Global Business Strategy

Week10 Business-level Strategic
Planning

Learning Objectives
• Types of business-level strategies
– Porter’s typology
– Miles & Snow’s typology
– Product life cycle

• Business-level strategic planning
– Value-chain
– Strategy clock

Week 10

2

Porter’s Competitive Strategies
• Overall cost leadership
– Supply the same product or service at a lower unit cost than competitors

• Differentiation
– Supply a product or service of which one or more attributes are perceived as more valuable

• Focus
– Target certain types of products for certain customer groups or regions
Week 10

3

Cost-leadership
• Cost leader can be obtained through
•
•
•
•

economies of scale simpler product design lower input costs efficient organisational process

• Case: IKEA
• simple, high-quality Scandinavian design (cost-saving in product design) • buying offices in 45 countries (cost-saving in inputs)
• knock-down furniture kits (cost-saving in assembling and delivering) • huge suburban stores (cost-saving in warehousing)
• customer self-service with tape measures, pens and notepaper
(cost-saving in staffing)
Week 10

4

Differentiation
• Differentiation brings competitive advantage
• meet the buyer needs in a unique manner
• create the higher perceived value and able to charge a higher price
• quality differentiation
• Rolex
• customer service
• Singapore Airlines
• value-for-money
• Fisher and Paykel, Mark and Spencer
• brand image
• Coca-Cola, Calvin and Klein
Week 10

5

Focus
• focus strategy brings competitive advantage
• match the features of specific products to the needs of specific customer groups
• geographic region
• ethnicity
• purchasing power
• tastes

• cost focus and differentiation focus
Week 10

6

Stuck in the middle
• Firms with no clear generic business strategy high Differentiation or low-cost strategy

Focus strategy

profitability

Stuck in the middle

low low market share
Week 10

high
7

Miles & Snow’ Typology (1)
• Prospector
–
–
–
–

Risk-taking
Growth oriented
Aggressively seek markets and opportunities
Entrepreneurial style of management

• defender
–
–
–
–

Protect current markets
Maintain stable growth
Serve existing customers
Emphasize efficiency over innovation

Week 10

8

Miles & Snow’ Typology (2)
• Analyzer
– Protect current market share + create market opportunities
– Seek balance between:
• Efficiency and innovation
• Risk-avoidance and risk-taking
• Control and flexibility

• Reactor
– No consistent approach
– React to environmental changes
– Compared to prospector:
• Drifts with events vs. seek out opportunities
• Wait to be influenced/changed vs. influence/change the industry
Week 10

9

Product Life Cycle (PLC) introduction growth

mature

decline

Market growth

Low

High

Low to moderate Negative

Competition

Low

Increasing

Intense

Changing

Overall objective Market awareness Create consumer demand

Defend market Consolidate, share maintain or exit Sales and marketing Production efficiency Major functional R&D concern Week 10

General management and finance

10

Strategies based on PLC

prospector

analyzer

defender

reactor

differentiation

low cost

low cost

focus

differentiation

Week 10

11

Business-level Strategic Planning: value chain
Organization Infrastructure
Human Resources
Information Systems
Material Management support inbound logistics production

outbound logistics Week 10

marketing
& sales

service

12

Value-added Analysis: sporting shoe industry
Value-added
17

3

30

50

component manufacturing assembling

wholesale

retail

35%

30%

15%

100

10%

cost
Week 10

13

The smiling curve

Week 10

14

Business-level Strategic