Business Level Strategy

Question 1

What are the advantages of lowering costs and differentiation

Answer 1

• Low costs allows:
• increased competitive advantage and profitability
• disadvantage competitors with price cuts and increase market share
• Differentiation: distinguishes company because of attribute that is unmatched
• gives company opportunity to charge premium prices
• helps company to increase demand and market share

Question 2

Discuss the differentiation-low cost tradeoff

Answer 2

• Efficiency frontier: looks at all the positions a company can utilise with regard to differentiation and low cost
• there are multiple positions on the differentiation-low cost continuum that can be viable
• in order to reach the Effeciency frontier a company must:
• utilise an appropriate functional level strategy and be organised
• ensure that all approaches and processes are aligned with each other

Question 3

Define value innovation

Answer 3

• Result of innovation pushing the efficiency frontier in an industry allowing for greater value to be offered through superior differentiation
• offered at a lower price than what was thought possible
• Allows a company to outperform competition for a long period of time

Question 4

Discuss the 3 different market segmentation approaches

Answer 4

• Standardisation strategy: producing a standard product for the average consumer without regard for any form of specification or segments
• Segmentation strategy: different offers for different segments, serving many segments, or the entire market
• Focus strategy: serving a limited amount or even just one segment

Question 5

List the different business level strategies

Answer 5

Generic business level strategy
Broad differentiation strategy
Broad low cost strategy
Focus low-cost strategy

Question 6

Differentiate between a low-cost company and a differentiated company

Answer 6

• Low-cost:
• can handle cost increases from suppliers
• offer low prices but still maintain profits
• offer discount prices for buyers
• Differentiated
• can withstand substitute goods because of brand loyalty
• can increase prices without influence from consumer market
• absorbs cost increase from suppliers by passing them on to consumers so no market share lost

Question 7

How can costs be lowered through functional strategy and organisation

Answer 7

• Achieve economies of scale and learning effects
• Adopt more effecient/technological manufacturing processes and assets that are flexible
• Utilise quality improvement methodologies to produce quality goods
• Streamline processes
• Use information systems to guide business processes
• Use just in time inventory control systems
• Increase customer retention
• Produce products that focus on cost reduction
• Make sure that org structure, system and culture reward actions that lead to higher productivity and greater effeciency

Question 8

Discuss the use of differentiation through functional-level strategy and organisation

Answer 8

• Customize product offering and marketing mix to different market segments
• Create product offerings that have a high perceived quality regarding:
• functions
• features
• performance
• reliability
• Deal with customer issues and needs quickly and effeciently
• direct market efforts on brand building and perceived differentiation from competitors
• Change employee behaviour to be consistent with company image
• implement the right org structure, control systems, culture and incentives
• Ensure that org structure, control system, incentive systems and culture are aligned with strategic direction

Question 9

Define a blue ocean strategy

Answer 9

Redefining its market to create a new business-level strategy

• for this a company must:
• remove factors that rivals take for granted and reduce costs
• reduce certain factors that are below industry standards and reduce costs
• incorporate certain factors that are above the industry standards and increase value
• create factors that rivals do not do not offer and increase value

Question 10

Define business-level strategy

Answer 10

• the overall competitive theme of a business
• the method in which a company positions itself within the market
• the different positioning strategies that can be used in different industry settings