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Module 4. Lesson Proper

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9 views

Module 4. Lesson Proper

Uploaded by

Pauline Chua
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Strategic Management Page 1 of 13

Introduction to Strategic Management

III. LESSON PROPER

Business-level strategy is concerned with how a company competes within a


particular industry or market. It focuses on positioning the company to achieve a
competitive advantage by choosing a strategy that appeals to its target customers. The
main goal of business-level strategy is to create value for customers while differentiating
the company from its competitors. There are three primary business-level strategies:
Cost Leadership, Differentiation, and Focus Strategies.

1. Cost Leadership
Cost leadership is a strategy where a company aims to become the lowest-cost
producer in its industry. By minimizing costs and offering products or services at a lower
price than competitors, the company can attract price-sensitive customers and achieve
higher market share.

Key Elements:
a. Economies of Scale: Large-scale production can reduce costs per unit.
b. Efficiency: Streamlining operations, reducing waste, and optimizing supply chains
to lower production costs.
c. Cost Reduction: Focusing on reducing costs in areas like materials, labor, and
overhead without compromising quality.
Examples:
Companies like Walmart and McDonald's use cost leadership by offering products at
lower prices than competitors through efficient operations and high-volume sales.

Discussion Points:
How does cost leadership create barriers to entry for potential competitors?
What are the risks associated with a cost leadership strategy?
Strategic Management Page 2 of 13
Introduction to Strategic Management

2. Differentiation
Differentiation involves creating unique products or services that offer superior value to
customers. This strategy focuses on innovation, quality, and brand reputation to stand
out from competitors and justify higher prices.

Key Elements:
a. Innovation: Developing new products or services that meet customer needs in
unique ways.
b. Branding: Building a strong brand identity that resonates with customers and
creates loyalty.
c. Customer Experience: Offering exceptional customer service, design, or features
that distinguish the company’s offerings.

Examples:
Companies like Apple and BMW use differentiation by offering innovative products with
distinct features and strong brand appeal, allowing them to charge premium prices.

Discussion Points:
How does differentiation allow a company to build customer loyalty?
What challenges might a company face when trying to sustain a differentiation strategy?

3. Focus Strategies
Focus strategies involve targeting a specific market segment or niche and tailoring the
company's offerings to meet the unique needs of that group. This can be done through
cost focus or differentiation focus.

Subtypes:
a. Cost Focus: Aiming to be the lowest-cost producer in a specific market segment.
Strategic Management Page 3 of 13
Introduction to Strategic Management

b. Differentiation Focus: Offering unique products or services to a narrow market


segment.

Key Elements:
a. Market Segmentation: Identifying and understanding the needs of a specific
customer group.
b. Customization: Tailoring products, services, and marketing efforts to meet the
needs of the target segment.
c. Niche Expertise: Developing a deep understanding of the niche market to serve it
better than competitors.
Examples:
Companies like Rolex (luxury watches) and Whole Foods (organic foods) use focus
strategies to serve specific market segments with specialized products.
Discussion Points:
What are the advantages of focusing on a niche market?
How can a focus strategy be combined with either cost leadership or differentiation to
enhance competitiveness?

References:
Barney, Jay et. al (2019). Strategic Management and Competitive Advantage: Concepts
6th Edition. Publisher: Pearson
Forest, David et.al (2020). Strategic Management: A Competitive Advantage Approach,
Concepts and Cases 17th edition. Publisher: Pearson
Grant, Robert (2021). Contemporary Strategy Analysis 11th Edition. Publisher: Wiley
Martin, Frank et. al (2021). Strategic Management: Awareness & Change 9th Edition.
Publisher: Cengage Learning
Rothaermel, Frank (2020). Strategic Management: Concepts and Cases 5th Edition.
Publisher: McGraw-Hill Education

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