BUSINESS LEVEL STRATEGY ANALYSIS t The Positioning Approach

BUSINESS LEVEL STRATEGY ANALYSIS t ü ü ü The Positioning Approach. Porter’s 5 Forces. Value Chain Analysis. The Generic Strategies.

The Positioning Approach The oldest approach to military strategy. n The newest of the three prescriptive approaches to strategy. n ©Design and Planning Approaches were explained in Chapter 3. n Focuses on how firms in a given context differ in product market positions compared to the competition. 80

Premises of The Positioning Approach Strategy follows structure. n Looks at the groups of competitors in an industry. n Relies more heavily on calculation than the design or planning schools. n Places even more emphasis on the role of strategic planners. n 81

Porter’s Five Forces Analysis Breaking Apart Industry-Level Competition 87

Porter’s Five Forces Analysis Threat of Entry

The 6 Barriers of Entry ÀEconomies of Scale. ÁProduct Differentiation. Capital Requirements. ÃCost Disadvantages Independent of Size. ÄAccess to Distribution Channels. ÅGovernment Policy. 89

Porter’s Five Forces Analysis Power of Buyers

Buyer Power Determinants * Bargaining Leverage. =Buyer Concentration =Buyer Volume. =Buyer Switching Costs. =Buyer Information. =Ability to Integrate Backward. =Substitute Products. =Pull-Through. 90

Buyer Power Determinants * Price Sensitivity. =Price/Total Purchases =Product Differences. =Brand Identity. =Impact on Quality/Performance. =Buyer Profits. =Decision-Maker’s Incentives. 90

Porter’s Five Forces Analysis Power of Suppliers

Supplier Power Determinants * Differentiation of Inputs. * Switching Costs of Suppliers. * Presence of Substitute Products. * Supplier Concentration. * Importance of Volume to Supplier. * Cost Relative to Total Purchases in the Industry. * Impact of Inputs on Cost or Differentiation. 90

Porter’s Five Forces Analysis Power of Substitutes

Power of Substitutes 1. Relative Price Performance of Substitute. 2. Switching Costs. 3. Buyer Propensity to Substitute. 92

Porter’s Five Forces Analysis Competitive Rivalry

Determinants of Rivalry * Industry Growth. * Fixed Costs/Value Added. * Intermittent Overcapacity. * Product Differences. * Brand Identity. * Switching Costs. * Concentration and Balance. * Informational Complexity. * Diversity of Competitors. * Corporate Stakes. * Exit Barriers. 92

Determinants of Rivalry * Industry Growth. * Fixed Costs/Value Added. * Intermittent Overcapacity. * Product Differences. * Brand Identity. * Switching Costs. * Concentration and Balance. * Informational Complexity. * Diversity of Competitors. * Corporate Stakes. * Exit Barriers. Competition is Everything!!!

Value Chain Analysis Figure 3 98

Value Chain Analysis in rg Ma Ma r gin ce rvi Se ng eti rk s Ma Sale & nd ou tb tics Ou gis Lo ns io at er Op d un s bo ti c In gis Lo Primary Activities Figure 3

Value Chain Analysis Procurement Human Resource Management Technology Development Procurement Ma r gin Primary Activities ce rvi Se ng eti rk s Ma Sale & nd ou tb tics Ou gis Lo ns io at er Op d un s bo ti c In gis Lo Figure 3 in rg Ma S U P P O R T A C T I V I T I E S

Value Chain Analysis 1. Importance of value-chain analysis is that it provides a framework for identifying or developing a distinctive competence. 82

Devising a Plan of Action p Position the Company. p Influence the Balance of the Forces. p Anticipate Shifts in the Forces. 93

Creating Families of Strategies 1. Locating the core business. 2. Distinguishing the core business. 3. Elaborating the core business. 4. Extending the core business. 5. Reconceiving the core business. 94

Creating Families of Strategies 1. Locating the core business. 2. Distinguishing the core business. 3. Elaborating the core business. 4. Extending the core business. 5. Reconceiving the core business. The Core Business is reflected in the Choice of Generic Strategies

Porter’s Generic Strategies Cost Advantage Lower Cost Broad Target Differentiation 1. Cost Leadership Competitive Scope Narrow Target Figure 4 99

Porter’s Generic Strategies Cost Advantage Lower Cost Broad Target Competitive Scope Narrow Target Figure 4 1. Cost Leadership Differentiation 2. Differentiation

Porter’s Generic Strategies Cost Advantage Lower Cost Broad Target 1. Cost Leadership Competitive Scope Narrow Target Figure 4 3 A. Cost Focus Differentiation 2. Differentiation

Porter’s Generic Strategies Cost Advantage Lower Cost Broad Target 1. Cost Leadership 2. Differentiation 3 A. Cost Focus 3 B. Differentiation Focus Competitive Scope Narrow Target Figure 4 Differentiation

Strategies of Differentiation í Price Differentiation. í Image Differentiation. í Support Differentiation. í Quality Differentiation. í Design Differentiation. í Undifferentiation. 99

Strategies of Scope íUnsegmentation. íSegmentation. íNiche. íCustomizing. 100

Elaborating the Core Business í Penetration Strategies. í Market Development Strategies. í Geographic Expansion Strategies. í Product Development Strategies. 101

Elaborating the Core Business í Penetration Strategies. í Market Development Strategies. í Geographic Expansion Strategies. í Product Development Strategies.

Ways to Elaborate a Given Business Existing Product New Product Existing Market Penetration Strategies Product Development Strategies New Market Development Strategies Diversification Strategies Figure 5 101

Questions ?

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