Week 6 : Business and functional level strategies

Business level strategies focus on improving the competitive position of a company’s or business unit’s product or services within the specific market segment that the business unit services. Seek to answer the following questions: Should the firm compete on the basis of lower cost or should we differentiate our products or services on some basis other than costs, such as quality or service

 There are three generic business level 

strategies that could be pursued by firms to defend and establish their position against competitors: cost leadership, differentiation, and focus strategy.

Cost leadership strategy

    That’s refers to the firm’s ability to produce goods and services at a lower cost than its rivals.

Companies which utilize a cost leadership strategy would concentrate on providing a basic and standardised product or service that can be produced at a relatively low cost and made available to a broad target market.

Firms that adopt this strategy do not customize their products or services to an individual customer’s tastes, needs or desires.

Successful implementation of the cost leadership strategy requires a consistent focus on driving costs  relatively lower to competitors’ costs.

For example even Air Asia airlines is not serve many services such as no luggage, no meal, no services and so on , they will still sustainable produces goods and services competitive Malaysia Airlines Berhad

                                                             

Differentiation strategy

      Differentiation strategy consists of creating differences in the firm’s products or services by offering something that is perceived industry wide as unique and valued by customers.  Firms that use this strategy would emphasize brand image, unique styling, technology, features, a dealer network, customer service or innovative design.

This strategy is based on the assumption that customers are willing to pay a higher price for a product or service that is distinct or perceived to be unique from that of its rivals.

Differentiation strategy creates customer loyalty to a firm’s products because customers perceive these products to be unique and as a result, are willing to pay more for a firm’s products or services.

Firms that use this strategy should constantly upgrade the differentiated features that customers value without significant cost increases.

For example differentiation strategy that Rolex have different based on own good quality, status of Rolex and standard image compare with Swatch.

                                                        

Focus strategy

     Focus strategy is based on the firm competing in a narrow scope within an industry where the firm selects a segment or group and tailors its strategy to serve them.

The success of a focus strategy rests on the firm’s ability to identify segments that are not properly served or to find market segments that have unique needs or that are so specialized that broad-based competitors select not to serve them.

v  There are two variants:

–        Cost focus where a firm strives to create cost advantage in its target segments

–        Differentiation focus where a firm seeks to differentiate its products or services in its target market

v  Firms that follow the focus strategy earn high profitability by

–        meeting the needs of a particular buyer group.

–        having the ability to attract a growing number of new customers.

–        continuing to attract repeat customers.

 Business level strategies focus on improving the competitive position of a company’s or business unit’s product or services within the specific market segment that the business unit services. Seek to answer the following questions: Should the firm compete on the basis of lower cost or should we differentiate our products or services on some basis other than costs, such as quality or service

 There are three generic business level strategies that could be pursued by firms to defend and establish their position against competitors: cost leadership, differentiation, and focus strategy.

 

Cost leadership strategy

    That’s refers to the firm’s ability to produce goods and services at a lower cost than its rivals.

Companies which utilize a cost leadership strategy would concentrate on providing a basic and standardised product or service that can be produced at a relatively low cost and made available to a broad target market.

Firms that adopt this strategy do not customize their products or services to an individual customer’s tastes, needs or desires.

Successful implementation of the cost leadership strategy requires a consistent focus on driving costs  relatively lower to competitors’ costs.

For example even Air Asia airlines is not serve many services such as no luggage, no meal, no services and so on , they will still sustainable produces goods and services competitive Malaysia Airlines Berhad

                                                            

Differentiation strategy

      Differentiation strategy consists of creating differences in the firm’s products or services by offering something that is perceived industry wide as unique and valued by customers.  Firms that use this strategy would emphasize brand image, unique styling, technology, features, a dealer network, customer service or innovative design.

This strategy is based on the assumption that customers are willing to pay a higher price for a product or service that is distinct or perceived to be unique from that of its rivals.

Differentiation strategy creates customer loyalty to a firm’s products because customers perceive these products to be unique and as a result, are willing to pay more for a firm’s products or services.

Firms that use this strategy should constantly upgrade the differentiated features that customers value without significant cost increases.

For example differentiation strategy that Rolex have different based on own good quality, status of Rolex and standard image compare with Swatch.

                                                        

Focus strategy

     Focus strategy is based on the firm competing in a narrow scope within an industry where the firm selects a segment or group and tailors its strategy to serve them.

The success of a focus strategy rests on the firm’s ability to identify segments that are not properly served or to find market segments that have unique needs or that are so specialized that broad-based competitors select not to serve them.

v  There are two variants:

–        Cost focus where a firm strives to create cost advantage in its target segments

–        Differentiation focus where a firm seeks to differentiate its products or services in its target market

v  Firms that follow the focus strategy earn high profitability by

–        meeting the needs of a particular buyer group.

–        having the ability to attract a growing number of new customers.

–        continuing to attract repeat customers.