of Substitute Substitute ProductsProducts
Effective Cost Leaders can remain profitable even when the Five Forces appear unattractiveEffective Cost Leaders can remain profitable even when the Five Forces appear unattractive
Rivalry Among Rivalry Among Competing Firms Competing Firms
in Industryin Industry
Rivalry Among Rivalry Among Competing Firms Competing Firms
in Industryin Industry
Bargaining Bargaining Power of Power of BuyersBuyers
Effective Cost Leaders can remain profitable even when the Five Forces appear unattractiveEffective Cost Leaders can remain profitable even when the Five Forces appear unattractive
Threat of New
Entrants
Threat of New
Entrants
Can frighten off New Entrants due to the need to: Can frighten off New Entrants due to the need to:
Enter at large scale to be Cost CompetitiveEnter at large scale to be Cost Competitive
**
Take time to move down the “Learning Curve”Take time to move down the “Learning Curve”
**
Bargaining Power of Buyers
Bargaining Power of Buyers
Can mitigate Buyer Power by:Can mitigate Buyer Power by:
**
Effective Cost Leaders can remain profitable even when the Five Forces appear unattractiveEffective Cost Leaders can remain profitable even when the Five Forces appear unattractive
Threat of Threat of New New
EntrantsEntrants
Driving prices far below competitors may cause exit and shift power back to firm
Driving prices far below competitors may cause exit and shift power back to firm
Threat of Substitute Products
Threat of Substitute Products
Well positioned relative to Substitutes in order to:Well positioned relative to Substitutes in order to:
Make investments to create substitutes firstMake investments to create substitutes first
**
Buy patents developed by potential substitutesBuy patents developed by potential substitutes
**
Lower prices to maintain value positionLower prices to maintain value position
**
Effective Cost Leaders can remain profitable even when the Five Forces appear unattractiveEffective Cost Leaders can remain profitable even when the Five Forces appear unattractive
Threat of Threat of New New
EntrantsEntrants
Bargaining Bargaining Power of Power of BuyersBuyers
Bargaining Power of Suppliers
Bargaining Power of Suppliers
Effective Cost Leaders can remain profitable even when the Five Forces appear unattractiveEffective Cost Leaders can remain profitable even when the Five Forces appear unattractive
Threat of Threat of New New
EntrantsEntrants
Threat of Threat of Substitute Substitute ProductsProducts
Bargaining Bargaining Power of Power of BuyersBuyers
Can mitigate Supplier Power by:Can mitigate Supplier Power by:
Low cost position makes them better able to absorb cost increasesLow cost position makes them better able to absorb cost increases
**
More likely to make very large purchases which reduces chance of supplier powerMore likely to make very large purchases which reduces chance of supplier power
**
Threat of Threat of New New
EntrantsEntrants
Bargaining Bargaining Power of Power of SuppliersSuppliers
Threat of Threat of Substitute Substitute ProductsProducts
Effective Cost Leaders can remain profitable even when the Five Forces appear unattractiveEffective Cost Leaders can remain profitable even when the Five Forces appear unattractive
Competitors avoid price wars with Cost Leaders, which creates higher profits for entire industry
Competitors avoid price wars with Cost Leaders, which creates higher profits for entire industry
Rivalry Among Competing Firms
in Industry
Rivalry Among Competing Firms
in Industry
Bargaining Bargaining Power of Power of BuyersBuyers
The Major The Major Risks involved Risks involved with a with a Cost Leadership Cost Leadership Business Level Business Level StrategyStrategy
The Major The Major Risks involved Risks involved with a with a Cost Leadership Cost Leadership Business Level Business Level StrategyStrategy
Dramatic technological change could take away your cost advantage
Dramatic technological change could take away your cost advantage
Focus on efficiency could cause Cost Leader to overlook changes in customer preferences
Focus on efficiency could cause Cost Leader to overlook changes in customer preferences
Competitors may learn how to imitate Value ChainCompetitors may learn how to imitate Value Chain
![Page 1 Competitive Strategy. Page 2 Business-level [Competitive] Strategy Since we’re in the XYZ industry, how do we compete? Profit = (Price – Cost)](https://img.pdfslide.net/doc/110x75/56649ccf5503460f9499b68f/page-1-competitive-strategy-page-2-business-level-competitive-strategy-since.jpg)
