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SBA Notes Chapter 8

1. Business level strategies are classified as competitive or cooperative. Competitive strategies battle competitors through differentiation or low costs. Cooperative strategies involve collaborating through alliances or collusion. 2. Differentiation strategies compete on uniqueness, while low cost strategies produce similar products more efficiently. Factors like industry structure and a company's skills influence strategy selection. 3. Developing a business level strategy involves analyzing industry competition, assessing a company's resources, and defining an offensive or defensive competitive position.

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56 views3 pages

SBA Notes Chapter 8

1. Business level strategies are classified as competitive or cooperative. Competitive strategies battle competitors through differentiation or low costs. Cooperative strategies involve collaborating through alliances or collusion. 2. Differentiation strategies compete on uniqueness, while low cost strategies produce similar products more efficiently. Factors like industry structure and a company's skills influence strategy selection. 3. Developing a business level strategy involves analyzing industry competition, assessing a company's resources, and defining an offensive or defensive competitive position.

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Aira Santos Vibar
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Chapter 8: Business Level Strategy The following situations will not provide competitive

advantage:
Business strategy  Product uniqueness is imitated
- Classified as:  Product/service demand disappears
1. Competitive Strategy  Market is becoming less attractive
2. Cooperative Strategy  The unique feature is less important to the
buyers
Competitive Strategy  Change in technology
- designed to battle against competitors
(close rival or not) 1. Differentiation
- market to serve: important factor in selecting  serves wider target market
competitive strategy  the product/service is unique in terms of
performance, features, reliability etc.
 the product provides value from customer’s
perspective
 higher profits than other types of competitive
strategies

2. Differentiation focus
Low cost strategy
 serves narrow target market
- produce similar product more efficiently than
competitors
Cooperative strategy
- evaluate the entire value chain
- competitive advantage is not only through competition
 To lower the product cost but cooperating with other companies in industry
 To eliminate activities that do not add value to - two types:
the product 1. Collusion
- but without sacrificing the product’s quality 2. Strategic Alliances

1. Cost leadership Collusion


 company aims to serve a broad target market - competitors agree to reduce supply/production so its
with low-cost products or services prices will increase or remain high
 operating activities are continuously evaluated - illegal
for possible ways to reduce or adjust the cost
2. Cost focus 1. Explicit collusion (Direct communication)
 appropriate to employ in narrow target market. 2. Tacit collusion (Trough informal means)
Example: niche market (pets, pregnant, LGBT ,
home décor) Strategic alliances
 the design and features of the product are - long term arrangement for mutual benefits
intended to satisfy the requirements only - reasons:
 Focus on marketing and promotional activities  Enter international market
to a selected niche only  Improve capabilities
 Reduce business risk (finance, legal matters)
Differentiation Strategy
- compete using uniqueness of the product in the form 1. Mutual service consortium
of packaging, design, brand image, customer service,  Fairly weak alliance because little interactions
innovation. among companies only
 Companies put together their resources for too
expensive project
2. Joint Venture
 Companies establish independent separate unit
while preserving their own legal entities
 Operational activities, ownership, and financial
rewards are allocated among partners
 dissolved when project is completed
3. Licensing
 When licensing company finds it too expensive
to establish an operating unit in foreign country,
it grants rights to produce or sell their products
by the licensee.
4. Value chain partnership
 Long term agreement with supplier for mutual
advantage

FACTORS INFLUENCING THE SELECTION OF BUSINESS


LEVEL STRATEGY
REQUIRED SKILLS AND RESOURCES
- company needs to assess its skills and resources as it
Before strategy is formulated, industry analysis is
aims to achieve competitive advantage.
conducted. Consider the following to select business
level strategy:
Overall cost leadership
- the following skills and resources need to adopt:
1. Industry structure ( fragmented and
 Low-cost production and distribution system
consolidated)
 Intense supervision and monitoring of
2. Industry evolutionary stage (embryonic, growth,
production cost
shakeout, and decline)
 Ease in design and manufacture of a product
3. Product life cycle (introduction, growth,
maturity, and decline)
Differentiation Strategy
4. Company’s skills and resources
- the following skills and resources need to adopt:
 Efficient product engineering
 Creative and innovative capabilities
 Strong marketing abilities and capabilities

Focus strategy
- Adopt the combined skills and resources above.
ISSUES TO RESOVE IN BUSINESS LEVEL STRATEGY 4. Map the tactic to be employed (offensive or
1. Company’s SWOT defensive)
2. Industry’s competitive forces
3. Location where company competes

Location where company competes


Company compete either in
 market location of competitor (offensive tactic)
 Frontal assault
- Attacks competitor head to head, from
pricing to distribution
 Flanking maneuver
- Attacks market where competitor is
weak
 Guerrilla warfare
- Use of small intermittent attack on
competitor’s market
 Bypass attack
- Redefines the market where company
offers new product that makes
competitor’s product outdated

 current market position (defensive tactic)


 Increase entry barriers
 Increase the expected aggressive retaliation
 Lower the inducement for possible attacks
All of which new entrant is discouraged to enter a
market.

CRAFTING A BUSINESS LEVEL STRATEGY


- Once a company already determined the market or
industry to compete in, a business strategy is
formulated where the following is considered:
1. Thorough evaluation of industry or market
- Deeper analysis and evaluation using
Porter’s five forces of competition model.

2. Assess company’s internal resources and


capabilities
- Ensures that the company has resources
and required competency to gain
competitive advantage

3. Define the specific business level strategy to


be adopted

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