Formulation of Business Level Strategies

(How a particular business competes)

Porter's
Porter's Generic
Generic Strategic
Strategic Model
Model
Structure-conduct-performance
Structure-conduct-performance paradigm
paradigm

Miles
Miles and
and Snow
Snow Typology
Typology
Strategic
Strategic Orientation
Orientation

Growth
Growth strategies
strategies
Ansoff’s
Ansoff’s Growth
Growth Share
Share Matrix
Matrix

Product
Product Life
Life Cycle
Cycle Strategies
Strategies
 Alternative Corporate Growth
Strategies

Current products New Products

Market
Market Penetration
Penetration Strategies
Strategies Product
Current Product Development
Development
Markets Strategies
Strategies

New Market
Market Development
Development Strategies
Strategies Diversification
Diversification Strategies
Strategies
Markets
 Alternative Corporate Growth
Strategies
Current products New Products
Current Product
Markets Market
Market Penetration
Penetration Strategies
Strategies Product Development
Development
Strategies
Strategies
• Price reductions • Offering a different version of an existing
• Advertising stressing the many benefitsproduct: mini-Oreos
of the product • Offering a new-improved version of the
• Packaging in different sized packages product: Gillette’s latest improvements in shavin
• Making it available at more locations technology
•Offering new ways to use an existing product

New
Market
Market Development
Development Strategies
Strategies Diversification
Diversification Strategies
Strategies
Markets

• Arm & Hammer continues to seek new •uses

Philip Morris, originally into cigarettes, diversifi
for its baking soda into financial services, Post cereals, Sealtest
• McDonald’s Dairy and Kraft Cheese
• Sara Lee acquired Coach Leather Products
Portfolio Models for Allocating
Resources - BCG Matrix
Star

Question Mark
Market Growth Rate

High

10%

Cash Cow Dog

Low

10x High 1x Low 0.1x

Relative Market Share

Limitations of Growth Share
Matrix
Mkt growth rate – an inadequate descriptor of
overall industry attractiveness
Relative Market share - an inadequate
descriptor of overall competitive strength
Outcomes of growth-share analysis are highly
sensitive to variations in how growth and
share are measured
Lack of guidance on how best to implement
investment strategies for each business
Model implicitly assumes that all business
units are independent of one another except
for the flow of cash
Strategic Options for SBUs as
analyzed by the BCG Portfolio Matrix

• Build
• Hold
• Harvest
• Divest
GE Matrix

High
Market Attractiveness

Medium

Low
Low

Strong Medium Weak

Business
BusinessPosition or strength
Strength
 Porter’s Generic Strategic Model
Each of the three strategies is based on
having a strong Differential Advantage so this
factor is not plotted.
High
Focus Cost Leadership
Differentiation
Profitability (ROI)

No Differentiation
No Cost Leadership
No Focus

Low
Narrow Broad
Scope of Target Market
Implementation of Miles & Snow
Typology
Culture
Culture Response
Response Style
Style

Capitalize
Capitalize on
on Emerging
Emerging
Prospector
Prospector Opportunities
Opportunities

Reactor
Reactor Maintain
Maintain the
the Status
Status Quo
Quo

Defender
Defender Reduce
Reduce Operating
Operating Costs
Costs

Defend
Defend Stable
Stable Market,
Market,
Analyzer
Analyzer Aggressively
Aggressively Enter
Enter Emerging
Emerging
Opportunities
Opportunities as
as “Second
“Second In”
In”
Product Life Cycle

A concept that provides a way

to trace the stages of a
product’s acceptance, from its
introduction (birth)
to its decline (death).
 Product Life Cycle

1. Like humans, Product also have

Life Cycle.
2. This term is applied to generic
category of product not to specific
brands.
3. PLC consists of aggregate demand
over an extended period of time
for all brands in generic product
category.
4. Length of PLC varies.
5. PLC is related to a market.
 Product Life Cycle
IntroductoryGrowth Maturity Decline
Stage Stage Stage StageProduct
Category
Sales
Dollars

Product
Category
Profits
0

Time
 Full-Scale
Full-Scale Launch
Launch
of
of New
New Products
Products
Introductory Stage
High failure rates Unpredictable conditions
Little competition Not Important
Frequent product Standards being Developed
modification
Limited distribution Selective Channels as build up takes
place
Negative profits High marketing and
production costs
Promotion Strategy Aim at early adopters. Promotion
Emphasis -Awareness and
information
Sales Promotion Intensive personal selling
to channels to stock
 Offered
Offered in
in more
more sizes,
sizes,
Growth Stage flavors,
flavors, options
options
Competition Some emulators threatens
competitive advantage of
firm
Strategy Market penetrations
Profits From high prices and Increasing
rate of demand
Goal is quality and ensuring
distribution
Distribution Market consolidation through
intensive distribution
Promotion Strategy Emphasizes brand benefits
Emphasis Word of mouth; minimal advert
Prices Normally start to fall
Sales Promotion Build Brand preference
 Many
Many consumer
consumer
products
products are
are in
in Maturit
Maturity Stage Maturit

Competition Maximum competitors Declining

sales growth and Saturated markets.
Marginal competitors drop out
Strategy Defend Brand position extend
product line by Stylistic product changes
Prices What the market can bear avoid
price war and profits fall
Promotion Strategy Use as a vehicle for
differentiation
Promotion Emphasis Moderate since buyers
are aware
Heavy promotions To encourage brand
switching
convert buyers to loyal buyers
Market is fragmented Niche marketers emerge
 Rate
Rate of
of decline
decline depends
depends on
on
change
change inin tastes
tastes or
or
Decline Stage adoption
adoption of
of substitute
substitute products
products

Competition Few with rapid shake out

Strategy Prepare for removal and milk the brand
Profits Decline as Long-run drop in sales due
to declining demand and push up costs
Prices Low to permit quick liquidation of Large
inventories of unsold items
Distribution Selective with unprofitable outlets
closed down
Promotion Strategy promote low price to reduce
stock
Emphasis Elimination of all nonessential
marketing expenses
Extending the PLC

Change product

Change product use

Change product image

Change product positioning