MM 5012

BUSINESS STRATEGY AND ENTERPRISE MODELLING

SUMMARY ASSIGNMENT II

R48A

Henny Zahrany

29112551

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT

INSTITUT TEKNOLOGI BANDUNG

2014

BUSINESS LEVEL STRATEGY

Business level strategy: integrated and coordinated set of commitments and actions the

firm uses to gain a competitive advantage by exploiting core competencies in specific

product markets

When selecting a business level strategy the firm determines 1. Who will be served, 2.

What needs those target customers have that it will satisfy, and 3. How those needs will

be satisfied

Strategic competitiveness results only when the firm satisfies a group of customers by

using its competitive advantage to compete in individual product market. Firms’

relationships with customers are characterized by three dimensions: Reach, Richness, and

Affiliation.

Reach: concerned with the firm’s access and connection to customers.

Richness: concerned with the depth and detail of the two-way flow of information

between the firm and the customers.

Affiliation: concerned with facilitating useful interactions with customers.

Dimensions of reach, richness, and affiliation helps the firm answer questions related to

the issues of who, what, and how.

Who: companies clusters people with similar needs into individual and identifiable

groups (market segmentation)

What: identify the targeted customer group’s needs that its goods or services can satisfy,

needs (what) are related to a product’s benefits and features.

How: determine how to use its capabilities and competencies to develop products that can

satisfy the needs of its target customers

A. The Purpose of a Business Level Strategy

to create differences between the firm’s positions and those of its competitors,

whether it intends to perform activities differently or to perform different activities.

B. Types of Business-Level Strategies

When selecting a business-level strategy, firms evaluate two types of potential

competitive advantages: lower cost than rivals, or the ability to differentiate and

command premium price that exceeds the extra cost of doing so.

Two types of target markets are broad market and narrow market segment. Broad

market seek to use their capabilities to create value for customers on an industry wide

basis. Narrow market intends to serve the needs of a narrow customer group.

1. Cost Leadership Strategy

It is an integrated set of actions taken to produce goods or services with features that

are acceptable to customers at the lowest cost, relative to those of competitors. Cost

leaders’ goods and services must have competitive levels of differentiation that create

value for customers.

2. Differentiation Strategy

Integrated set of actions taken to produce goods or services (at an acceptable cost)

that customers perceive as being different in ways that are important to them. Firms

must be able to produce differentiated products at competitive costs to reduce upward

pressure on the price that customers pay.

3. Focus strategies

Integrated set of actions taken to produce goods or services that serve the needs o a

particular competitive segment (particular buyer group, different segment of a

product line, and different geographic market).

Focused Cost Leadership Strategy

Emphasizes several activities to keep its cost low

Also offers some differentiated features that appeal to its target customers

Uniquely aligned with the needs of its customers

Focused Differentiation Strategy

Activities required to use the focused differentiation strategy are largely identical

to those of the industry wide differentiation strategy, the only difference is in the

firm’s competitive scope; the firm focuses on a narrow industry segment.

4. Integrated Cost Leadership/Differentiation Strategy

Efficiently produce products with some differentiated features. Efficient production is

the source of maintaining low costs while differentiation is the source of creating

unique value. Flexible manufacturing systems, information networks, and total

quality management systems are three sources of flexibility that are particularly

useful for firms to use this strategy.

SINGAPORE AIRLINES BALANCING ACT

SIA executes a dual strategy by managing four paradoxes: 1). Providing service

excellence cost effectively, 2).Innovating in both centralized and decentralized manner,

3).Being a technology leader and a follower, 4). Achieving standardization and

personalization in its process.

1) Achieving Service Excellence Cost-Effectively

It has two main assets- planes and people-and it manages them so that its service is

better than rivals’ and its cost are lower.

Plane: SIA ensures that its fleet is always young, this triggers a virtuous cycle. It is

also spend less time in hangars, which mean more time in the air.

People: invest heavily in training employees; it schools its fresh recruits for four

months and held retraining annually.

2) Fostering Both Centralized and Decentralized Innovation

SIA sustain innovation by using a structured, rigorous, and centralized process

along with an emergent, distributed, and local process.

Product innovation department (PID): engages frontline employees, customers,

competitors, and the media to create multiple feedback channels.

Uses its distributed innovations approach; employees must innovate if SIA is to

stay ahead.

It focuses on incremental innovation in most areas because the overall experience

matters most.

3) Being Both a Technology Leader and Follower

Being a technology leader where customers can experience the benefits is essential

to differentiation; being a follower in the back office contributes to cost leadership.

SIA has developed the ability to execute high-risk innovation projects (A380).

SIA is happy to be a back-office laggard. Also outsourced many of its IT

functions, so it could focus on its core business.

4) Using Standardization for Personalization

SIA’s service processes are highly standardizes, but the airline also

institutionalizes personalization by creating a service culture that sustains through

recruitment, training and rewards.

It personalizes customer experience by relaying information through its CRM

system.

SIA’s training program, Transforming customer, teach cabin crews to anticipate

customers’ needs.

5) The How-To of Dual Strategies

Harness the power of your people and culture

Make good use of technology

Utilize the power of business ecosystems

Make investment decisions strategically

What are the main ideas of the reading materials?

Business level strategy intends to create differences between the firm’s positions and those of its

competitors, whether it intends to perform activities differently or to perform different activities.

What are the requirements for implementing the ideas in your own context?

The firm must determining who will be served, what needs those target customers have that it

will satisfy, and how those needs will be satisfied.

What are practical implications for you?

When running a company, it has to choose how it intends to compete in individual product

markets, which strategies that will enhance their vision and mission. By creating differences

among competitors, a company could sustain its competitive advantage.

What are the lessons learned?

Every function is responsible for improving its services, the process ensures that innovations are

developed in accordance with operational realities, making it easy to implement them. Also

constant innovation on many fronts is risky, but changing processes could spread resources and

expertise thin and blur a company’s customer focus. Standardization actually enables

personalization as simple processes and good employees training makes following procedures

becomes second nature.