chapter 6- bpsm
TRANSCRIPT
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Ch. 6-
Generic Strategies
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Strategies Formulation
Strategies are formulated at 3 different levels Objectives are set at Corporate level. Rellocation of resources so as to nurture the portfolio
is the important objective Various strategies decided at corporate level may be- Stability Strategy Expansion Strategy Retrenchment Strategy Then individual business formulate their own stratgeies
so as to achieve the objectives set at corporate level.
Use of BCG matrix for rellocation of resourcesProf. Prashant B. Kalaskar
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The Central Role of Customers
In selecting a business-level strategy, the firmdetermines
1. who it will serve2. what needs those target customers have
that it will satisfy3. how those needs will be satisfied(Abells 3 dimentions of Business definition- Customer needs, Customer Groups
& Technology) Prof. Prashant B. Kalaskar
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Generic Strategies
M. Porter suggested 3 generic strategies tocompete in the environment of competition.
Company adopts any one of these 3 strategies, onthe basis of-
1) The entry point of the firm elative to theindustrys life cycle.
2) Its present position & the internal resourcecapabilities3) The structure of the industry (5 Forces) &4) The nature of forces driving the industry.
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Industry Life Cycle
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Industry Life-Cycle Stages:Strategic Implications
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Industry Life-Cycle Strategies
In the Introduction Stage: Products are unfamiliar to consumers
Market segments not well defined Product features not clearly specified Competition tends to be limitedStrategies for the Introduction Stage: Develop product and get users to try it Generate exposure so product becomes
standard Prof. Prashant B. Kalaskar
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Industry Life-Cycle Strategies
The Growth Stage is: Characterized by strong increases in sales Attractive to potential competitors
Strategies for the Growth Stage: Brand recognition Differentiated products Financial resources to support value-chain activities
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Industry Life-Cycle Strategies
In the Maturity stage: Aggregate industry demand slows
Market becomes saturated, few new adopters Direct competition becomes predominant Marginal competitors begin to exitFor the Maturity Stage: Efficient manufacturing operations and process
engineering Low costs (customers become price sensitive)
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Industry Life-Cycle Strategies
In the Decline Stage: Industry sales and profits begin to fall Strategic options become dependent on the actions
of rivalsFor the Decline Stage Maintaining
Exiting the market Harvesting Consolidation
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Turnaround Strategies in the Life Cycle
Turnaround strategy a strategy that reverses a firms decline in
performance and returns it to growth andprofitability.
Asset and cost surgery Selective product and market pruning Piecemeal productivity improvements
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Current market position of Britannia biscuits
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Business Level Strategy
Business-level strategy : an integrated andcoordinated set of commitments andactions the firm (Business Unit) uses togain a competitive advantage by exploitingcore competencies in specific product
markets
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Generic Strategy
The generic strategies are nothing but theapproaches of the company to fight against
competitors ( In general/Commonstrategies. 3 Generic Strategies are-
- Low Cost Leadership- Differentiation- Focus
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Strategic Orientation Porters Three Generic Strategies
UniquenessLow CostPosition
Strategic Advantages
DifferentiationOverall CostLeadership
Focus
FocusDifferentiation
Focus Low Cost
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Three Generic Strategies
Overall cost leadership Low-cost-position relative to a firms peers Manage relationships throughout the entire
value chain Differentiation
Create products and/or services that areunique and valued
Non-price attributes for which customerswill pay a premium
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Three Generic Strategies
Focus strategy Narrow product lines, buyer segments, or
targeted geographic markets Attain advantages either through
differentiation or cost leadership
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Examples
Companies pursuing an overall costleadership strategy
McDonalds
Wal-Mart Companies pursuing a differentiation
strategy Harley Davison
Apple Companies pursuing a focus strategy
Rolex Lamborghini
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Strategic Orientation Porters Three Generic Strategies
UniquenessLow CostPosition
Strategic Advantages
Differentiation Overall CostLeadership
Focus
Focus Differentiation Focus Low Cost
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Cost Leadership Strategy
An integrated set of actions designed toproduce or deliver goods or services at thelowest cost, relative to competitors with
features that are acceptable to customers relatively standardized products features acceptable to many customers
lowest competitive priceEx- Toyota, are very good not only at producing high qualityautos at a low price, but have the brand and marketing skillsto use a premium pricing policy.
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Cost Leadership Strategy
Cost saving actions required by this strategy: building efficient scale facilities tightly controlling production costs and
overhead minimizing costs of sales, R&D and service building efficient manufacturing facilities
monitoring costs of activities provided byoutsiders simplifying production processes
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Overall Cost Leadership
Experience curve refers to how business learns to lower
costs as it gains experience with productionprocesses
with experience, unit costs of productiondecline as output
increases in mostindustries
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Differentiation
The Differentiation can be attained on thebasis of
Prestige or brand image Technology Innovation Features
Customer service Dealer network
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Differentiation
Firms may differentiate along severaldimensions at once
Successful differentiation requiresintegration with all parts of a firms valuechain
An important aspect of differentiation is
speed or quick response There is also the chance that any
differentiation could be copied bycompetitors
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Focus
Focus strategy involves concentratingon a-
Particular customer Product line Geographical area
Channel of distribution Niche market
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Focus
Focus strategy is that the firm isbetter able to serve its limited segment
than competitors serving a broaderrange of customers Firms may thus be able to differentiate
themselves based on meeting customerneeds through differentiation orthrough low costs and competitivepricing for specialty goods
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Focus
Focus is based on the choice of a narrowcompetitive scope within an industry
Firm selects a segment or group ofsegments (niche) and tailors its strategy toserve them
Firm achieves competitive advantages bydedicating itself to these segmentsexclusively
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Focus
Cost focus firm strives to create a cost advantage in its
target segment Differentiation focus
firm seeks to differentiate in its target market
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Focus: Improving Competitive Position
Focus Creates barriers of either cost leadership or
differentiation, or both Used to select niches that are least vulnerable
to substitutes or where competitors areweakest
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Title
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