Group Exercise
For your Case Company:
1.
2.
Are there examples of rivals that more
closely follow CL, Diff, and Focus?
Provide 5 different company examples
(hypothetical is ok) of rivals deploying one of
the named grand strategies.
1
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Break Out Reporting

Case:

Industry:

Company & Rival Generic Strategy Examples:

Grand Strategy Examples:
2
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Session 12
Business Strategy:Building
Sustainable Competitive
Advantages
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Session Objectives: Three Items
1.Evaluating and Choosing
Business Strategies:
Seeking Sustained
Competitive Advantage




Evaluating Cost
Leadership Opportunities
Evaluating Differentiation
Opportunities
Evaluating Speed as a
Competitive Advantage
Evaluating Market Focus
as a Way to Win
Competitive Advantage
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2.Selected Industry
Environments and
Business Strategy Choices






Emerging Industries
Growth Industries
Mature
Declining Industries
Fragmented Industries
Global Industries
3.Dominant Product/Service
Businesses:
Diversification to Build
Value
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5
Key Issues: Strategic Choice in Single Businesses
1. What strategies are most effective at building
sustainable competitive advantages for single
business units?
2. When should dominant-product/service
businesses diversify to build value and
competitive advantage? What grand strategies
are most appropriate?
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How should you choose
among competitive
advantage strategies?
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Prominent Sources of Competitive Advantage
Cost leadership
Sources of
competitive
advantage
Differentiation
Speed
Market focus
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For Each of the Four: CL, Diff, Speed/RR, MF
Skills and Resource Requirements
Structural/Organizational
Requirements
Value Chain Examples
Advantages
Risks
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Evaluating A Business’s Cost Leadership Opportunities
A. Skills and Resources Fostering Cost Leadership
• Sustained capital investment and access to capital
• Process engineering skills
• Intense supervision of labor or core technical operations
• Products or services designed for ease of manufacture or
delivery
• Low-cost distribution system
B. Organizational Requirements Supporting Cost Leadership
• Tight cost control
• Frequent, detailed control reports
• Continuous improvement and benchmarking orientation
• Structured organization and responsibilities
• Incentives based on meeting strict, usually quantitative targets
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Evaluating A Business’s Cost Leadership Opportunities -C. Examples of Ways Businesses Achieve Competitive Advantage
Process innovations
lowering production costs
Product redesign to reduce
number of components
Safety training for all employees reduces absenteeism,
downtime, and accidents
Technology
development
Human
resource
management
Reduced levels of management Computerized, integrated information General
administration
cuts corporate overhead
system reduces errors and costs
Favorable long-term contracts; captive suppliers or key customer
for supplier
Global, online
suppliers
provide
automatic
restocking of
orders based
on sales
Inbound logistics
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Economy of
scale in plant
reduces
equipment
costs and
depreciation
Operations
Computerized
routing lowers
transportation
expense
Cooperative
advertising
with
distributors
creates local
cost advantage
in buying
media space
and time
Outbound logistics
Marketing & sales
Procurement
Subcontracted
service
technicians
repair
product
correctly
first time
or bear
costs
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Advantages of a Cost Leadership Strategy
Low-cost advantages reduce likelihood of pricing
pressure from buyers
Sustained low-cost advantages may push rivals into
other areas, lessening price competition
New entrants must face an entrenched cost leader
without experience to replicate cost advantages
Low-cost advantages should lessen attractiveness of
substitutes
Higher margins allow low-cost producers to
withstand supplier cost increases
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Key Risks of Cost Leadership
Many cost-saving activities are easily duplicated
Exclusive cost leadership can become a trap
Obsessive cost cutting can shrink other competitive
advantages involving key product attributes
Cost differences often decline over time
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Industry Environments and Strategy Choices
Emerging Industries
Growth Industries
Mature Industries
Declining Industries
Fragmented Industries
Global Industries
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For each Industry Environment …
Characteristics
Strategic Options
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Characteristics of Markets in Emerging Industries
Proprietary technology and technological
uncertainty
 Competitor uncertainty regarding inadequate
information
 High initial cost structure
 Few entry barriers
 First-time buyers require initial inducement
 Inability to easily obtain raw materials and
components
 Need for high-risk capital

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Strategic Options for Emerging Industries
1. Ability to shape industry’s structure
2. Ability to rapidly improve product quality
3. Establish favorable relations with key suppliers
4. Ability to establish technology as dominant force
5. Acquire a core group of loyal customers
6. Ability to forecast future competitors
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Grand Strategy Selection Matrix
Overcome weaknesses
Internal
(redirected
resources
within the
firm)
Turnaround or
retrenchment
Divestiture
Liquidation
II
III
Concentrated growth
Market development
Product development
Innovation
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Vertical integration
Conglomerate diversification
External
(acquisition
I
or merger for
resource
IV
capability)
Horizontal integration
Concentric diversification
Joint venture
Maximize strengths
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Model of Grand Strategy Clusters
Rapid market growth
1. Concentrated
growth
2. Vertical integration
3. Concentric
diversification
1. Reformulation of
concentrated growth
2. Horizontal integration
3. Divestiture
4. Liquidation
Strong
Weak
I II
competitive
competitive
position
position
IV III
1. Concentric
1. Turnaround or retrenchment
diversification
2. Concentric diversification
2. Conglomerate
3. Conglomerate diversification
diversification
4. Divestiture
3. Joint venture
5. Liquidation
Slow market growth
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Conclusion: Selecting a Business Strategy to
Achieve a Competitive Advantage
Focusing on key sources of
competitive advantage requiring
total, consistent commitment
Selection of
appropriate
business
strategie(s)
involves
Weighing skills, resources,
organizational requirements, and
risks of each source of
competitive advantage
Considering unique effects of the
generic industry environment on a
firm’s value chain activities
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