Today i learn about the business and functional level (lecture, Thursday night)
A) Business level strategies refer to strategies that firms use to build competitive advantage.These strategies include:
1) Low Cost Leadership
2) Differentiation Strategy
3) Focus Strategy.
1) Cost Level Strategy
Cost level strategy refers to the firm's ability to produce goods and services at a lower cost than its rivals. it is not necessary for firms to have the lowest cost in industries but its has lower costs than its competitors. in example, some companies have followed this strategy which is Dell (computers), AirAsia (air travel) and Mydin (grocery stores).
2) Differentiation Strategy
Differentiation strategy is a business level strategy based on providing buyers with a unique on special product or service that distinguishes the firm's products on services from its competitors. Firms can differentiate themselves through product features, product customization or the level of services and support provided to the customers. For example, in the production and technology related activities, firms can develop flexible manufacturing system that allow different different models to be made or different option to be added on the same assembly line.
3) Focus strategy
Focus strategy refers to the business level strategy based on providing products or services to a specific niche within and industry. Focus strategies can occur in two forms: cost-based focus and differentiation-based focus.
- Cost focus: a firm strives to create cost advantages in its target market segment. for example, Gap aims its Old Navy clothing line at customers who are cost conscious.
- Differentiation focus: a firm seeks to differentiate in its target market. For example, Porsche is a focused differentiators that markets its sports cars-only to the most affluent customers.
Functional level strategies are actions taken at the functional or operational level and they must be in line or contribute towards the overall strategy of the corporation. Functional strategies address problem commonly faced by lower-level managers, and handle activities considered relevant to achieve the business level and corporate level strategies.
The value chain or the value chain analysis (VCA) is a systematic approach to examine the development of competitive advantage.
Value chain activities can be classified into two main categories: primary activities and support activities.
- Primary activities: are the activities involved in bringing materials into the business.operating on them, sending them out, marketing them and servicing them.
- Support activities: are the activities that improve the effectiveness or efficiency of the primary activities and other support activities in helping the organization achieve its competitive advantage.
