For Class room discussion only.

Business Strategy

Scope of business is defined by

- Products it chooses to offer or not to offer.
- Markets it seeks to serve or not to serve
- Deciding on who to compete with
- By its level of vertical integration
- Segments it may choose to avoid

Goals and objectives depend upon its corporate objectives.

Objectives are aggregated over product markets- sales, profit growth, ROI etc

Levels of investment:
There are several options to choose from. Depends upon objectives.
- Invest to grow
- Invest only to maintain existing position
- Milk the business. Minimize investment
- Divest, liquidate.

Functional Area Strategies:

Are needed to compete in the select product markets:

- Product line strategies

- Communication strategies
- Distribution strategies
- Pricing strategies
- Manufacturing strategies
- IT Strategies
- and so on

The Strategic assets and competencies

that underlie the strategy and provide sustainable competitive advantage

A strategic asset is a resource such as a powerful brand, distribution system, customer base etc
that is superior than competitors.

A strategic competency is something a business unit does exceptionally well in relation to

competition that is of strategic importance. e.g. customer service. Product innovations…

:
 A Business Strategy

Product-mkt. Functional area Basis of SCAs:

investment strategies
decisions product, price -Assets
-prod/mkt scope promotion, -Competencies
-Resource allocation distribution etc -Synergies
over business units

The Strategic Thrust- the rout to competitive advantage

Several options:
- Focus on innovations
- Global thrust
- IT
- Manufacturing process
-and so

The following are some of the well- known generic strategies:

- Differentiation
- Low Cost leadership
- Focus

As well as:

- Pre-emptive moves
- Synergy

Differentiation Strategy:
The product offering is differentiated from competition by providing better value to customer
perhaps by enhancing the performance.

- Quality
- Features
- prestige
- Service back up
- Convenience
- and so on

Differentiation has the following advantage:

- Makes price less critical
- Enhances customer loyalty
- Improves channel cooperation
- Helps improve market position
The business unit may decide whether to follow premium pricing or parity pricing strategy.

Low Cost Strategy:

This is based on achieving a sustainable cost advantage leadership position in some important
element of the value chain.

This can be achieved through many ways some of which are:

- Market share
- Access to raw materials
- Market location
- Economies of scale/ Learning curve

A low cost strategy need not be associated with low prices.

Low costs can lead to higher profits or increase in marketing inputs e. g. increased
advertising, deeper distribution, enhancement in customer service and so on.

The Focus Strategy:

Involves focusing the business on a product line, a small market segment or

a group of customers.

e.g. an automobile component manufacturer may focus on shock absorbers for a certain
type of vehicles. or for select list of OEM manufacturers.

The business allocates its resources on a smaller market may be not of interest
to larger manufacturers. This strategy may be central to the creation of SCA and the
driving force.

The low cost or Differentiation strategies are also normally associated with focus strategy.

A Preemptive Move:

This is a pioneering implementation of a strategy into a business area that, because it is

first
generates an asset or a competency or develop market insights, that forms the basis
of a SCA. for example preempting the best distributors in a market.
Synergy:

Synergy occurs when a business has an advantage when its able to share resources (sales
force, warehouse, distribution, customer base, service setup…), knowledge/skills, brand
name of another business in the same business group.

Strategic Market Management:

This assumes that the planning cycle is inadequate to with rapid changes in environment and to cope
with the surprises, threats and opportunities.
A business need to have the following characteristics:

- External market orientation of the organization; towards customers, competitors, environment

etc

- Pro-active strategies to influence events rather than react to them

- Importance of information system; real time information management, how to obtain needed
information efficiently, effectively, analyzed processed, stored and retrieved.

- Knowledge management; is key company asset be it technology marketing processes etc

that lies in the minds of its people. The challenge is to capture it, nurture it and share with
a wider group.

- On-line analysis and decision making systems for capturing, analysis, and strategic decision
making in the context of complexity of decision making; a system that is sensitive and flexible.

- Entrepreneurial thrust: Character of risk taking, leading from the front and owning- up etc

- Implementation: Strategy should fit org structure, sytems, people and culture.
Structure should be linked to functional area policies and operating plans.

- Global realities: acquiring global perspective since they affect strategy

- Long term horizon

- Marketing interaction between business and market place: Developing marketing skills.
e.g. creating brand equity, customer insights, segmentation, targeting, positioning, PLC,
Category management, Information management and so on