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Corporate-level strategies: are basically about the decisions related to allocating resources among
the different businesses of an organisation, transferring resources from one set of businesses to
others, and managing and nurturing a portfolio of businesses such that overall corporate objectives
are achieved.
Business definition of a company consists of three dimensions of customer needs, customer groups,
and alternative technologies.
Business model: is “a representation of a firm's underlying core logic and strategic choices for
creating and capturing value within a value network.”
Corporate-level strategies, business definition, and business model act as the foundations for
business strategies.
S. M. Shafer, H. J. Smith and J. C. Linder, "The power of business models," Business Horizons Elsevier, 48, no. 3, (2005): 199-207.
C. A. Montgomery and M. E. Porter, Strategy: Seeking and Securing Competitive Advantage (Boston, MA: Harvard Business School Publishing,1991): xiv.
Business-level Strategies: 2 FACTORS Influence
• Business strategies are the courses of action adopted by an organisation for each of its businesses
separately to serve identified customer groups and provide value to the customer by satisfaction of
their needs.
• The source of competitive advantage for any business operating in an industry arises from the skilful
use of its core competencies.
• The dynamic factors that determine the choice of a competitive strategy, according to Porter, are
two namely the industry structure, and the positioning of a firm in the industry.
• A combination of organisational behaviour and resources ultimately leads to the development of
capabilities that an organisation uses to build competencies.
• An organisation can attempt to define and establish an approach to compete in their industry through
a competitive strategy.
Industry Structure and
Positioning of Firm in Industry
• Industry structure is determined by the competitive forces which are five in number: the threat
of new entrants; the threat of substitute products or services; the bargaining power of suppliers; the
bargaining power of buyers; and the rivalry among the existing competitors in an industry.
according to Porter.
• Porter considers positioning as the overall approach of the firm to competing. It is designed to
gain sustainable competitive advantage based on competitive advantage and competitive scope
https://hbr.org/video/2226587624001/the-five-competitive-forces-that-shape-strategy
Porter’s Five Forces Framework(Industry Structure)
Positioning: Competitive Advantage and Competitive Scope
• Competitive advantage can arise due to two factors: lower cost and differentiation:
i. Lower-cost is based on the competence of an organisation to design, produce, and market a comparable product
more efficiently than its competitors.
ii. Differentiation is the competence of the firm to provide unique and superior value to the buyer in terms of
product quality, special features, or after-sale service.
• Competitive scope can be in terms of two factors: broad target and narrow target:
i. Broad targeting: The firm can offer a full range of products / services to a wide range of customer groups located
in widely-scattered geographical area.
ii. Narrow targeting: The firm can choose to offer a limited range of products / services to a few customer groups in
a restricted geographical area.
Generic Business Strategies: PORTER
We could classify business strategies into the following three types:
• Cost leadership (lower cost / broad target market) When the competitive advantage of an
organisation lies in lower cost of products or services relative to what the competitors have to
offer, it is termed as cost leadership.
• Focus (lower cost or differentiation / narrow target market) They are niche strategies and rely
on either cost leadership or differentiation but cater to a narrow segment of the total market.
Porter's Generic Business Strategies
Porter's Generic Business Strategies
Broad
COMPETITIVE SCOPE
Overall Broad
target
(Where to compete)
Cost leadership differentiation
market
Low-cost Differentiated
products/services Products/services
COMPETITIVE ADVANTAGE
(How to compete)
Source: Adapted from M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New
York: Free Press, 1985): 12.
Checkers Drive-In Restaurants in the United
States. They specialize in hamburgers, hot
dogs, french fries, and milkshakes.
Cost Leadership as a Business Strategy
• The basic objective in achieving cost leadership is to ensure that the cumulative costs across the value chain
is lower than that of competitors. WALMART
• Several actions could be taken for achieving cost leadership as mentioned below:
Accurate demand forecasting and high capacity utilisation is essential to realise cost advantages. Indigo
Attaining economies of scale leads to lower per unit cost of product / service. Maruti Alto
High level of standardisation of products and offering uniform service packages using mass production
techniques yields lower per unit costs. Coke
Aiming at the average customer makes it possible to offer a generalised set of utility in a product / service to
cover greater number of customers. Basic versions of Mobile
Investments in cost-saving technologies can help an organisation to squeeze every extra paisa out of the
cost making the product / service competitive in the market. Tata Steel
Withholding differentiation till it becomes absolutely necessary is another way to realise cost-based
competitiveness. Airtel DTH
Reasons for Cost leadership
Conditions under which cost leadership is used are mentioned below.
• The markets for the product / service operate in such a way that price-based competition is vigorous making
costs an important factor. JIO
• The product / service is standardised and its consumption takes place in such a manner that differentiation is
superfluous. Patanjali Groceries, Brand factory
• The buyers may be large and possess significant bargaining power to negotiate a price reduction from the
supplying organisation. Indian Railways
• There is lesser customer loyalty and the cost of switching from one seller to another is low. This is often seen in
the case of commodities or products that are highly standardised. Desktops
• There might be few ways available for differentiation to take place. Alternatively, whatever ways for
differentiation are possible do not matter much to the customers. Chinese Mobiles
Benefits of Cost Leadership
• Cost advantage is possibly the best insurance against industry competition. An organisation is
protected against the ill effects of competition if it has a lower-cost structure for its products and
services.
• Powerful suppliers possess higher bargaining power to negotiate price increase for inputs.
Organisations that possess cost advantage are less affected in such a scenario as they can absorb
the price increases to some extent.
• Powerful buyers possess higher bargaining power to effect price reduction. Organisations that
possess cost advantage can offer price reduction to some extent in such a case.
• The threat of cheaper substitutes can be offset to some extent by lowering prices.
• Cost advantage acts as an effective entry barrier for potential entrants who cannot offer the
product / service at a lower price.
Limitations of Cost Leadership
• Cost advantage is ephemeral. It does not remain for long as competitors can imitate the cost reduction
techniques. Duplication of cost reduction techniques makes the position of cost leader vulnerable from
competitive threats.
• Cost leadership can dilute customer focus and limit experimentation with product attributes. This may
create a situation where cost reduction is done for its own sake and the interests of the customers are
ignored.
• Depending on the industry structure, sometimes less efficient producers may not choose to remain in
the market owing to the competitive dominance of cost leader and scope for product/service may get
reduced affecting the cost leader.
• Technological shifts are a great threat to cost leader as these may change the ground rules on which an
industry operates. For instance, technological development may lead to the creation of a cheaper
process or product which is adopted by newer competitors. The older players in the industry may be
left with an obsolete technology that now proves to be costlier. In this way, technological
breakthroughs can upset cost leadership strategies.
Differentiation Business Strategy
The key to achieving differentiation is to create value for the customer that is unmatched by the competitors at the
price at which the differentiator organisation offers its products
A differentiated product or service stands apart in the market and is distinguishable by the customers for its special
features and attributes. Apple, Zara, Ciaz
Measures that a differentiator organisation can adopt in its product features are:
• Offer utility for the customer and match her tastes and preferences.
• Lower the overall cost for the buyer in using the product / service.
• Raise the performance of the product.
• Increase the buyer satisfaction in tangible or non-tangible ways.
• Offer the promise of high quality of product / service.
• Enable the customer to claim distinctiveness from other customers and enhance her status and prestige among the buyer
community.
• Offer the full range of product /service that a customer requires for her need satisfaction.
Conditions for Differentiation
The major conditions under which differentiation business strategies could be employed are given
below:
• The market is too large to be catered to by a few organisations offering a standardised product / service. High-
end consumer needs can’t be served by Chinese and Budget Standardized Mobiles
• The customer needs and preferences are too diversified to be satisfied by a standardised product / service.
High-end customers look for specific High-end products
• It is possible for the organisation to charge a premium price for differentiation that is valued by the customer.
iPhone 11
• The nature of the product / service is such that brand loyalty is possible to generate and sustain.
Samsung Galaxy Fold, Rs. 164999 https://www.youtube.com/watch?v=E9ydQoi2VbA
• There is ample scope for increasing sale for the product / service on the basis of differentiated features and
premium pricing. Huawei P30 Pro
Budget Phones/standardized in India
• REDMI NOTE 7 PRO.
• REALME 3 PRO.
• SAMSUNG GALAXY M30.
• VIVO Z1X.
• REDMI NOTE 7S.
• REDMI NOTE 7.
• OPPO K1.
• REALME U1.
Benefits for Differentiation
• Organisations distinguish themselves successfully on the basis of differentiation thereby lessening
competitive rivalry. Customer brand loyalty too acts as a safeguard against competitors. Brand loyal
customers are also generally less price-sensitive.
• Powerful suppliers can negotiate price increases that the organisation can absorb to some extent as it has
brand loyal customers typically less sensitive to price increase.
• Powerful buyers do not usually negotiate price decrease as they have fewer options with regard to suppliers
and generally have no cause for complain as they get the special features and attributes demanded. Owing
to its nature, differentiation is a market- and customer-focussed strategy.
• Differentiation is an expensive proposition. Newer entrants are not normally in a position to offer similar
differentiation at a comparable price. In this manner, differentiation acts as a formidable entry barrier to
new entrants.
• For similar reasons, as in the case of newer entrants, substitutes product / service supplier too pose
negligible threat to established differentiator organisations.
Limitations of Differentiation
• In a growing market, products tend to become commodities. Long-term perceived uniqueness -
the basis for differentiation - is difficult to sustain. Motorola Pagers
• In the case of several differentiators adopting similar differentiation strategies the basis for
distinctiveness is gradually lessened and ultimately fades away.
• Differentiation fails to work if its basis is something that is not valued by the customer.
• Price premium too have a limit. Charging too high a price for differentiated features may cause
the customer to forego the additional advantage from a product / service on the basis of her
own cost-benefit analysis.
• Failure on the part of the organisation to communicate adequately the benefits arising out of
differentiation or over relying on the intrinsic product attributes not readily apparent to a
customer may cause the differentiation strategy to fail.
Focus Business Strategy
• Focus strategy is concerned with identifying a narrow target in terms of markets and customers. The organisation
seeking to adopt a focus strategy has to locate a niche in the market where the cost leaders and differentiators are
not operating.
• Going beyond the confines of the industry, innovative organisations could also explore the ‘blue ocean’ segments
that they could create and take advantage of.
• Choosing specific niches by identifying gaps not covered by cost leaders and differentiators.
• Creating superior skills for catering to such niche markets.
• Creating superior efficiency for serving such niche markets.
• Achieving lower cost / differentiation as compared to competitors in serving such niche markets. Tata Nano, Jaipur Foot,
Psoriasis treatment (TED Talk by Dr Mashelkar)
• Developing innovative ways in managing the value chain different from the prevalent ways in an industry.
https://www.ted.com/talks/r_a_mashelkar_breakthrough_designs_for_ultra_low_cost_products?language=ltg
W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy: How to create Uncontested Market Space and Make Competition Irrelevant (Boston, MA: Harvard Business Review Press, 2005).
Reasons for Focus Business Strategy
Conditions ripe for the adoption of a focus strategy are:
• There is some type of uniqueness in the segment which could either be geographical, demographic, or
based on lifestyle. Gems for Children
• There are specialised requirements for using the products or services that the common customers cannot be
expected to fulfil.
• The niche market is big enough to be profitable for the focussed organisation.
• There is a promising potential for growth in the niche segment.
• The major players in the industry are not interested in the niche as it may not fit into their own plans or not
be crucial to their own success.
• The focussing organisation has a required skill/expertise to serve the niche segment.
• The focussing organisation can guard its turf from other predator organisations on the basis of customer
relations and loyalty it has developed and its acknowledged superiority in serving the niche segments.
Benefits for Focus Business Strategy
• The focussed organisation is protected from competition to the extent that the other
organisations having a broader target do not possess the competitive ability to cater to the niche
markets.
• The focussed organisations buy in small quantities and so powerful suppliers may not evince
much interest.
• Powerful buyers are less likely to shift loyalties as they might not find others willing to cater to
the niche markets as the focussed organisations do.
• The specialisation that focussed organisations is able to achieve in serving a niche market acts
as a powerful barrier to substitute products / services that might be available in the market.
• For the same reason as above, the competence of the focussed organisation acts as an effective
entry barrier to potential entrants to the niche markets.
Limitations for Focus Business Strategy
• Serving niche markets requires the development of distinctive competencies to serve those
markets and their development may be a long-drawn difficult process.
• Being focussed means commitment to a narrow market segment. Once committed, it may be
difficult for focussed organisation to move to other segments of markets.
• A major risk lies in the cost configuration for a focussed organisation as the costs are higher and
markets are limited and the volume of production and sales small.
• Niches are often transient and may disappear owing to technology or market factors.
• Niches may sometimes become attractive enough for the bigger players to shift attention to
them.
• Rivals in the market may sometimes out-focus the focussed organisations by devising ways to
serve the niche markets in a better manner.
Stuck-in-the-Middle Positioning
• Organisations that clearly are cost leaders, differentiators or focusers there are some who are not
clear about their positioning and end up doing something of everything resulting in doing
nothing substantial. These are the organisations that are `stuck in the middle'. Clearly such
organisations do not possess a competitive advantage and have a below-average performance.
• Positioning through stuck-in-the-middle is failure to develop business strategy on the basis of
one of the three generic strategies of cost leadership, differentiation or focus.
• Depending on a firm’s resources and capabilities, a firm stuck in the middle should endeavour to
move either towards one of the three generic strategies positioning.
Stuck-in-the-Middle Positioning
Superior
Advantage due to Low cost with
differentiation differentiation
advantage
Inferior
Stuck-in-the-middle Advantage due to low
cost
Inferior Superior
Source: Based on ideas in M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance
(New York: Free Press, 1985).
Best-Value Provider Positioning
J. D. Hunger and T. L. Wheelen, Strategic Manasgement (Reading, Mass.: Addison Wesley, 1999): 121.
Benefits for First Mover Tactics
• They can establish position as market leader. They can establish business models and gain valuable
experience that can help them in attaining cost leadership.
• Moving first in an industry results in early commitments to suppliers of raw materials, new
technology, and distribution channels creating cost advantages over late movers.
• They develop an image of being a pioneer that helps build image and reputation. First movers create
standards in different areas for all subsequent products and services in the industry.
• Moving first constitutes a pre-emptive strike and creates a lead for the first movers. For the late
movers, imitation may be difficult and risky. Savlon antiseptic liquid is struggling
• First time customers are likely to remain loyal.
• Nokia mobiles are first movers
Limitations for First Movers
• Being a pioneer is often costlier than being a follower. Pioneering organisations have to spend
resources on creating customer awareness and education for the products especially if these are
new products.
• Late movers face lesser risks when the markets are developed.
• Late movers can imitate technological advances, skills, know-how and marketing approaches
easily negating the advantages that first movers are likely to have.
• Technological change is often rapid creating obsolescence for the first movers. Late movers can
jump the technological thresholds and use the latest technology available. Blackberry
Smartphone was the first mover, but Apple and Samsung are ruling the market now
• Customer loyalty is not guaranteed and can often prove to be ephemeral. Late movers can snatch
market share from the first mover.
Market Location Tactics: 4 Types
• Market location business tactic deals with the issue of where to compete. On the basis of the role that
organisations play in the target market, market location tactics could be of four types: leader,
challenger, follower, and nichers.
• Market leaders are organisations that have the largest market share in the relevant product market and
usually lead the industry in factors such as technological developments, product and service attributes,
price benchmarks, or distribution channel design.
• Market challengers are organisations that have the second or lower ranking in the industry. These
organisations can either challenge the market leader or choose to follow them.
• Market followers are organisations that imitate the market leaders but do not upset the balance of
competitive power in the industry.
• Market nichers are organisations that carve out a distinct niche that is left uncovered by the other
organisations in the industry or a niche that is of little or no interest to others.
Hypothetical Market Structure (market share)
Approach for a Market Leader: 6 Strategies
• Expanding the total market through new users, new uses, and more usage.
• 6 Strategies: Defending the market share through position defence, flank defence,
counteroffensive defence, mobile defence and contraction defence.
• Expanding the market share through enhancement of operational effectiveness by means such
as new product development, raising manufacturing efficiency, improving product quality,
providing superior support services or increasing marketing expenditure.
Approach for a Market Challenger: 5 Strategies
• Frontal attack involving matching the opponent in terms of the product, price, promotion, and
distribution.
• Flank attack involving challenging the opponent's weak or uncovered geographical or segmental
areas.
• Encirclement attack is a grand move to capture the opponent's market share through launching
an advertising blitzkrieg, making an unbeatable product-related offering, or presenting a unique
service guarantee.
• Bypass attack involving ignoring the opponent and attacking the easier markets by means such
as diversifying into unrelated products, moving into new geographical areas or leapfrogging into
new technologies.
• Guerrilla attack involving small, intermittent attacks to harass and demoralise the opponent
organisation and eventually secure an organisation foothold in the industry. This could be done
by means such as price cuts, price discounts, intensive comparative advertising or initiating legal
action.
Approach for a Market Follower: 4 Strategies
• Counterfeiter strategy involving duplicating the market leader's product and packaging and selling it
in the black market.
• Cloner strategy involving emulating the market leader's products, name, and packaging.
• Imitator strategy involving copying some things from the market leader while retaining some other
features such as pricing, packaging or advertising.
• Adapter strategy involving adapting one's own products to those of the market leader and selling
them in different markets.
Approach for a Market Nicher: 3 Ways
• Creating niches involving looking for ways and means by which niches can be identified or created
in an industry.
• Expanding niches involving enhancing the coverage of present niche to include similar market
niches or new niches.
• Protecting niches involving shielding the niches served from attacks by other organisations in the
industry.
Leader: 6 Defense Marketing Strategies
Olay, previously Oil of Olay or Oil of Ulay, is an American skin care line
It is one of Procter & Gamble's multibillion-dollar brands
Olay originated in South Africa as Oil of Olay. "Oil of Olay" as a spin on the word
"lanolin", a key ingredient.
Market Follower Strategies
• Followers must know how to hold current customers and win a fair share of new ones.
Each follower tries to bring distinctive advantages to its target market—location, services,
financing–while defensively keeping its manufacturing costs low and its product quality
and services high. It must also enter new markets as they open up. The follower must
define a growth path, but one that doesn’t invite competitive retaliation.
• The market nicher knows the target customers so well, it meets their needs better
than other firms selling to them casually. As a result, the nicher can charge a
substantial price over costs. The nicher achieves high margin, whereas the mass
marketer achieves high volume.
• The risk is that the niche might dry up or be attacked. The company is then stuck
with highly specialized resources that may not have high-value alternative uses.
Because niches can weaken, the firm must continually create new ones.
• Even large, profitable firms may choose to use niching strategies for some of their
business units or companies
Market Nicher Strategies
• Be a leader in small market, or niche; avoid competing with large firms by targeting small
markets, no interest to the larger firms
MARKET SIZE
TIME
Embryonic Stage
In the embryonic stage of the industry life cycle the conditions are as below. Under these conditions, the
business strategies need to help organisations to help set up their base, develop competencies, and build
market share. Early movers may be able to establish market share.
• Investment and capital needs are highest as the industry has just started. Returns are low and uncertain.
• Companies are first movers and fast followers who have to generate capital internally or attracted outside capital
usually from venture capitalists.
• Demand is being established; customers lack information and are hesitant to try out new products or services
• Business models are unproven; business uncertainty is high and managerial decisions involve high risks
• Smart Cars and Drones may belong to different Industry, Cybersecurity,
Virtual reality, Artificial intelligence
Growth Stage
In the growth stage of the life cycle the conditions are as mentioned below. Under these conditions,
the strategies could be either low-cost or differentiation
• Investment and capital needs decrease but gradually. Returns are high.
• Technology gains a firm footing and standardisation increases. Jio
• Demand is established, customers gain information and learn to differentiate between the product
offerings
• Business models take shape and business is on more secure footing and managerial decisions involve
moderate risks
• Market share of incumbent companies increases; new bases for market segmentation emerge
• Mobile/Smartphone Telecom Industry
Maturity Stage
In the maturity stage of the industry life cycle the conditions are as below. Under these conditions,
business strategies of all three types: cost leadership, differentiation, and focus are in use.
• Investment and capital decrease significantly. Returns are lower and stabilise.
• Technology developments are few and standardisation is high.
• Demand is stable, customers are well-aware of options available, and have learnt to choose and
differentiate.
• Business models are well established.
• Market shares of companies are steady and jealously guarded
• Industry gets consolidated and is dominated by small number of large companies
• Petroleum, and tobacco industries
Decline Stage
In the decline stage of the industry life cycle the conditions present are as below. Under these
conditions, business strategies of low-cost tend to gain an upper hand.