Ch 05

• Business-level strategy


  A company's overall competitive theme and the way it positions itself in the marketplace to gain a competitive advantage
• Business-level strategy


  • Determines who (customers) the company wants to serve
  • What are customers' needs and desires that the company is trying to satisfy
  • How the company is going to satisfy the customers
• Low-cost strategy


  Enabling a company to gain a competitive advantage in commodity markets, undercut rivals on price, gain market share, and maintain or increase profitability
• Low-cost strategy


  • Wal-Mart in the US market
  • US-Bangla Airlines in Bangladesh
• Differentiation strategy


  Distinguishing oneself from rivals by offering something that they find hard to match
• Differentiation strategy


  • Achieved through superior reliability, functions, features
  • Better design, branding, point-of-sale service, after sales service, and support
• Differentiation advantages


  • Allows a company to charge a premium price
  • Helps a company to grow overall demand and capture market share from its rivals
• Differentiation often (but not always) raises the cost structure of the firm
• Differentiation


  • Apple
  • Starbucks
• Efficiency frontier


  • Shows all the positions a company can adopt with regard to differentiation and low cost
  • Has a convex shape because of diminishing returns
  • Multiple positions on the differentiation-low cost continuum are viable
• One cannot be Wal-Mart and Nordstrom
• 1. Mart is shown to be inside the efficiency frontier, as its internal operations are not efficient
• To get to the efficiency frontier

  • Pursue the right functional-level strategies
  • Be properly organized
  • Ensure its business-level strategy, functional-level strategy, and organizational arrangement align with each other
• Value innovation


  Innovations that push out the efficiency frontier in an industry, enabling greater value to be offered through superior differentiation at a lower cost than was thought possible
• Value innovation


  • Toyota's pioneering of lean production systems that improved the quality of automobiles, while simultaneously lowering costs
• Market segmentation


  A company's decision to group customers based on important differences in their needs, demands, and desires to gain a competitive advantage
• Market segmentation strategies


  • Standardization strategy
  • Segmentation strategy
  • Focus strategy
• Market segmentation


  • Coca-Cola segmenting the market by needs - regular Coke for the average consumer, and diet cola for those concerned about their weight
• Generic business-level strategies


  • Broad low-cost strategy
  • Broad differentiation strategy
  • Focus low-cost strategy
  • Focus differentiation strategy
• Lowering costs through functional strategy and organization

  • Achieve economies of scale and learning effects
  • Adopt lean production and flexible manufacturing technologies
  • Implement quality improvement methodologies to produce reliable goods
  • Streamline processes
  • Use information systems to automate business processes
  • Implement just-in-time inventory control systems
  • Design products with a focus on reducing costs
  • Increase customer retention
  • Ensure the organization's structure, systems, and culture reward actions that lead to higher productivity and greater efficiency
• Differentiation through functional-level strategy and organization


  • Customize product offering and marketing mix to different market segments
  • Design product offerings that have a high perceived quality regarding their functions, features, performance, and reliability
  • Handle and respond to customer queries and problems promptly
  • Focus marketing efforts on brand building and perceived differentiation from rivals
  • Ensure employees act in a manner consistent with the company's image
  • Create the right organizational structure, controls, incentives, and culture
  • Ensure the control systems, incentive systems, and culture align with the strategic thrust