10.4 Business-level strategy Flashcards
(37 cards)
What is meant by “business level strategy”?
The development of strategy and the choices that take place within a defined business unit.
Why is business level strategy important for large company groups?
There may be many unrelated business entities as part of a group, and each will require an individual strategy, although this can be part of the larger Group strategy.
What does “SBU” stand for?
Strategic business unit
Porter sets out 4 choices for businesses to follow when selecting strategy as a matrix. These four choices a re: - cost l\_\_\_\_\_\_\_\_\_\_ - d\_\_\_\_\_\_\_\_\_\_\_\_ - cost f\_\_\_\_\_\_\_ and d\_\_\_\_\_\_\_\_\_ focus
cost leadership
differentiation
cost focus
differentiation focus
Johnson states that there are four key cost drivers to consider when pursuing a cost leadership model. These are:
- input c_____ (i.e. minimising the cost of labour and materials)
- e_________ of scale (spreading cost over time and avoiding large upfront costs
- ex__________ (employing experience people who already know what they are doing)
- d______ (using a rational strategy to ensure that the design of the product is efficient).
costs
economies
experience
design
What are reasons why a cost leadership approach might fail?
- unjustified focus on the cost of one or more elements of the supply chain while ignoring others
- insufficient supply base to share across competitors (i.e. you cannot be the cheapest if another supplier controls key resources).
- the product and cost savings are easily imitated by others
- cost restrictions have caused a drop in quality.
What is meant by “differentiation” as a business strategy?
Using different variants of the same product to drive up sales (e.g. the various types of Coca Cola)
Johnson suggests there are thee primary drivers for a “differentiation” strategy:
- product and service a__________ (appealing to customers with a variety of choice)
- customer r_________ (the manner in which a business deals with their customer base)
- c________ (the add ons that come with a product to improve its service (e.g. inclusion of software with certain computers)
attributes
relationships
complements
Garvin (1987) defined 8 dimensions of quality in providing a “differentiation” approach:
1 P________ - is it better than the competition?
2 Features - does it have unique aspects
3 Reliability - will it outperform others?
4 C_________ - does it meet laws and standards?
5 Durability - will it last?
6 Serviceability - if it breaks can it be repaired?
7 A_________ - does it look. sound or feel better?
8 Perceived quality - is the customer satisfied?
performance
conformance
aesthetics
What could be some possible downsides to differentiation?
- too much differentiation could confuse customers
- too high a price
- competitors could easily copy
- different perceptions between buyers and sellers
- striving for uniqueness of value
What is an “organisational focus” strategy?
Tailoring a product or service to the specific needs of the perceived customer. (e.g. Ryanair target budget travelers)
Johnson (2017) gives examples of two different organisational focus strategies:
1 c____ focus strategy - e.g. Ryanair targeting price conscious travelers
2 d_________ focus strategy - e.g. Ecover targeting environmentally conscious customers
cost
differentiation
Porter suggests that an organisation is only successful through following a distinct strategy:
- a c_____ l______ will end up adding cost if it attempts to diffenrentiate
- a d________ will lose its point of difference if it fails have clarity over why it is different
- a f______ s________ can find its customer base eroded by being perceived as losing its specialism
cost leader
differentiation
focus strategy
What is meant by a “hybrid strategy”?
A strategy whereby elements of multiple different strategies are employed together - e.g. a cost leader with elements of focus strategy.
Wearden provides two examples of organisations that have successfully employed hybrid strategies - which are these?
1) Tesco - has succeeded in being UK’s largest retailer for over 25 years through using a combination of Porter’s three generic strategies
2) MacDonald’s - moved from initial product differentiation to a cost leader (this was only possible because of its size and dominance).
Wearden discussed the methods used to ensure that different strategies remain sustainable over a long period.
Cost leadership can be monitored and controlled through the effective and ongoing use of a robust v______ c_____ a________.
value chain analysis
Wearden discussed the methods used to ensure that different strategies remain sustainable over a long period.
Differentiation can be monitored and controlled through a close understanding of different stakeholder expectations, through the ongoing use of a s_________ m__________ e_________.
stakeholder mapping exercise
Wearden discussed the methods used to ensure that different strategies remain sustainable over a long period.
Focus can be monitored and controlled through a robust understanding of the different options available to customers through the ongoing use of a model such as P________ f____ f______ model.
Porter’s five forces.
What might “BPR” stand for?
Business Process Re-engineering
“Business Process Re-engineering” (BPR) requires a … radical redesign of organisational p________ with the aim of achieving significant improvement in operation to achieve strategic o_________.
processes
objectives
There are 5 rules to “Business Process Re-engineering” (BPR):
- s_______ must be determined before redesign
- existing p________ should be used as a basis for redesign
- use of i_______ t________ should be optimised
- governance, c_______ and organisational structures must align with the process flow
- people need to understand and participate (buy-in)
strategy
processes
information technology
culture
Define “synergy” in the context of discussing business units working together.
The alignment of assets or activities such that the combined results can deliver a greater advantage than the separate parts.
Porter identified three ways in which an organisation can gain advantage. What are these?
Cost - be the cheapest
Differentiation - offer something different
Focus - hone in on a particular target market or markets
When pursuing a cost leadership strategy, what are the key tactics?
A detailed understanding of product costs (direct and indirect)
A focus on cost reduction based on historic performance
Removal of inefficiencies
Focus on customers who pay on time and in full
A focus on product quality
