BUSINESS-LEVEL STRATEGIES

IKEA India launches first online store in Mumbai

• Swedish ready-to-assemble furniture giant IKEA has launched its first online store in Mumbai
offering more than 7,500 products( 19/8/2019)
• IKEA conducted a “Life at Home” study to understand the way Mumbaikars live – inside and outside
their homes, their tastes and motivations. This was carried out through a combined approach of
home visits by IKEA experts, and data-rich surveys.
• The online store will offer 1,000 products priced below Rs 200, with uniform across India, both in the
offline and online stores
• IKEA aims to be present in 49 cities by 2030. Aims to touch 100 million customers in the next three
years
• IKEA has been sourcing from India for its global stores for close to 35 years. IKEA currently has more
than 55+ suppliers with 45,000 direct employees and 400,000 people in the extended supply chain.
• The furniture giant opened its first store in India in Hyderabad on August 9, 2018. So far, more than 3
million customers have visited IKEA's Hyderabad store and about 8 million have visited IKEA's India
website.
• IKEA has four land sites in the states of Telangana, Maharashtra, Karnataka and Delhi/NCR and
continues to look for more in other major cities.
 Learning objectives
• Describe how corporate-level strategies, business definition, and business model act as the
foundations for business strategies
• Identify how industry structure and positioning of the firm in the industry help to determine the
competitive advantage
• Discuss and give examples of achieving cost leadership, differentiation, and focus generic
business strategies, conditions under which each of these are used, their benefits and risks
• Explain the two types of tactics used for business strategies: timing and market location
• Indicate business strategies for four different industry conditions (ILC and PLC)
• Demonstrate leveraging home country advantages and organisation-specific advantages for
international business strategies
The Foundations of Business-level Strategies
Business-level strategies are an important level at which companies set their strategies.

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.

• Differentiation (differentiation / broad target market) When the competitive advantage of an

organisation lies in special features incorporated into the product / service which is demanded
by the customers who are willing to pay for it then the strategy adopted is the differentiation
business strategy.

• 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

Narrow Focussed cost leadership Focussed differentiation

target
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.

• The basis for an organization in adapting focus strategy are:

• 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

Relative ability to differentiate

Superior
Advantage due to Low cost with
differentiation differentiation
advantage

Inferior
Stuck-in-the-middle Advantage due to low
cost

Inferior Superior

Relative ability to reap cost advantage

Source: Based on ideas in M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance
(New York: Free Press, 1985).
Best-Value Provider Positioning

• Strategic positioning organisations adopt by being primarily cost leaders, differentiators, or

focusers is open to risks.
• Purpose of managing an organisation strategically is to be alive to the changes taking place in
the environment.
• Best value: is the relatively lower price charged compared to that charged for a competitor’s
products with similar attributes.
• Providing value for money: Cost leaders and differentiators can adopt a best-value provider
positioning when they offer products and services to customers at the best price-value available
on the market.
Integrating Cost Leadership and Differentiation
• Integrating cost leadership and differentiation: is possible through providing
product/service at low cost through technologies that enable differentiation through
focus on niche segments.
• Mass customisation is possible through the use of Computer - Assisted (or - Aided)
Design (CAD) and Computer-Assisted (or - Aided) Manufacturing (CAM) and robot
technology resulting in manufacturing of small batch of products at low cost.
• Flexible manufacturing systems, using mass customisation, allow low-volume
production at relatively lower costs.
Tactics for Business Strategies
Tactic is "a specific operating plan detailing how a strategy is to be implemented
in terms of when and where it is to be put into action. The two tactics of timing
(when) and market location (where) used in formulating and implementing business
strategies.
• Timing : When to make a business strategy move is often as important as what move to make.
• First movers and late movers: The first company to manufacture and sell a new product or service
is called the pioneer or the first mover organisation. The organisations which enter the industry
subsequently are late mover organisations
• Dettol antiseptic lotion is the first mover
• Savlon is the late mover

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

 To reduce the probability of attack

 Divert attacks to less-threatened areas
 Lessen attackers’ intensity
 Leader: Six Defense Strategies
A dominant firm can use the six defense strategies
1. Position defense means occupying the most desirable market space in
consumers’ minds, making the brand almost impregnable. Intel Chip, Crest for
cavity
2. Flank defense, the market leader should erect outposts to protect a weak front or
support a possible counterattack. Ex. Taj into Ginger hotels
3. Preemptive defense, a more aggressive maneuver is to attack first, perhaps with
guerrilla action across the market—hitting one competitor here, another there—
and keeping everyone off balance. Another is to achieve broad market
envelopment that signals competitors not to attack. SBI’s ATMs in 100,000
villages, Vaporware (next slide)
4. Counteroffensive, the market leader can meet the attacker frontally and hit its
flank, or launch a pincer movement so it will have to pull back to defend itself.
FedEX attacking UPS, Reduce the price to eliminate enemy, Ex. Jio and Airtel
5. Mobile defense, the leader stretches its domain over new territories through
market broadening and market diversification. Market broadening shifts the
company’s focus from the current product to the underlying generic need. Market
diversification shifts the company’s focus into unrelated industries. Sometimes
large companies can no longer defend all their territory. ITC into FMCG and Food
business
6. Contraction defense(also called strategic withdrawal), they give up weaker
markets and reassign resources to stronger ones. IBM’s exit from Laptop
vaporware
• vaporware is a product, typically computer hardware or software,
that is announced to the general public but is never actually
manufactured nor officially cancelled.
• Use of the word has broadened to include products such as
automobiles.
• Ex. Electric four-wheelers
Hyundai Kona Electric
Mahindra e2oPlus
Mahindra E Verito
Tata Tigor EV
Challenger: 5 General Attack Strategies
1. Frontal attack
2. Flank attack
3. Encirclement attack
4. Bypass attack
5. Guerilla warfare
Attack from regional champions
Market Challenger: 5 Strategies
 5 General Attack Strategies
1. Frontal attack, the attacker matches its opponent’s product, advertising, price, and distribution.
Pepsi vs. Coke
2. Flanking strategy is another name for identifying shifts that are causing gaps to develop, then
rushing to fill the gaps. The challenger spots areas where the opponent is underperforming.
Nirma occupied more market share than HUL in BOP segment.
3. Encirclement attempts to capture a wide slice of territory by launching a grand offensive on
several fronts. Sun Microsystems licensed its JAVA software to companies and software
developers for consumer devices to attack Microsoft
4. Bypassing the enemy altogether to attack easier markets instead offers three lines of approach:
diversifying into unrelated products, diversifying into new geographical markets, and
leapfrogging into new technologies. Google overtake Yahoo; Pepsi introduced Aquafina
bottled water before Coke launched Dasani.
5. Guerrilla attacks consist of small, intermittent attacks, conventional and unconventional,
including selective price cuts, intense promotional blitzes, and occasional legal action, to harass
the opponent and eventually secure permanent footholds. Bajaj attacked Hero Honda
6. Regional attack: The wide geographical spread of the market and variations in tastes,
preferences, and habits in South Asia have encouraged the growth of regional brands in a wide
range of product categories. Reputed international brands face stiff competition from regional
champions who understand the local and regional tastes, customs, and preferences well. These
firms also tend to be entrepreneurial in their strategic and tactical initiatives and quick in
decision making. CavinKare(Chik shampoo), Wipro’s Santoor, Parachute oil
 Specific Attack Strategies: Challenger

Motorola to create a growing niche in a

• Price discounts
• Improved services

Unillever’s Ponds and Lakme

• Lower-priced goods

market dominated by Nokia

• Distribution
• Value-priced goods innovation
• Prestige goods • Manufacturing-cost
• Product proliferation reduction
• Product innovation • Intensive advertising
• Masstige (P&G): Olay-Leader
promotion
strategy (middle class)

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.

Four broad strategies:

1. The counterfeiter duplicates the leader’s product and packages and sells it on the black
market or through disreputable dealers. Music firms, Apple and Rolex are plagued by
counterfeiters.
2. The cloner emulates the leader’s products, name, and packaging, with slight variations.
Bisley bottled water
3. The imitator copies some things from the leader but differentiates on packaging,
advertising, pricing, or location. Koryo brand of Future Group: Toaster, TV, Ac’s
4. The adapter takes the leader’s products and adapts or improves them. Chinese goods
4 FOLLOWER
Strategies
Fake Brands in Rural India
• Rs 8,000 cr. in FMCG sector
• Same colour and logo
• 100 variants of Parachute oil and Fair and Lovely fairness cream,
Dabur’s Lal Dant Manjan
• Look-alike
• Spell-alike: Pentane (Pantene)
• Duplicates
Strategy: Strengthen distribution network, hologram, educating
consumers (fake notes), rural intelligence, Coke-consumer response
coordinators, P&G legal battle, FICCI-brand protection committee, etc.
Fake Brands
 Market Nicher Strategies
• Firms with low shares of the total market can become highly profitable through
smart niching. Such companies tend to offer high value, charge a premium price,
achieve lower manufacturing costs, and shape a strong corporate culture and
vision.

• 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

Nichers have three tasks:

1. Creating niches
2. Expanding niches
3. Protecting niches
 Nichers achieve high margins, where as mass marketer high volume
 Multiple niching is better than single niching
 Garments with ethnic designs, Bank branches for high-net worth customers, or special lounges,
etc.
Niche Specialist Roles
• Product-Line
• End-User Specialist Specialist
• Vertical-Level Specialist • Job-Shop Specialist
• Customer-Size Specialist • Quality-Price
• Specific-Customer Specialist
Specialist, Raymond’s
Suit Studio • Service-Specialist
• Geographic Specialist • Channel Specialist
Beard Oil, One Gram Gold Jewellery
Maternity Wear, Gym Wear
Lovely Sweets in Jalandhar
In Mysore, the "madhur vada"is a huge niche product
Business Strategies for Different Industry
Conditions
• Industry life cycle means that industries typically pass through different stages of
their life cycle starting from embryonic through decline stages.
• Business strategies are addressed to a particular industry and markets.
• Conditions vary through different stages of industry life cycle requiring adaptation of
business strategies
Four Stages of Industry Life Cycle

MARKET SIZE

Embryonic Growth Maturity Decline

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.

• Technology is yet unproven and not standardised.

• 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.

• Investment and capital practically cease. Returns decline.

• Technological developments become superfluous.
• Demand shrinks and it becomes difficult to attract new customers.
• Products tend to become commodities and lose their brand power.
• Market shares reduce in size as industry demand shrinks.
• Industry faces movement of firms through retrenchment strategies.
• Handicraft Industry, Print Media, Film(Image) Industry, DVD Industry
 Business Strategies and Internationalisation
• There are four types of international corporate strategies that organisations adopt -
international, multi domestic, global, and transnational strategies.
• It must be clear that organisations adopt the business strategies of cost leadership,
differentiation and focus at the international level too. Again, leveraging national
and organisation-specific advantages play a significant role in business strategies.
• The model of competitive advantage of nations tells us that four determinants of a
nation’s competitive advantage are: factor conditions, demand conditions, related
and supporting industries, and firm strategy, structure, and rivalry.
Industry Location and Home Country Advantages
• The model of competitive advantage of nations tells us that four determinants of a nation’s
competitive advantage are: factor conditions, demand conditions, related and supporting
industries, and firm strategy, structure, and rivalry.
• These four determinants help us to locate the industries in which a nation can possess
competitive advantage with respect to other nations. Home country advantages, thus, become
important basis for competitive advantage for an organisation when they choose to operate abroad.
But this can happen only when the organisation formulates and implements a strategy that is
designed to reap the advantages of home country.
• It is for this reason that home country advantages become important when business strategies of
cost leadership, differentiation and focus are implemented internationally.
• Porter Diamond Model
Any Questions?