Ch.

6-

Generic Strategies

Prof. Prashant B. Kalaskar

Strategies Formulation
Strategies are formulated at 3 different levels Objectives are set at Corporate level. Rellocation of resources so as to nurture the portfolio is the important objective Various strategies decided at corporate level may be Stability Strategy Expansion Strategy Retrenchment Strategy Then individual business formulate their own stratgeies so as to achieve the objectives set at corporate level. Use of BCG matrix for rellocation of resources
Prof. Prashant B. Kalaskar

The Central Role of Customers

In selecting a business-level strategy, the firm determines 1. who it will serve 2. what needs those target customers have that it will satisfy 3. how those needs will be satisfied
(Abells 3 dimentions of Business definition- Customer needs, Customer Groups & Technology)
Prof. Prashant B. Kalaskar

Generic Strategies
M. Porter suggested 3 generic strategies to compete in the environment of competition. Company adopts any one of these 3 strategies, on the basis of1) The entry point of the firm elative to the industrys life cycle. 2) Its present position & the internal resource capabilities 3) The structure of the industry (5 Forces) & 4) The nature of forces driving the industry.
Prof. Prashant B. Kalaskar

Industry Life Cycle

Prof. Prashant B. Kalaskar

Industry Life-Cycle Stages: Strategic Implications

Prof. Prashant B. Kalaskar

Industry Life-Cycle Strategies

In the Introduction Stage: Products are unfamiliar to consumers Market segments not well defined Product features not clearly specified Competition tends to be limited Strategies for the Introduction Stage: Develop product and get users to try it Generate exposure so product becomes standard
Prof. Prashant B. Kalaskar

Industry Life-Cycle Strategies

The Growth Stage is: Characterized by strong increases in sales Attractive to potential competitors

Strategies for the Growth Stage: Brand recognition Differentiated products Financial resources to support value-chain activities

Prof. Prashant B. Kalaskar

Industry Life-Cycle Strategies

In the Maturity stage: Aggregate industry demand slows Market becomes saturated, few new adopters Direct competition becomes predominant Marginal competitors begin to exit For the Maturity Stage: Efficient manufacturing operations and process engineering Low costs (customers become price sensitive)
Prof. Prashant B. Kalaskar

Industry Life-Cycle Strategies

In the Decline Stage: Industry sales and profits begin to fall Strategic options become dependent on the actions of rivals
For the Decline Stage Maintaining Exiting the market Harvesting Consolidation
Prof. Prashant B. Kalaskar

Turnaround Strategies in the Life Cycle

Turnaround strategy
a strategy that reverses a firms decline in performance and returns it to growth and profitability. Asset and cost surgery Selective product and market pruning Piecemeal productivity improvements

Prof. Prashant B. Kalaskar

Current market position of Britannia biscuits

Nutri Choice
I N T R O D U C T I O N

Treat Pure Magic

Good Day Tiger

Little Hearts Marie Nice

ales

G R O W T H

M A T U R I T Y

D E C L I N E

Time

Business Level Strategy

Business-level strategy: an integrated and coordinated set of commitments and actions the firm (Business Unit) uses to gain a competitive advantage by exploiting core competencies in specific product markets

Prof. Prashant B. Kalaskar

Generic Strategy
The generic strategies are nothing but the approaches of the company to fight against competitors ( In general/Common strategies. 3 Generic Strategies are- Low Cost Leadership - Differentiation - Focus
Prof. Prashant B. Kalaskar

3 Important Generic Strategies

Low-cost leadership

Differentiation

Focus

Prof. Prashant B. Kalaskar

Strategic Orientation Porters Three Generic Strategies

Uniqueness Low Cost Position

Differentiation

Overall Cost Leadership

Focus Focus Differentiation Focus Low Cost

Strategic Advantages
Prof. Prashant B. Kalaskar

Three Generic Strategies

Overall cost leadership
Low-cost-position relative to a firms peers Manage relationships throughout the entire value chain

Differentiation
Create products and/or services that are unique and valued Non-price attributes for which customers will pay a premium
Prof. Prashant B. Kalaskar

Three Generic Strategies

Focus strategy
Narrow product lines, buyer segments, or targeted geographic markets Attain advantages either through differentiation or cost leadership

Prof. Prashant B. Kalaskar

Examples
Companies pursuing an overall cost leadership strategy Companies pursuing a differentiation strategy Companies pursuing a focus strategy
Rolex Lamborghini Harley Davison Apple McDonalds Wal-Mart

Prof. Prashant B. Kalaskar

Strategic Orientation Porters Three Generic Strategies

Low Cost Position

Uniqueness

Differentiation

Overall Cost Leadership

Focus Focus Differentiation Focus Low Cost

Strategic Advantages

Cost Leadership Strategy

An integrated set of actions designed to produce or deliver goods or services at the lowest cost, relative to competitors with features that are acceptable to customers relatively standardized products features acceptable to many customers lowest competitive price
Ex- Toyota, are very good not only at producing high quality autos at a low price, but have the brand and marketing skills to use a premium pricing policy.

Prof. Prashant B. Kalaskar

Cost Leadership Strategy

Cost saving actions required by this strategy: building efficient scale facilities tightly controlling production costs and overhead minimizing costs of sales, R&D and service building efficient manufacturing facilities monitoring costs of activities provided by outsiders simplifying production processes
Prof. Prashant B. Kalaskar

Overall Cost Leadership

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

Prof. Prashant B. Kalaskar

Differentiation
The Differentiation can be attained on the basis of Prestige or brand image Technology Innovation Features Customer service Dealer network

Prof. Prashant B. Kalaskar

Differentiation
Firms may differentiate along several dimensions at once Successful differentiation requires integration with all parts of a firms value chain An important aspect of differentiation is speed or quick response There is also the chance that any differentiation could be copied by competitors
Prof. Prashant B. Kalaskar

Focus
Focus strategy involves concentrating on a Particular customer Product line Geographical area Channel of distribution Niche market
Prof. Prashant B. Kalaskar

Focus
Focus strategy is that the firm is better able to serve its limited segment than competitors serving a broader range of customers Firms may thus be able to differentiate themselves based on meeting customer needs through differentiation or through low costs and competitive pricing for specialty goods
Prof. Prashant B. Kalaskar

Focus
Focus 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

Prof. Prashant B. Kalaskar

Focus
Cost focus
firm strives to create a cost advantage in its target segment

Differentiation focus
firm seeks to differentiate in its target market

Prof. Prashant B. Kalaskar

Focus: Improving Competitive Position

Focus
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

Prof. Prashant B. Kalaskar

Title

Prof. Prashant B. Kalaskar