BUSINESS LEVEL STRATEGIES

Types of business strategies

• Porters generic Strategies
• Industry life cycle strategies
• Miles and Snows adaptation model
• Game theory model
• Warfare strategies (also called tactics)
• Blue Ocean strategy
 Types of Business unit strategies
• Porter: cost leadership, Differentiation , Focus
• Life cycle: Introduction, Growth , maturity
Decline (Hofer’s Matrix)
• Miles and snow: Defender, Analyser,
Prospector, Reactor
• Game theory: simultaneous, sequential,
Repeated
– Game rules; timeframe, information, level playing
• Competitive Tactics
• Blue Ocean - out of box thinking
Porters generic strategies
 Cost leadership
• Organization attempts to outperform
competitors by doing everything it can to
produce goods or services at a lower cost than
competitors
• Emphasis is on operational efficiency
• May be achieved through process innovations
• Results in above average returns
Cost leadership and porters five forces
• Rivalry – can sustain low prices better than
competitors
• Power of buyers – price pressure not likely to be
below that of next-most-efficient competitor
• Power of suppliers – better able to absorb price
increases than other competitors
• Threat of new entrants – ever improving
efficiency levels to create entry barriers
• Substitutes – has more flexibility to reduce prices
to thwart customers switching to
 Differentiation
• Organization attempts to create a product that is
perceived by customers as unique in some important
way
• Emphasis is on strategic positioning
• May be achieved through
– Superior quality
– Superior customer responsiveness
– Superior innovation
• Results in above average returns through premium
pricing
 Differentiation contd…
• Firms following this business-level strategy rely on unique
features of their product or service to drive superior margins
to those of their competitors.
• A firm’s product can be differentiated in an almost countless
number of ways, such as:
– Unusual features
– Responsive customer service
– Rapid product innovation
– Technological leadership
– Perceived prestige and status
– Different tastes
 Differentiation and five forces
• Rivalry – creates customer loyalty that reduces
price sensitivity
• Power of Buyers – the uniqueness of the good
or service reduces number of suppliers and
increases switching costs
• Power of Suppliers – higher margins insulate
the firm, and price insensitivity by buyers allows
the firm to pass on price increases
• Threat of New Entrants – loyalty of customers
and need to invest in differentiating techniques
reduces this threat
• Substitutes – loyal customers and high
switching
 Miles and snow typology
• Defender strategies:
– defender strategy attempt to protect their market
from new competitors.
• Focus on improving efficiency not innovation
• Prospector Strategy.
– Organizations implementing a prospector strategy
are innovative, seek out new opportunities, take
risks and grow. Eg: 3M- innovation strategy
Example of 3M
• Analyzer Strategy. Organizations implementing
analyzer strategies attempt to maintain their current
businesses and to be somewhat innovative in new
businesses
– Amul vs Kwality
• Reactor Strategy. Organizations that follow a reactor
strategy have no a consistent strategy-structure
relationship. Rather than defining a strategy to suit a
specific environment, reactors respond to
environmental threats and opportunities in ad hoc
fashion.
– Ambassdor
Tactic - a specific operating plan that contributes
to strategy implementation in terms of when &
where it should be put into action.
Link between strategy formulation & strategy
implementation.
Classified as : Timing tactics , Market location
tactics.
 Timing the tactics
When to compete
First mover
a. Manufactures & sells product
b. Establishes reputation as leader in market &
cost
c. Establishes standards and gain market share
 Location tactics
• Where to compete : Classified into Offensive & Defensive
tactics
• Offensive tactics:
 Offensive Tactics are :
a. Frontal attack
b. Flanking Maneuver
c. Bypass attack
d. Encirclement
e. Guerilla warfare
Frontal attack : Expensive tactic involving huge resources ,sustained efforts ,fights against
competitors in terms of price ,promotion & channels.

Ex : Nirma against HLL.

Flanking Maneuver : Attacks competitor’s weaker section

Ex : Positioning of TATA SUMO VS Scorpio.

Bypass attack : No direct attack is involved instead they change the rule of the game .

Ex : Offering a new product which makes competitor’s product unnecessary. WHATSSAPP vs

messenger

Encirclement : Attacking the competitor with a variety of products in varied price ranges.

Ex : Microsoft in internet .

Guerilla warfare: No direct attack. They “hit & run” very often, gain is small. Normally new
entrants & small firms prefer this tactics.

Ex : Indian companies like Ganga & pure water against national brands such as Parle,Bisleri &
Acquafina.
 Game theory
• Sequential gaming
– In a sequential game, the players act at well-defined
turns, and have some information on what the
other(s) did at previous turns.
• Simultaneous gaming
– Simultaneous games are the one in which the move of
two players (the strategy adopted by two players) is
simultaneous. In simultaneous move, players do not
have knowledge about the move of other players.
– In a simultaneous game, all players act at the same
time, or independently, have no information on the
actions of the others in the same turn.