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 firms 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 groups needs that its goods or services can satisfy, needs (what) are related to a products 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 firms 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 firms 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 SIAs 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. SIAs 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 firms 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 companys customer focus. Standardization actually enables personalization as simple processes and good employees training makes following procedures becomes second nature.