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Anil Dhankhar Core Competencies and Strategy : Core Competencies and Strategy The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals An integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage Actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product markets Business Level Strategy : Business Level Strategy Three Issues: Whom it will serve. What needs target customers have that it will satisfy. How those needs will be satisfied through implementation of given strategy. Five Business-Level Strategies : Five Business-Level Strategies 1. Cost Leadership Strategy : 1. Cost Leadership Strategy An integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors with features that are acceptable to customers Relatively standardized products Features acceptable to many customers Lowest competitive price 1. Cost Leadership strategy : 1. Cost Leadership strategy Threats of new entrants. Bargaining power of suppliers. Bargaining power of buyers. Threat of substituted products. Rivalry among competing firms. 1. COST LEADERSHIP STRATEGY : 8 1. COST LEADERSHIP STRATEGY FAILS WHEN? Being overly aggressive in cutting price (revenue erosion of lower price is not offset by gains in sales volume--profits go down, not up). Low cost methods are easily imitated by rivals Becoming too fixated on reducing costs and ignoring Buyer interest in additional features Declining buyer sensitivity to price Changes in how the product is used Technological breakthroughs open up cost reductions for rivals. 2. DIFFERENTIATION STRATEGY : 9 2. DIFFERENTIATION STRATEGY Objective Incorporate differentiating features that cause buyers to prefer firm’s product or service over the brands of rivals. Keys to Success Find ways to differentiate that create value for buyers Not easily matched or cheaply copied by rivals. Characteristics Uniqueness is achieved in ways that: Buyers perceive as valuable Rivals find hard to match or copy 2. DIFFERENTIATION STRATEGY : 11 2. DIFFERENTIATION STRATEGY FAILS WHEN? Trying to differentiate on a feature buyers do not perceive as lowering their cost or enhancing their well-being Over-differentiating such that product features exceed buyers’ needs Charging a price premium that buyers perceive is too high Failing to signal value Not understanding what buyers want or prefer and differentiating on the “wrong” things Competitive Risks of Differentiation : Competitive Risks of Differentiation The price differential between the differentiator’s product and the cost leader’s product becomes too large Differentiation ceases to provide value for which customers are willing to pay Experience narrows customers’ perceptions of the value of differentiated features Counterfeit goods replicate differentiated features of the firm’s products 3. FOCUS STRATEGY : 13 3. FOCUS STRATEGY Objective Involves concentrated attention on a narrow piece of the total market Serve niche buyers better than rivals Keys to Success Choose a market niche where buyers have distinctive preferences, special requirements, or unique needs Develop unique capabilities to serve needs of target buyer segment Characteristics Achieve LOWER COSTS than rivals in serving the segment -- A low-cost strategy Offer niche buyers SOMETHING DIFFERENT from rivals -- A differentiation strategy Focused cost leadership strategy : Focused cost leadership strategy Focused Differentiation Strategy : Focused Differentiation Strategy 3. FOCUS STRATEGY : 16 3. FOCUS STRATEGY FAILS WHEN? Competitors find effective ways to match a focuser’s capabilities in serving niche Niche buyers’ preferences shift towards product attributes desired by majority of buyers--the niche becomes part of the overall market Segment becomes so attractive it becomes crowded with rivals, causing segment profits to be splintered 4. Integrated Cost Leadership/ Differentiation Strategy : 4. Integrated Cost Leadership/ Differentiation Strategy A firm that successfully uses an integrated cost leadership/differentiation strategy should be in a better position to: Adapt quickly to environmental changes Learn new skills and technologies more quickly Effectively leverage its core competencies while competing against its rivals Integrated Cost Leadership/ Differentiation Strategy : Integrated Cost Leadership/ Differentiation Strategy Risks of the Integrated Cost Leadership/ Differentiation Strategy : Risks of the Integrated Cost Leadership/ Differentiation Strategy Often involves compromises Becoming neither the lowest cost nor the most differentiated firm Becoming “stuck in the middle” Lacking the strong commitment and expertise that accompanies firms following either a cost leadership or a differentiated strategy THANK YOU FOR LISTENING : THANK YOU FOR LISTENING You do not have the permission to view this presentation. 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