BUSINESS

STRATEGIES

Generic Business
Strategies
They operate below corporate level strategies
They are derived from corporate level
strategies
Their manner of operation is determined by the
corporate level strategy based on resources
allocated to them
The business definition provides direction to
business strategies

What- Customer function

Who- Customer groups
How- Alternate technologies

Business Definition example Oral care

company

Definition
Business Strategies are courses of
action adopted by a firm for each
of its businesses separately to
serve identified customer groups
and provide value to the customer
by satisfying their needs

Competitive Strategies
Industry
Structure

Porters
Five Forces
Model
Lower
Cost

Choice of
competitive
strategy

Competitive
Advantage
Positioning of a
firm in the
industry
Competiti
ve Scope

Differentiatio
n
Broad
Target
Narrow
Target

Competitive Scope

Porters Generic Business

Strategies

Broad
Target

Cost
Leadership

Differentiation

Narrow
Target

Focussed
Cost
leadership

Focussed
Differentiation

Low cost
product/
services

Differentiated
product/ services

Competitive Advantage

Broad target- large range of products/services to wide range of

customer groups locate in a widely scattered geographical area

Narrow target- limited range of products/ services to a few

customer groups in a restricted geographical area

Low cost- firm is able to offer lower cost products/ services

than competitors

Differentiation- firm is able to offer products/services with

special features demanded by customers who are willing to pay

Focus Firm offers either low cost or differentiated

products/services to a narrow target

Cost Leadership achievement

Accurate demand forecasting
Attaining economies of scale
Cost saving technologies
Aiming at the average customer
Conditions
1. Price sensitive buyers
2. High bargaining power of buyers
3. Less customer loyalty
4. Standardized product
5. Differentiation is difficult

Benefits of cost leadership

Cost advantage- against competition
Powerful suppliers effect is reduced Buyers bargaining power is met with low prices
Entry barrier for potential entrants
Cheaper substitutes is difficult

Disadvantages
Cost advantage is temporary
Dilute customer focus
Technology changes

Differentiationachievement
Firm offers utility matching customer tastes
and preferences
Lower the overall cost for the buyer
Raise the performance for the buyer
High quality of the product
Distinctiveness- prestige and status
Full range of product/service to satisfy
customer needs

Conditions for
differentiation
Too large market
Customer needs and preferences are too
diversified
Customers are ready to pay a premium
price for the differentiation
Brand loyalty is possible

Benefits of differentiation
Distinctive firms. Customer brand loyaltyprotection from competition
Powerful suppliers- brand loyal customersnot sensitive to price increases
Bargaining power of buyers is less as they
have less options
High price- entry barrier
Substitutes difficult

Risks under differentiation

Threat from imitation possible
Over differentiation, lack of value perceived
by customer is a risk
Charging too high is a risk
Failure to communicate the benefits of the
product/ service properly to customer can
cause differentiation strategy to fail

Focus strategiesachievement
Identifying gaps not covered by cost leaders
and differentiators
Unique skills, efficiency to serve niche
markets
Innovative ways of serving these markets

Conditions
Geographic, demographic or lifestyle based
segment
Specialized requirement
Niche market is big enough to generate
profit
Potential for growth
Major players are not interested