business level strategy competitive strategy and industry

Business level strategyCompetitive strategy and

industry environmentSession 11

Business level strategy• How to compete?• Generic business strategies• Choice of business strategy• Investment strategies

Business level strategy• Cost Leadership• 5-Forces model (protected

through low costs)• Disadvantages

– Cost competition from competitors– Imitation – Focus exclusively on efficiency

Business level strategy• Differentiation• 5-Forces model (protected through

differentiation, brand loyalty)• Disadvantages

– Need to maintain uniqueness– Imitation– Changes in consumer tastes and

demands

Business level strategy• Focus strategy• 5-Forces model (Protected by

either low costs or differentiation)• Disadvantages

– Smaller volumes, higher costs– Changes in technology or consumer

taste– Competition from differentiators

Business level strategy• Cost leadership and differentiation

– Production and process technology– Flexible manufacturing systems

• Stuck in the middle– Importance of FIT – capabilities and

strategy– Align product/technology/market

choices with strategy

Investment strategy• Supports competitive strategy (FIT)• Cost of strategy

– Resources required• Returns from strategy

– Firm competitive position– Stage of industry life cycle

We don’t like their sound, and guitarmusic is on the way out.

-Decca Recording Co., rejecting the Beatles, 1962

Investment Strategy• Strength of company competitive

position– Market share– Distinctive competency

• Industry life cycle– Opportunities– Threats

Competitive Strategy & Industry Environment• Managing industry environment

(FIT)• Fragmented Industries• Embryonic & Growth Industries• Mature Industries• Declining Industries

Fragmented Industries• Characteristics

– Many small/medium sized companies– Few economies of scale, High transport costs

• Strategic Focus– Niche, customization

• Consolidation Strategies– Chaining– Franchising– Horizontal Merger

Embryonic & Growth Industries• Characteristics

– Created by pioneers– Attract imitators

• Strategic focus– Exploit innovation

• Strategies– Go it alone– Enter into alliance– License innovation

Mature Industries• Characteristics

– Consolidated– Competitive interdependence

• Strategic focus– Deter entry– Manage rivalry– Supply and distribution strategy

Mature Industry• Deter entry

– Product proliferation/ Filling niches– Price cutting– Maintaining excess capacity

• Manage Rivalry– Price signaling– Price leadership– Product differentiation– Controlling industry capacity

• Preemptive• Co-ordination

Declining Industry• Characteristics

– Falling demand – Intense competition

• Strategic Focus– Dealing with decline

Strategies– Leadership– Niche– Harvest– Divestment