Business Level Strategies

Strategic Management
Business-level Strategies
Reshma Strategic Management ©chintech

Business-level Strategies
 Business strategies are the courses of action adopted by a firm for
each of its businesses separately to serve identified customer
groups and provide value to the customer by a satisfaction of
their needs.
 They are intended to create differences between the firm's
positions relative to their rivals.
 The dynamic factors that determine the choice of a competitive
strategy, according to Michael E. Porter, are two, namely the
industry structure and the positioning of a firm in the industry.

Industry structure
It is determined by the competitive forces : the threat of new
entrants; the threat of substitute products or services; the
bargaining power of suppliers; the bargaining power of buyers;
and the rivalry among the existing competitors in an industry.

Positioning of Firm in Industry
It is the overall approach of the firm towards competing. It is based
on two variables :
The competitive advantage – Lower cost and Differentiation
The compettive scope – Broad target and Narrow target

Tactics for Business Strategies
 It is a specific operating plan detailing how a strategy is to be
implemented in terms of when and where it is to be put into
action.
 Two tactics used in formulating & implementing business
strategies are :- Timing and Market location.

I Timing Tactics
 When to make a business strategy move is often as important as
what move to make.
 First movers – The first company to manufacture and sell a new
product or service is called the pioneer or the first mover
organisation.
 Late mover – The organisations which enter the industry
subsequently are late mover organisations.

Advantages of being First Mover
 They can establish position as market leader.
 Moving first results in early commitments to suppliers of raw
materials, new technology & distribution channels, creating cost
advantages.
 They develop an image of being a pioneer, which helps build
image and reputation.
 It constitutes a pre-emptive strike & creates a lead for the first
movers.
 First time customers are likely to remain loyal.

Disadvantages of being First Mover
 Being a pioneer is often costlier than being a follower.
 Late movers face lesser risks when the markets are developed.
 Late movers can imitate technological advances, skills, know-
how & marketing approaches easily.
 Late movers can jump the technological thresholds & use the
latest technology available.
 Customer loyalty is not guaranteed. Late movers can snatch
market share from the first mover.

II Market Location Tactics
 It deals with the issue of where to compete. It means the target
market the organisation aims at in applying its business strategies.
 Market location tactics could be of four types: leader, challenger,
follower and nichers.

Market Leaders
 Organisations that have the largest market share in the relevant
product market & usually lead the industry in technological
developments, product & service attributes, price benchmarks or
distribution channel design.
Three strategies can be used:
 Expanding the total market through new users, new uses & more
usage.
 Defending the market share through position defence, flank
defence, counteroffensive defence, contraction defence.
 Expanding the market share through enhancement of operational
effectiveness.
Market Challengers
 Organisations that have the second or lower ranking in the
industry. These organisations can either challenge the market
leader or choose to follow them.
A general attack approach could be of five types :
 Frontal attack
 Flank attack
 Encirclement attack
 Bypass attack
 Guerrilla attack

Market Followers
 Organisations that imitate the market leaders but do not upset the
balance of competitve power in the industy.
They may adopt four broad approaches
 Counterfeiter strategy
 Cloner strategy
 Imitator strategy
 Adapter strategy

Market Nichers
 Organisations that carve out a distinct niche that is left uncovered
by the other organisations in the industry or a niche that is of little
or no interest to others.
 They can adopt three approaches
 Creating niches, involving looking for ways & means by which
niches can be identified.
 Expanding niches, involving enhancing the coverage of present
niche to include similar market niches or new niches.
 Protecting niches, involving shielding the niches served from
attacks by other organisations in the industry.

Business strategies for different industry conditions
Industries pass through four stages in their life cycle :
 Embryonic stage
 Growth stage
 Maturity stage
 Decline stage

Embryonic Stage
 Investment & capital needs are highest.
 Companies are first movers & fast followers who have to
generate capital internally or from venture capitalists.
 Technology is yet unproven & not standardised.
 Demand is being established; customers lack information & are
hesitant to try out new products or services.
 Business models are unproven.

Growth Stage
 Investment & capital needs decrease but gradually. Returns are
high.
 Technology gains a firm footing & standardisation increases.
 Demand is established.
 Business models take shape.
 Market share of incumbent companies increases; new bases for
market segementation emerge.

Maturity Stage
 Investment & capital decrease significantly. Returns are lower
and stabilise.
 Technology developments are few & standardisation is high.
 Demand is stable.
 Business models are well established.
 Market shares of companies are steady.
 Industry gets consolidated & is dominated by small number of
large companies.

Decline Stage
 Investment & capital practically cease. Returns decline.
 Technology development becomes superfluous.
 Demand shrinks
 Products tend to become commodities & lose their brand power.
 Market share reduces in size
 Industry faces movement of firms through retrenchment
strategies.

Business Level Strategies

Uploaded by

Copyright:

Available Formats

Business Level Strategies

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Business Level Strategies

Uploaded by

Copyright:

Available Formats

Strategic Management

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

entrants; the threat of substitute products or services; the

bargaining power of suppliers; the bargaining power of buyers;

and the rivalry among the existing competitors in an industry.

Reshma Strategic Management ©chintech

The competitive advantage – Lower cost and Differentiation

The compettive scope – Broad target and Narrow target

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

Reshma Strategic Management ©chintech

You might also like