Strategic Management – Slide 7 Business Level Strategies – Flashcards

• Creating and Sustaining a Competitive Advantage • Frameworks => Porter's Three Generic Strategies =; Innovation as a Fourth Generic Strategy =; Miles ; Snow "Dynamic" Strategies

Three Generic Strategies • Overall Cost Leadership • Differentiation • Focus

- Low-cost-position relative to a firm's peers - Manage relationships throughout the entire value chain

- Create products and/or services that are unique and valued - Non-price attributes for which customers will pay a premium - May be actual or perceived

- Narrow product lines, buyer segments, or targeted geographic markets - Attain advantages through specialization and in-depth user knowledge.

Requires a tight set of interrelated tactics that includes: • Tight cost and overhead control • Avoidance of marginal customer accounts • Cost minimization in all activities in the firm's value chain?R&D, service, sales force, and advertising Experience curve - Refers to how business "learns" to lower costs as it gains experience with production processes. - With experience, unit costs of production decline as output increases in most industries.

• Prestige or brand image • Technology • Quality • Features • Customer service • Dealer network

• Creates higher entry barriers due to customer loyalty • Provides higher margins that enable the firm to deal with supplier power • Establishes customer loyalty and hence less threat from substitutes

• Focus strategy is based on the choice of a narrow competitive scope within an industry. => Firm selects a segment or group of segments (niche) and tailors its strategy to serve them. =>Firm achieves competitive advantages by dedicating itself to these segments exclusively.

• Creates barriers of either cost leadership or differentiation, or both. • Used to select niches that are least vulnerable to substitutes or where competitors are weakest.

• Efficiency • Innovation • Quality • Customer Service • Speed/Adaptability

• Overall Cost Leadership 1) Dell 2) Wal-Mart • Differentiation 1) Harley Davison 2) Bose 3) Motel 6 • Focus 1) Radio Shack 2) Guitar Center 3) Southwest Airlines (in the 1980s)

• Positioning strategies are "static" and do not take time or competitive dynamics into account. • Not sustainable through industry life cycle stages. • Innovation: "Fourth" generic strategy =; Separate from differentiation because innovation is a dynamic strategy =; Apple as an example