Sharlaine Mae Ricalde Bsba-OM

Strategic Activity 4

KEYTERMS

1.Business Level Strategy- is an integrated and coordinated set of commitments and actions the firm
uses to gain a competitive advantage by exploiting core competencies in specific product market.

2.Cost Leadership Strategy- is an integrated set of actions taken to produce goods or services with
features that are acceptable to costumers at the lowest cost,relative to that of competitors

3.Differentiation Strategy-is an integrated set of action taken to produce goods or services (at an
acceptable cost)that costumers perceive as being different in ways that are important to them.

4.Focus Strategy-is an integrated set of actions taken to produce goods or services that serve needs of
particular competitive segment.

5.Integrated cost leadership /differentiation strategy -Involves engaging is primary value chain activities
and support function that allow firm to simultaneously pursue low cost and differentiation.

6.Market segmentation-is a process used to cluster people with similar needs into individual and
identifiable groups.

7.Total quality management(TQM)-is a managerial process that emphasizes an organization's

commitment to the costumer and to continous improvement of all processes through problem solving
based on empowerment of employees.

REVIEW QUESTIONS

1. What is a business level strategy?

- is an integrated and coordinated set of commitment and action the firm uses to gain a competitive
advantage by exploiting core competencies in specific product markets.

2.What is the relationship between a firm's costumer and its business level strategy in terms of
who,what and how ? Why is this relationship important?

- Costumers are the foundation of successful business level strategies and should never be taken for
granted. Effectively managing costumer relationship helps the firm answer question related to the
issues of who,what and how . In terms of costumers,when selecting a business level strategy the firm
determines who will be served,what needs those target costumers have that will satisfy,and how those
needs will be satisfied. Deciding who the target costumer is that the firm intends to serve with its
business-level strategy is an important decision. Companies divide costumers into group based on
differences in the costumer needs to make this decision.
3.What are the differences among the cost leadership ,differentiation,focused cost leadership ,focused
differentiation and integrated cost leadership /differentiation business-level strategies?

- The cost leadership strategy is an integrated set of action taken to produce goods or services with
features that are acceptable to costumer at the lower cost ,relative to that of competitor in broad
market. On the other hand ,the differentiation strategy is an integrated set of actions taken to produce
goods or services(at an acceptable cost)that costumer perceive as being different in ways that are
important to them in the broad market . Focused cost leadership strategy is an integrated set of action
taken to produce goods or services with features that are acceptable to costumer at the lowest
cost,similar to cost leadership strategy. Focused differentiation strategy is a type of differentiation
strategy which used in narrow market instead of bdoad market. Integrated cost leadership
/differentiation strategy which involves engaging primary value-chain activities and support function
that allow a firm to simultaneously pursue low cost and differentiation.

4. How can each of the business -level strategies be used to position the firm relative to the five forces
of competition in a way that help the firm earn above average returns?

-a. Cost leadership strategy. Having the low cost position is valuable when dealing with rival. Because of
the cost leader's advantageous position.

b. Differentiation Strategy. Costumer tend to be loyal purchasers of products differentiated in ways that
are meaningful to them.

C.focused cost leadership strategy. This strategy is used to position the firm relative to the five forces of
competition in a way that helps the firm earn above average return similar to cost leadership strategy.

D.Focused Differentiation strategy. This strategy used to position the firm relative to the five forces of
competition in a way that helps the firms earn above average return similar to differentiation strategy.

5. Integrated cost leadership/Differentiation strategy. Flexibility is required for firms to complete

primary value chain activities and support function in ways that allow them to use the integrated cost
leadership /differentiation strategy in order to produce somewhat differentiated products at relatively
low cost.

5. What are the specific risk associated with using each business -level strategy?

Cost leadership strategy risk is that the processes used by the cost leader to produce and distribute its
good or service could become obsolete because of competitors innovation.

Differentiation strategy one risk of differentiation strategy is that costumer might decide that the price
differential between the differentiators product and the cost leaders product is too large

Focused cost leadership strategy and focused differentiation strategy has all risk of cost leadership and
differentiation strategy a competitor may be able to focus on a more narrowly defined competitive
segment and there by "out focus" the focuser.
Integrated cost leadership /differentiation strategy risk is that firm and find it difficult to perform
primary value chain activities and support function in ways that allow them to produce relatively
inexpensive products with level of differentiation that create value for the target costumer.

CASE DISCUSSION QUESTION

1. What strategy was the new CEO at JCPenney seeking to implement given the generic strategies found
in chapter4?

The old approach of offering special discount through out the year was eliminated in favor of a new
costumer value pricing approach that reduced prices on goods across the board by as much as 40
percent. The intent was to offer costumer a better deal on all products an opposed to providing special
high discount on selected product.

2.What was the result of change in strategy implemented ?

JCPenny was seeking to implement a differentiation strategy deviating from cost leadership strategy
initially pursued. New strategy appeared it to be failure. Total sales in 2012 were 54.28 billion less than
2011 and firm stock price declined by 55 percent. It seems that the new executive team at Jcpenny
thought they could retain their current

costumer base(perhaps with the value pricing across the board).

3. Why was this strategy disaster for JCPenney?

The low price strategy would attract more costumer rather than coupon discount. Instead he should
conduct a market survey to understand the costumer behaviour before eliminating the old price
strategy plan.

4. What does it mean to be "stuck in the middle"between two strategies (between low cost and
differentiation strategies)?

A firm is said to be stuck in the middle if it does not offer features that are unique enough to convince
costumers to buy its offering and its prices are too high to effectively compete based on price .Firms that
are stuck in the middle generally perform poorly because they lack a clear market or competitive pricing