BUSINESS ACCELERATORS/

BUSINESS STRATEGY

Prof. Gagan Bhatia; Strategic

Management

BUSINESS STRATEGY

Business level strategies are

concerned with questions of how to
compete within a particular business

Prof. Gagan Bhatia; Strategic

Management

Scope
Competitive

Porters Generic
Business Strategy
Broa
d
Targ
et
Narro
w
Target

COST
LEADERSHIP

DIFFERENTIATION

FOCUSSED COST
LEADERSHIP

FOCUSSED
DIFFERENTIATION

Low Cost Products

/services

Differentiated
products
/Services

Competitive
Advantage
Prof. Gagan
Bhatia; Strategic
Management

Porters Generic Business Strategy

Cost leadership- Competitive advantage of a
firm lies in its lower cost of products and
services relative to what the competitors have
to offer
Differentiation- Competitive advantage lies in
special features incorporated into the
product/service, backed by customer demand
& ability to pay for it
Focus- Niche strategies which cater to a
narrow segment of the total market
Prof. Gagan Bhatia; Strategic
Management

Cost Leadership Strategy

Strategy involves the firm winning market share
by appealing to cost-conscious or price-sensitive
customers
Achieved by having the lowest prices in the target
market segment
Strategy calls for being the low cost producer in
an industry for a given level of quality
Usually targets a broad market
Prof. Gagan Bhatia; Strategic
Management

Cost Leadership Strategy

3 ways to achieve this
1. Involve production of high
volumes of output.
Economies of scale -This approach
means fixed costs are spread over a
larger number of units of the
product or service, resulting in a
lower unit cost
Prof. Gagan Bhatia; Strategic
Management

Cost Leadership Strategy

2. Achieving low direct and
indirect operating costs.
This is achieved by
offering high volumes of standardized products
offering basic no-frills products
limiting customization and personalization of
service.

Prof. Gagan Bhatia; Strategic

Management

Cost Leadership Strategy

3. Control over the
supply/procurement chain to ensure
low costs.
This could be achieved by
bulk buying to enjoy quantity discounts,
squeezing suppliers on price,
working with vendors to keep inventories low

Prof. Gagan Bhatia; Strategic

Management

Wal-Marts Approach to
Managing Its Value Chain

Pursue
Pursue global
global procurement
procurement of
of some
some items
items
Install
Install security
security systems
systems to
to reduce
reduce pilferage
pilferage rates
rates
Negotiate
Negotiate preferred
preferred real
real estate
estate rental
rental and
and leasing
leasing rates
rates
with
with real
real estate
estate developers
developers
Manage
Manage and
and compensate
compensate its
its workforce
workforce in
in aa manner
manner to
to
yield
yield lower
lower labor
labor costs
costs

Prof. Gagan Bhatia; Strategic

Management

Pitfalls of Low-Cost
Strategies
Low cost methods are easily imitated
by rivals
A reputation for low quality
Lower customer loyalty

Prof. Gagan Bhatia; Strategic

Management

Differentiation Strategies
Objective

Incorporate differentiating features

that cause buyers to prefer firms
product or service over brands of
rivals

Prof. Gagan Bhatia; Strategic

Management

Benefits of Successful
Differentiation
A product / service with unique,
appealing attributes allows a firm
to

Command a premium price

Which
and/or
hat is

unique
?

Increase unit sales and/or

Build brand loyalty

= Competitive Advantage
Prof. Gagan Bhatia; Strategic
Management

Differentiation Strategy
Appropriate when
target customer segment is not pricesensitive

customers needs which are under-served

firm has unique resources and

capabilities which
are difficult to copy
Prof. Gagan Bhatia; Strategic
Management

Pitfalls of Differentiation
Strategy
Appealing product features are easily
copied by rivals
Overspending on efforts to
differentiate, thus eroding
profitability
Charging a price premium
buyers perceive is too high

Prof. Gagan Bhatia; Strategic

Management

Types of Differentiation
Themes
Multiple features Microsoft Windows and
Office
Superior service Jet Airways
Engineering design and performance
Mercedes, BMW
Product reliability Johnson & Johnson
Quality manufacture Toyota

Prof. Gagan Bhatia; Strategic

Management

he First Nighttime Cold Remed

Prof. Gagan Bhatia; Strategic

Management

The First Ice-Cream For Dog

Prof. Gagan Bhatia; Strategic

Management

Attributes in Automobiles
BMW..driving
Volvo...safety
Mercedes...prestige
Toyota...reliability
Jaguarstyling
Ferrari.speed
Prof. Gagan Bhatia; Strategic
Management

Owning an Attribute
Fights Cavities
Tastes Good
Whitens Teeth
Freshens Breath
Prof. Gagan Bhatia; Strategic
Management

Focus / Niche Strategies

Involve concentrated attention on a
narrow piece of the total market
Objective

Serve niche buyers better than rivals

Prof. Gagan Bhatia; Strategic

Management

Focus / Niche Strategies

and Competitive Advantage
Approach 1

Focused low-cost strategy

Approach 2
Focused differentiation strategy

Which
hat is
unique?

Approaches to Defining a Market

Niche
Geographic uniqueness
Specialized requirements in
using product/service
Special product attributes
appealing only to niche buyers
Prof. Gagan Bhatia; Strategic
Management

Risks of a Focus Strategy

Competitors find effective ways
to serving niche

Prof. Gagan Bhatia; Strategic

Management

Risks of a Focus Strategy

Segment becomes so attractive
that its is crowded with rivals,
causing profits to be splintered

Prof. Gagan Bhatia; Strategic

Management

Examples of Focus
Strategies
Animal Planet and History Channel
Cable TV

Google
Internet search engines

Porsche
Sports cars
Prof. Gagan Bhatia; Strategic
Management

Stuck in the Middle Strategy

Prof. Gagan Bhatia; Strategic

Management

CONVENTIONAL & UNCONVENTIONAL

STRATEGIC MANAGEMENT

Prof. Gagan Bhatia; Strategic

Management

THANK YOU

Gagan Bhatia, Prof. Marketing