Business level versus corporate-level strategy
- Business level: How should we compete in a given industry
- Corporate level: Which industry should be be in? How do we derive advantage across businesses?
-> Performance: Competitive advantage; Above-average profits
Porters generic business strategies
Cost leadership, tactics and problem?
Integrated tactics:
- Aggressive construction of efficient-scale facilities
- Vigorous pursuit of cost reductions from experience
- Tight cost and overhead control
- Avoidance of marginal customer accounts
Problem:
- Imitability -> Secrecy, process improvements
Differentiation, Tactics and Problems?
Tactics:
- along several dimensions at once
- Price premiums exceed extra costs of being unique
- Requires coordination of all parts of a firm’s value chain
- Speed as first mover or quick response as second mover
Main problems:
- Justify premium and dilution of brand
- Too much of it
- Imitability
Focus?
Focus on a narrow competitive scope within an industry, strategy tailored to serve a segment or group of segments (niche)
These strategies exist both for cost and differentiation strategies
Focus: improving competitive position with respect to the Five forces
Issues: Cannot exploit scale economies, erosion of cost advantage
Stages of the industry life cycle?
Stages of Industry life cycle:
Introduction
- New products that are not known to customers
- Poorly defined market segments
- Unspecified product features
- Low sales growth
- Rapid technological change
- Need for financial support
- Operating losses
Strategy:
Emphasis on R&D and marketing activities, developing the product and finding a way to get users to try it
Stages of Industry life cycle:
Growth
- Strong Increase in sales
- Growing competition
- Developing brand recognition
- Developing a need for financial complementary value-chain activities
Strategy:
Clearly define the product and brand, to enable fast diffusion
Stages of Industry life cycle:
Maturity
- Slowing demand growth
- Saturated markets
- Direct competition
- Price competition
- Strategic emphasis on efficient operations
Strategy:
Don’t let yourself be held hostage by life cycle curve, think about repositioning your products in unexpected ways
Stages of Industry life cycle:
Decline
- Falling sales and profits
- Increasing price competition
- Industry consideration
Strategy:
Monitor carefully the actions and intentions of competitors before deciding on a course of action
The logic of corporate strategy?
- Pick new industries to enter and decide on means of entry
- Initiate actions to boost combined performance of businesses
- Pursue opportunities to leverage cross-business value chain relationships and strategic fits into competitive advantage
- Establish investment priorities, steering resources into most attractive business units
