Business Level Strategy

Cost Leadership strategy

Operational excellence

Constant effort to reduce costs

• Invest in “good” facilities with an efficient capacity
• PROCESS INNOVATION - Streamline & automate
• Benefit from experience (learning curve)
• Control costs of overhead & contracted activities
• Ensure value for $ in marketing, sales & service
• Moving production to cheaper locations

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Major risks

• New technology may take away your cost advantage

(Toyota JIT vs Ford Mass Produce)

• Competitors may be able to replicate your value chain

(Chinese manufacturers vs Sony)

• Focus on efficiency could overlook changes in customer preferences

(Telephone voice messaging vs Operator)

Differentiation strategy

Product Leadership

Constant effort to distinguish products

• Product innovation & marketing
• Strong R&D and engineering capability
• Quality in product and service
• Experienced and motivated Staff
• Use advertising and word of mouth to shape perceptions

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Major risks

• Customers may decide that the cost of “uniqueness” is too great
• Competitors may learn how to imitate your product or process
• Distinctive features that you offer may no longer be valued by customers

Focus strategy

Customer Intimacy

Constant effort to serve a niche market

• Target a narrow segment where needs and preferences differ significantly from the rest of the market.

• Serve that segment or niche at a lower cost or offer something customized to their needs and tastes.

• Remain dedicated to serving the niche better than anyone else.

Major risks

• Target segment becomes unattractive due to eroding boundaries or declining demand.
• Larger rivals may increase their focus on an attractive segment.
• New entrants with focus strategies may sub-segment the niche.

Best on all three

IKEA, DELL, UNIQLO....