21632 Chapter Notes - Chapter 6: Cost Leadership, Ikea, Switching Barriers
Business Strategy
Generic competitive strategies - cost leadership, differentiation, focus and hybrid strategies.
Interactive strategies - building on generic strategies to consider interaction with competitors,
including hyper-competitive strategies, cooperative strategies and game theory.
Strategic Business Unit (SBU) - supplies goods or services for a distinct domain of activity:
•Market-Based criteria - target same customer types through similar channels and facing similar
competitors
•Capabilities-based criteria - similar strategic capabilities
Purpose of SBUs - to allow large corporate to vary their business strategies according to different
needs of external markets, and to encourage accountability.
Generic Strategies
Cost leadership - involves becoming lowest-cost organisation in a domain of activity, through four
cost drivers:
-Input costs
-Economies of scale
-Experience of staff
-Product/process design
Porter’s requirements for cost leadership:
-Having the lowest costs
-Low costs pursued not at the expense of quality
Parity (equivalence) - similarity with competitors in product or service features valued by
customers.
Proximity (closeness) - similarity to competitors in terms of features.
Differentiation - involves uniqueness along some dimension that is sufficiently valued by customers
to allow a price premium.
Attributes to be differentiated based on two factors:
•Strategic customer - needs of the customer that are to be differentiated
•Key competitors - acceptable boundaries of comparison between competition
Focus strategies - targets a narrow segment or domain of activity and tailors its product or services
to the needs of that specific segment to the exclusion of others, through cost focuses or
differentiation focuses.
Stuck in the middle - dangerous middle ground between differentiation and cost leadership.
Strategy clock - focuses on prices being more visible than costs, and allows for more continuous
choices i.e. alternating between cost leadership and differentiation as hybrid strategies (e.g. IKEA).
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Document Summary
Generic competitive strategies - cost leadership, differentiation, focus and hybrid strategies. Interactive strategies - building on generic strategies to consider interaction with competitors, including hyper-competitive strategies, cooperative strategies and game theory. Strategic business unit (sbu) - supplies goods or services for a distinct domain of activity: market-based criteria - target same customer types through similar channels and facing similar competitors, capabilities-based criteria - similar strategic capabilities. Purpose of sbus - to allow large corporate to vary their business strategies according to different needs of external markets, and to encourage accountability. Cost leadership - involves becoming lowest-cost organisation in a domain of activity, through four cost drivers: Low costs pursued not at the expense of quality. Parity (equivalence) - similarity with competitors in product or service features valued by customers. Proximity (closeness) - similarity to competitors in terms of features. Differentiation - involves uniqueness along some dimension that is suf ciently valued by customers to allow a price premium.
