BA 411 (Corporate Planning Strategy)

MBA Class (1st Sem., SY 2021-2022)

Assigned Report:

• Business Growth / Level Strategy and the Industry Environment

• Strategies in Fragmented Industry

Prepared by : Erik De Venecia

Student, University of Rizal System

Submitted to : Jericho Inarda

Professor, University of Rizal System
Learning Objectives

Understand the models of Business Level Strategies

Differentiate Business Level Strategy from Corporate Level Strategy

Briefly discuss Porter’s Five Forces

To be familiar with the different competitive layers of Industry Environment

Discuss the problems of developing a competitive advantage in a fragmented

industry and the solutions
Introduction
• A Business-level strategy can help organization achieve a competitive advantage
in the marketplace

• It provides generic way to think about providing value to customers by

exploiting organization’s core competencies

• What types of clothes do you prefer?

• Budget?
• Midrange?
• High End?
Business Level Strategy
Definition:

• Business level strategies refer to the combined set of moves and actions taken
with an aim of offering value to the customers

• Developing competitive advantage by using firm’s competencies in the

individual product or service market

• It determines the market position of the enterprise, in relation to its rivals

Business Level Strategy vs. Corporate Level Strategy

Corporate Level Strategy

• Is the top of the planning strategy
• The main purpose of the business
• Company direction

Business Level Strategy

• How we compete
• How we win in the market
Porter’s Five Forces
Threat of New Entrants
Existing Competitor Rivalry
 The threat of new entrants to the market
 Intensity of competition is driven
puts a limit on how profitable that market
by the number of competitors
can be
 If rivalry is intense, this will drive
down profits
Buyer Power
 If your customers are
powerful enough to force
you to reduce your prices

Supplier Power
Threat of Substitution
 Determined by how easy
 How easy is it to swap
for suppliers to raise
your product for an
prices
alternative?
What are the Business Level Strategies

Competitive Advantage:

1. Cost Leadership
2. Differentiation

Competitive Scope:

3. Broad Market
4. Narrow Market
Five Business Level Strategies
1. Cost Leadership Strategy

 This strategy is for organizations that want

to compete for a broad customer base based
on price.

 To maintain above-average returns and

provide the lowest price, this strategy
focuses on internal efficiencies continually

 To be effective, this strategy requires your

product to be standardized
Five Business Level Strategies
2. Differentiation Strategy

 This strategy is for firms that want a

broad customer base based on their
uniqueness

 Typically, firms with this strategy will

focus on building unique features to win
in the marketplace. They also usually
charge a higher price to their customers,
to offset the cost of being unique.
 Five Business Level Strategies
3. Focused Cost Leadership Strategy

 This strategy is used by organizations to

compete on price but also stand out because
they focus on serving a specific market
 Five Business Level Strategies
4. Focused Differentiation Strategy

 This strategy is very similar to differentiation

strategy except that it is focused on a very
narrow segment of the market
 Five Business Level Strategies
5. Integrated Cost Leadership / Differentiation Strategy
 This strategy involves producing low-cost products with differentiated features
 Simultaneously focus on the two drivers of competitive advantage: cost and differentiation
 This can be a high-risk strategy because you must invest in both reducing costs and invest in
differentiating your product
Summary – Business Level Strategy

Three essential strategies that you can use to win in the marketplace:

• Cost

• Focus

• Differentiation
Industry Environment

“Industry environment is the set of factors that directly influences a firm and its
competitive actions and competitive responses”

- Michael A. Hitt, R. Duane Ireland

“The General conditions for the competition that influence all businesses”

- Michael E. Porter, Harvard Business School

Industry Environment

How well do you know your business / industry environment?

What are the current opportunities and threats in your organization?

What are the trends in your industry?

Business Industry Environment
Industry Environment 3 distinct layers
Internal Environment
• This is about your own organization
• Systems
• People

Industry Environment
• It’s the industry environment which the business operates
• Customers
• Competitors Macro Internal
Environment Environment
• Ex. Porter’s Five Forces for analysis Industry
Environment
Macro Environment
• Broadest layer of industry environment
• Political Impacts
• Economic Status
• Ex. PESTLE is used for analysis
Fragmented Industries
A Fragmented Industry is defined as a marketplace where no single organization has enough
influence to move the industry in a single direction

Fragmented market consists of several small and medium sized organizations that compete with one
another but there is no one single company that dominates the entire market

Notable Features of a Fragmented Industry:

• Absence of market leaders
• None of the units has a king-sized market share
• No single unit has a widespread buyer recognition

Examples:

Laundry Shops, Dry Cleaning Companies, Massage Centers, Barber Shops or Beauty Salons, Health
Clinics, Furniture Making, Automobile Repair
Reasons for Fragmented Industries

• Lack of Economies of Scale

• No scope for a large mass production / operation

• Brand Loyalty in the industry may primarily be local

• It may be difficult to build a brand that transcends a particular location
or region

• Low Entry Barriers

• Permit constant entry by new companies
Consolidating a Fragmented Industry
Through Value Innovation
• Business history is full of examples of organizations that have pursued strategies
to create scale of economies where none previously existed

• In the process, they have consolidated industries that were once fragmented
Strategies for Fragmented Industries
Chaining

• It involves opening additional locations that adhere to the same basic formula that
the company owns

Franchising

• Is similar in many respects to chaining, except, the founding company is the

franchisor and licenses the right to operate a new store to another enterprise
which is the franchisee
Strategies for Fragmented Industries
Horizontal Mergers

• Another way of consolidating is to merge with or acquire competitors, combining

them together into a single larger enterprise that is able to realize economies of
scale and build a more compelling national brand
 - END –

THANK YOU!
REFERENCES
• Strategic Management Theory 11th
Edition, Charles W.L. Hill, University of Washington, Gareth R. Jones and Melissa A. Schilling, N
ew York University

• https://businessjargons.com/business-level-strategy.html

• https://getsling.com/blog/corporate-level-strategy/

• https://www.marketing91.com/fragmented-market/

• https://www.iedunote.com/fragmented-industry

• https://getsling.com/blog/corporate-level-strategy/

• https://techleens.com/mba/strategic-management/what-is-industry-environment.php

• https://the-definition.com/term/industry-environment