BUSINESS LEVEL STRATEGY PART 1

• BUSINESS LEVEL STRATEGY
• STRATEGIC MANAGEMENT

• BUSINESS LEVEL STRATEGIES 

1. COURSE OF ACTION ADOPTED BY THE ORGANIZATION FOR EACH OF THE BUSINESS SEPARATELY TO SERVE IDENTIFIED CUSTOMER GROUP AND PROVIDE VALUE TO THE CUSTOMER BY SATISFACTION OF THEIR NEEDS
2. BUSINESS LEVEL STRATEGIES

3.    AN ORGANIZATION ‘S CORE COMPETENCIES SHOULD BE FOCUSED ON SATISFYING CUSTOMER NEEDS OR PREFERENCES IN ORDER TO ACHIEVE ABOVE AVERAGE RETURNS. DONE THROUGH BUSINESS LEVEL STRATEGIES GAIN A COMPETITIVE ADVANTAGE BY EXPLOITING CORE COMPETENCIES IN SPECIFIC,INDIVIDUAL PRODUCT OR SERVICE MARKETS

• BUSINESS LEVEL STRATEGIES
• MICHAEL E PORTER  : COMPETITIVE STRATEGIES
• BASIC UNIT OF ANALYSIS FOR UNDERSTANDING COMPETITION IS THE INDUSTRY WHICH ACCORDING TO HIM A GROUP OF COMPETITORS PRODUCING PRODUCTS DIRECTLY WITH EACH OTHER
• IT IS THE INDUSTRY WHERE COMPETITIVE ADVANTAGE IS INDUSTRY WON OR LOST
• THE DYNAMIC FACTORS THAT DETERMINE THE CHOICE OF A COMPETITIVE STRATEGY:-
• BUSINESS LEVEL STRATEGIES
• THE DYNAMIC FACTORS THAT DETERMINE THE CHOICE OF A COMPETITIVE STRATEGY:
• INDUSTRY STRUCTURE IS DETERMINED BY COMPETITIVE FORCES

1. THE THREAT OF NEW ENTRANTS
2. THE THREATS OF SUBSTITUTE PRODUCTS OR SERVICES
3. THE BARGAINING POWER OF SUPPLIERS
4. THE BARGAINING POWER OF THE BUYERS
5. RIVALRY AMONG THE EXISTING COMPETITORRS IN AN INDUSTRY

• POSITIONING OF FIRMS IN INDUSTRY:

• COMPETITIVE ADVANTAGES
• DEPENDENT ON THE INDUSTRY STRUCTURE AND POSITIONING OF THE FIRM IN THE INDUSTRY
• POSITIONING IS BASED ON COMPETITIVE ADVANTAGE AND COMPETITIVE SCOPE
• COMPETITIVE ADVANTAGE :LOWER COST/DIFFERENTIATION
• COMPETITIVE SCOPE : BROAD TARGET/NARROW TARGET
• GENERIC BUSINESS STRATEGIES
• CLASSIFICATION OF BUSINESS LEVEL STRATEGIES

1. COST LEADERSHIP ( LOWER COST/BROAD TARGET)
2. DIFFERENTIATION ( DIFFERENTIATION BROAD TARGET)
3. FOCUS ( LOWER COST OR DIFFERENTIATION)

• COST LEADERSHIP BUSINESS STRATEGY

1. LOWER COST OR PRODUCTS OR SERVICES AS COMPARED TO COMPETITORS
2. CUSTOMER PERFORMS A LOWER COST PRODUCT
3. THE COST LEADER ORGANIZATION EARNS HIGHER PROFITS OWING TO THE LOW COST OF ITS PRODUCTS

• ACHIEVING COST LEADERSHIP WITH

1. ACCURATE DEMAND FORECASTING AND HIGH CAPACITY UTILIZATION
2. ATTAINING ECONOMIES OF SCALE
3. HIGH LEVEL OF STANDARDIZATION OF PRODUCTS
4. INVESTMENT IN COST SAVING TECHNOLOGIES
5. WITHHOLDING DIFFERENTIATION

• CONDITIONS UNDER WHICH THE COST LEADERSHIP IS USED

1. THE MARKETS FOR THE PRODUCTS/SERVICE OPERATE IN SUCH A WAY THAT PRICE BASED COMPETITION IS VIGOROUS
2. THE PRODUCT/SERVICE IS STANDARDIZED
3. SIGNIFICANT BARGAINING POWER BY THE BUYERS
4. LESSER CUSTOMER LOYALTY
5. FEW WAYS AVAILABLE FOR DIFFERENTIATION

• BENEFITS ASSOCIATED WITH COST LEADERSHIP STRATEGY

1. COST ADVANTAGE IS POSSIBLY THE BEST INSURANCE AGAINST INDUSTRY COMPETITION
2. POWERFUL SUPPLIERS POSSESS HIGH BARGAINING POWER TO NEGOTIATE PRICE INCREASES FOR INPUTS. ORGANIZATION THAT POSSESS A COST ADVANTAGE ARE LESS EFFECTED IN SUCH A SCENARIO AS THEY ARE ABSORBED PRICE INCREASE TO SOME EXTENT
3. POWERFUL BUYERS POSSESS HIGHER BARGAINING POWER TO EFFECT A PRICE REDUCTION
4. THE THREAT OF CHEAPER SUBSTITUTE CAN BE OFFSET TO SOME EXTENT BY LOWERING PRICES
5. COST ADVANTAGE ACTS AS AN EFFECTIVE ENTRY BARRIER FOR POTENTIAL ENTRANTS WHO CAN NOT OFFER THE PRODUCTS AT  A LOWER PRICE

• RISK FACED UNDER COST LEADERSHIP STRATEGY

1. COST ADVANTAGE IS EPHEMERAL
2. IS OBVIOUSLY NOT A MARKET FRIENDLY APPROACH
3. TECHNOLOGICAL SHIFTS ARE A GREAT THREAT TO COST LEADERS
4. LOW COST IS ALWAYS RELATIVE TO WHAT THE COMPETITORS HAVE TO OFFER