Business Level Strategy

Presented by Group 1:
2106768815 - Ervina Maulida
2206126854 - Ida Zuraida
2206126886 - Ihsanuddin Usman
2206126892 - Mega Satria

Supervised by:
Dr. Ir. Manerep Pasaribu, MM
www.emperism.com
https://www.linkedin.com/in/manerep-pasaribu-b312ba40 Week 4
Strategic Management
September 23rd, 2022
 Presentation Outline

01. Case & Video Netflix

02. Hitt: Business Level - 5 types of business level strategy

03. Are you sure you have strategy?

04. What is strategy ?

05. Digital Transformation : Big Data

06. Digital Strategizing: The Role of Leadership &

Organizational Learning

07. Summary
 Section 01

Case & Video Netflix

Hitt, M. A.; R. D. Ireland & R. E. Hoskisson (2017).

Strategic Management: Competitiveness & Globalization.
12th Edition. Cengage Learning
 Opening Case: Digital, Increasingly Important Aspect of Strategy
Choice and Strategy Implementation firms need to have a digital
strategy to implement all type

Pace of change – uncertainty - complexity Successful business-level

a digital strategy “is the
application of information &
strategy (5 types-Porter) technology to raise human
Firm’s direction: allocate & HUMAN who implement these performance (more agile, quick,
capable, effective)
reallocate resource; create values Human as Competitive
for certain type of customer Advantage
Digital strategy help firm to
Create Innovation develop competitive advantage

Firm’s direction: allocate & reallocate resource; (role of IT)

Digitally based
create values for certain type of customer Redefine customers, growth,
technology tools: AI, IoT,
efficiency, & innovation =
effective of digital strategy Robotics, Data Analytics
Need to Choose a business-level
strategy: the gathering and
interpreting of data to
‘’gain a competitive advantage by identify behavioral
patterns among
exploiting its core competencies within customers for the
one or more specific product markets’’ purpose of serving
customers’ needs
better during future
transactions
the world’s competitive environments are increasingly
information intensive and interconnected
 Netflix Case
With Technology & Information: Netflix able to maintain opex (efficiency) &
create above average margin, increase market share & user (network effect)

1997
DVDs Rent by mail

r
buste
Block
1998-2000
Online rental site, subscription
model, and personalized
recommendation

2007
Live Streaming Service

b u ste r ‘gone’’
ck
2011
2 0 1 0 Bl o
Netflix button on TV Remote

Now
Cross platform, interactive t?
service hat's nex
W
Change: How’s Transformation Looks Like?

5
Source : Video and images by Netflix, Inc.; https://youtu.be/pMZPTnWpaWk
 Section 02

Hitt: Business Level - 5 types of

business level strategy

Hitt, M. A.; R. D. Ireland & R. E. Hoskisson (2017).

Strategic Management: Competitiveness & Globalization.
12th Edition. Cengage Learning
 A Business-level Strategy

• is an integrated and coordinated set of commitments

and actions the firm uses to gain a competitive
advantage by exploiting core competencies in a specific
product market.
• Customers are the foundation of successful business-
level strategies;
• When selecting a business-level strategy, the firm
determines :

who will be served what needs those target how those needs will be
customers have that it satisfied.
will satisfy,
7
The Purpose of a Business Level Strategy
The firm’s business-level
The purpose of a The firm’s unique culture
strategy is a deliberate
business-level strategy is and customer service are
choice about how it will
to create differences sources of competitive
perform the value chain’s
between the firm’s advantage that rivals
primary and support
position and those of its have been unable to
activities to create
competitors. imitate
unique value.
It is more difficult for a
Strategic fit among the
competitor to match a
many activities is critical
configuration of
for competitive
integrated activities than
advantage.
to imitate a particular
activity such as sales
promotion, or a process
technology.

8
Customers: Their Relationship with Business-Level Strategies

Delivering Customer
superior value satisfaction
increases

Competitive Profitability
advantage increases
9
Three Dimensions That Characterize Firms’ Relationships With
Customers

Richness

Reach Affiliation

Facebook Relationship
with
Customers

10
How to create differences between the firm’s position and those of its
competitors

• The firm intends to serve with its business-level

Who strategy
• Market segmentation

• Identify the targeted customer group’s needs

What that its products can satisfy.
• Related to a product’s benefits and features.

• How to use its resources, capabilities, and

How competencies to develop products that can
satisfy its target customers’ needs.

11
 Business Model & The Relationship With Business-Level Strategy

Same Business
A business model is a
framework for how the firm will Franchise Model: only purchase number Model: Franchise
create, deliver, and capture of units in a market area
value for stakeholder while a
business-level strategy is the set
of commitments and actions
Franchise Model: able to purchase a single
that yields the path a firm
Differentiation Strategy McDonald’s unit
intends to follow to gain a
competitive advantage by
exploiting its core competencies
in a specific product market. Different Business-
Level Strategies

Cost Leadership Strategy

12
5 Type of Business Level Strategy
Be the most competitive
company in Cost in entire
market
(entire)
Be a very competitive in
(a segment) cost in a particular product
or niche
• 2 type of potential competitive advantage:
1. Low Cost
2. Distinctiveness
• Lower costs result from the firm’s ability to
perform activities differently than rivals; being
able to differentiate indicates the firm’s capacity
Be a distinctive company, to perform different (and valuable) activities.
recognized for its
uniqueness, quality, or • 2 types of target markets:
personality
1. Broad market
2. Narrow market segment(s)
• Firms serving a broad market seek to use their
capabilities to create value for customers on an
industry-wide basis. A narrow market segment
means that the firm intends to serve the needs of
a narrow customer group
• The effectiveness of the 5 strategy is contingent
Have a differentiated on the opportunities and threats in a firm’s
product or market niece
external environment and the strengths and
weaknesses derived from its resource portfolio
13
 5 Type of Business Level Strategy
Lowest Cost Distinctiveness
Southwest Airline, Walmart, Apple, Mercedes/BMW,
Amazon, McD /Lexus/Nike, Macys, Smash Burger

Broad
Changan Ford
Automobile Corp

Target Market
Cost Leadership Strategy Differentiation Strategy

Ikea, Kewpee Monkey Burger

N Brand Business Level Differentiator Price
o Strategy Applied Range

1 Monkey Focus Location, Historic Building, $6.95 to

Differentiation Quality (unique menu simple $8.35
& fresh), Integrated Cost Leadership/Cost
2 Smash Differentiation Unique food items (made to $6.59 to
Narrow Leadership Strategy
burger order, no frozen, smashed on $7.79.
grill)

3 Kewpee Focus Cost Geography (local population), $2.20 to

Leadership low prices, locally raised beef, $2.40
Focused Cost Leadership Focused Differentiation Strategy
4 Mc Cost consistent quality at all of the >$4.00 Source of Competitive Advantage
Donald Leadership firm’s locations, food
products at lower costs ‘dollar (Basis for Customer Values) 14
menu’
Value Creating Activities related to 1. Cost Leadership Strategy

• The cost leadership strategy is an

integrated set of actions taken to
produce products with features
that are acceptable to customers at
the lowest cost, relative to that of
competitors

• Firms using the cost leadership

strategy commonly sell
standardized goods or services, but
with competitive levels of
differentiation, to the industry’s
most typical customers.

• Process innovations, which are newly designed production

and distribution methods and techniques that allow the firm
to operate more efficiently, are critical to a firm’s efforts to
use the cost leadership strategy successfully.

15
Value Creating Activities related to 2. Differentiation Strategy

• The differentiation strategy is an

integrated set of actions taken to
produce products (at an acceptable
cost) that customers perceive as being
different in ways that are important to
them.
• Product innovation, which is “the
result of bringing to life a new way to
solve the customer’s problem—
through a new product or service
development—that benefits both the
customer and the sponsoring
company,” is critical to successful use
of the differentiation strategy.

Customers who value differentiated features more than low cost because a
differentiated product satisfies customers’ unique needs, firms following the
differentiation strategy are able to charge premium prices, superior product
reliability, durability, and high-performance, Unusual features, responsive
customer service, rapid product innovations, technological leadership, perceived
prestige and status, different tastes, engineering design and performance.

create real or perceived value in consumers’ eyes is a basis for differentiation 16

 Section 03

Are you sure you have strategy?

5 elements of strategy

Hambrick, D.C; Fredrickson, J.W. (2001). Are You Sure You

Have a Strategy? The Academy of Management Executive,
15 (4), 48-59. (HFJ)
 What is your company’s strategy?

Go to www.menti.com and use The voting code 7671 9943

Live result: https://www.mentimeter.com/app/presentation/6ce0e2fa669d076035162cc1063b4ab2/a9a36195761b 18

 What is your company’s strategy?

Lowest cost in industry

We are different
Unrivaled customer service

A Global Strategy
Strategy Value Chain

To be number 1 in industry Hit the premium segment

M&A Strategy Invest in People/Technology Resource based

Information System
Service Strategy
19
Strategy
Attention to
Shape & Figures
Choosing Colors

‘Great paintings
depend on artful
combinations of all
elements’

Brush Finishing
Technique Process
20
Putting Strategy in its Place

21
 Strategy is….

A strategy need not be static

• It can evolve and be adjusted on an ongoing basis.

A strategy doesn't require a business to become rigid

• Some of the best strategies for today's turbulent environment keep multiple options open and
build in desirable flexibility—through alliances, outsourcing, leased assets, toehold investments in
promising technologies, and numerous other means.
A strategy doesn't deal only with an unknowable, distant future.
• Strategy used to be equated with 5- or 10-year horizons, but today a horizon of two to three years
is often more fitting

22
5 Major Elements of Strategy

Efficiency Productivity Above Average Margin

23
5 Major Elements of Strategy : IKEA’s Strategy

Testing the Quality of Your Strategy: Key Evaluation Criteria

1. Does your strategy fit with what's going on in the

environment?

2. Does your strategy exploit your key resources?

3. Will your envisioned differentiators be sustainable?

4. Are the elements of your strategy internally

consistent?

5. Do you have enough resources to pursue this

strategy?

6. Is your strategy implementable?

24
 Section 04

What is strategy ?

Porter, M.E. (1996). What Is Strategy? Harvard Business

Review, Nov-Dec. (PME-2)
 Operational Effectiveness vs Strategic Positioning

Operational effectiveness (OE)

• OE means performing similar activities better than rivals perform them.
• Constant improvement in operational effectiveness is necessary to achieve
superior profitability. However, it is not usually sufficient. Few companies have
competed successfully on the basis of operational effectiveness over an
extended period, and staying ahead of rivals gets harder every day
• Corporate managers have been preoccupied with improving operational
effectiveness programs (i.e. TQM, time-based competition, and benchmarking)
to eliminate inefficiencies, improve customer satisfaction, and achieve best
practice. Hoping to keep up with shifts in the productivity frontier, managers
have embraced continuous improvement, empowerment, change management,
and the so-called learning organization

Strategic Positioning
• In contrast, strategic positioning means performing different activities from
rivals’ or performing similar activities in different ways

26
 Why OE is Insufficient for Strategic Positioning

Think About Things Differently

Benchmarking making all The rapid diffusion of best

look a like practices
• OE makes competition becomes • OE competition shifts the
a series of races down identical productivity frontier outward
paths that no one can win • OE competition effectively
• Competition based on OE alone raising the bar for everyone
is mutually destructive

27
 Sources of Strategic Positioning
Variety-based Positioning
Producing a subset of an industry’s
products or services.
It makes economic sense when a
company can best produce particular
products or services using distinctive
sets of activities
Strategic
Positioning
Access-based Positioning
Segmenting customers who are
accessible in different ways. Access
can be functions of geography or
customer scale or anything that
requires a different set of activities to
reach customers
Need-based Positioning
Segmenting customer based on their
needs 28
Types of Fit to Drive Competitive Advantage & Sustainability

Simple Consistency
Consistency ensures that the competitive
advantages of activities cumulate and do not
erode or cancel themselves out.

Competitive Reinforcing Activities

Advantage & Company's activities reinforce one another,
Sustainability lowering total related costs

Optimization of Effort
Coordination and information exchange across
activities to eliminate redundancy and minimize
Competitive advantage arises from fit across
wasted effort.
activities. Sustainability comes from activity
system, not the parts 29
 Mapping Activity System
Southwest Airline Activity System

• Activity-system maps can

be useful for examining
and strengthening
strategic fit.

• The more a company’s

positioning rests on
activity systems with
second- and third-order
fit, the more sustainable
its advantage will be.

Source: Harvard business review • november–december 1996 30

Rediscovering Strategy

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31
 Section 05

Digital Transformation : Big Data

Pasaribu, M. & Widjaja, A. (2020). Strategi dan

Transformasi Digital: Perspektif Manajemen Strategis.
Kepustakaan Populer Gramedia. Jakarta (MPWA 3)
 Big Data & Decision Value

• Algorithms Analytics The basic of decision

• Machine Learning Experts making
• Statistics Statisticiens

INFORMATION KNOWLEDGE

Small
Data
Ackaff, 1989
TEORI DASAR
DATA
Sveiby.com, 2013
INSIGHTS
Big
Data

• Trends
• Ideas
ACTIONS DECISIONS • Solutions

• Implementation of SOP • Strategy

• Evaluation • Policy
• Result • SOP

(Source: David AJ Axson, 2003; ac cited in Pasaribu, 2020) 33

Data Science Pyramid

Increasing potential to
support business
decisions
Decision Making

Machine Learning

Data Exploration

Data Aggregating Preprocessing and

Warehousing

Data Sources
Transactional, Operational, Social, Environments

(Source : Han, Kamber, dan Pei, 2011, as cited in Pasaribu, 2020) 34

Internal & External Environment Scanning

35
(Source : Wheelan dan Hunger, 2012, as cited in Pasaribu, 2019)
 Deming Cycle

Accelerating scientific and technological developments

Source: Pasaribu, 2020 36
 Digital Transformation

Customer
Experience

Enhanced Product &

Corporate Service
Control Innovation

Risk Distribution,
Optimization Marketing &
Sales

Digital
Fulfillment
(Source : Flevy Pro Community – flevy.com, as cited
37
in Pasaribu, 2020)
 Key Success of Business Model
CUSTOMER VALUE PROPOSITION (CVP)
§ Target Customer
§ Job to be done to solve an important problem or
fulfill an important need for the target customer.
§ Offering which satisfies the problem fulfills the
need this defined not only by what is sold but also
by how it sold.
KEY RESOURCES
Needed to deliver the customer value
proposition profitably. Might include:
People, Technology & products,
Equipment, Information, Channels,
Partnerships alliances, Brand
PROFIT FORMULA
§ Revenue Model: how much money can be made: price x volume.
Volume can be thoust of in terms of market size, purchase
frequency, ancillary sales, etc.
§ Cost Structure: how costs are allocated includes cost of key assets,
direct cost, indirect cost, economies of scale.
§ Margin Model: how much each transaction should net to achieve
desired profit levels.
§ Resource Velocity: how quickly resources need to be used to
support target volume, includes lead times, throughput, inventory
tums asset utilization, and so on.
KEY PROCESSES
As well as rules, metrics and norms, that make the profitable delivery of
customer value proposition repeatable and scalable. Might include:
§ Processes: design, product development, sourcing, manufacturing,
marketing hiring and training, IT
§ Rules and Metrics: margin requirement for investment credit terms,
lead times, supplier terms
§ Norms: opportunity size needed for investment, approach to
customer and channel
38
 Disruption Digital

Artificial
Intelligence (AI)
• Internet/
Platform Data Digital Fundamentally
• Big data Analytics Disruption Change
• Smartphone
Technology • Business model • In sector after sector
• Offline
Digital Robotics • Business plan • New entrants are lowering
interaction
• Business model prices
• Algorithm, Indonesian • Meeting customer needs in
whatsapp, (BMI) novel ways
facebook, The Internet of
• Digital Business • Making better use of under
google, Things Model utilized assets
Instagram, • Fundamentally hiring people
twitter, etc. New Software with broadly relevant digital
Enabled skills, are who have
Industrial collaborative, creative and
efficient work styles.
Platforms

(Source : Strategy+Business, Spring, 2018; as cited in Pasaribu, 2020) 39

 Section 06

Digital Strategizing: The Role of Leadership

& Organizational Learning

Hub Ruel Hospitality Business School, The Hague, Den

Haag, The Netherlands, and Hefin Rowlands and Esther
Njoku Business School, University of South Wales,
Pontypridd, UK)
 The Role of Leadership & Organizational Learning
Description Dimension

Effective Strategy
Leadership dimensions for Formulation &
intraorganizational digital
business strategizing
Execution
(Digital Business
Strategizing)

as a process-based approach to
keeping resources, capabilities
and an organization’s
environment aligned through
Organizational learning its emphasis on resources and
dimensions for capabilities adoption,
intraorganizational digital development, reconfiguration
business strategizing and renewal

Thematic map connecting leadership and organizational learning to intraorganizational digital business strategizing
41
Organizational Learning

42
Section 07

Summary
 Summary – Business Level Strategy

q A business-level strategy is an integrated and coordinated set of commitments and actions the firm uses to gain a
competitive advantage by exploiting core competencies in a specific product market.
q 5 types of business level strategy including Cost Differentiation Strategy; Differentiation Strategy; Focus Cost
Leadership; Focused Differentiation; Integrated Cost Leadership/Differentiation
q Strategic fit among the many activities is critical for competitive advantage (low cost and distinctiveness). It is more
difficult for a competitor to match a configuration of integrated activities than to imitate a particular activity
q A strategy need not be static: it can evolve and be adjusted on an ongoing basis. Strategy is orchestrated holism,
which have 5 elements: Arena, Vehicle: How to get there?, Differentiator, Stagging, and Economic Logic
q Strategic continuity does not imply a static view of competition. A company must continually improve its
operational effectiveness and actively try to shift the productivity frontier; at the same time there needs to be
ongoing effort to extend its uniqueness while strengthening the fit among its activities.
q The are opportunities of digitalization of all stages of value chain activities and increase their competitive power.
Businesses operate as clusters of network organizations (digital ecosystems) - creating synergistic advantages for
the overall network by increasing value at each stage of the chain through better communication, collaboration and
teamwork. Digital business strategizing requires more of leadership to ensure effective strategy formulation and
execution.

44
 References

Hambrick, D.C; Fredrickson, J.W. (2001). Are You Sure You Have a Strategy? The Academy of Management
Executive, 15 (4), 48-59.
Hitt, M. A.; R. D. Ireland & R. E. Hoskisson (2017). Strategic Management: Competitiveness &
Globalization. 12th Edition. Cengage Learning.
Hub Ruel Hospitality Business School, The Hague, Den Haag, The Netherlands, and Hefin Rowlands and
Esther Njoku Business School, University of South Wales, Pontypridd, UK).
Pasaribu, M. & Widjaja, A. (2020). Strategi dan Transformasi Digital: Perspektif Manajemen Strategis.
Kepustakaan Populer Gramedia. Jakarta.
Porter, M.E. (1996). What Is Strategy? Harvard Business Review, Nov-Dec.

45
THANK YOU