strategic mgmt hw

Chapter 5 Business -Level Strategy Introduction Exhibit :Levels of Strategy Functional -level strategy Business -level strategy Corporate -level strategy Company Strategic Business Unit (SBU) 1 Manufacturing Finance Marketing Human Resource SBU 2 SBU 3 Corporate -level strategy: How a firm creates value through the configuration and coordination of its multimarket activities. Business -level strategy: How a SBU can be competitive in its industry . Functional -level strategy: Organizational plan for human resources, marketing , manufacturing and other functional areas. Al -Ghanim group: - Electronics activity - Automobile activity - Furniture activity - … Virgin Group: - Virgin Airlines - Virgin Hotels - Virgin Trains - Virgin Money - Virgin Mobile - Virgin Media - …. Strategic Segmentation vs. Market Segmentation -------------------------------------------------------------- Company SBU 1 SBU 2 SBU 3 Strategic segmentation Market segmentation Products/services Strategic segmentation and Market segmentation Strategic segmentation :Subdividing the activities of the firm into SBUs . Examples :  ALMARAI Company :  Dairy products (Yogurt, Milk, … )  Drinks  Biscuits  … .. Market segmentation : subdividing a large market into identifiable segments having similar needs, wants, or demand characteristics . The objective is to precisely meet the expectations of customers in each segment . Criteria : - Demographic factors (age, income, sex, etc .) - Socioeconomic factors (social class, etc .) - Geographic factors (cultural, regional, etc .) LVMH Group:

- Wines & Spirits - Fashion & Leather Goods - Perfumes & Cosmetics - Watches & Jewelry - Selective retailing A Strategic Business Unit (SBU) is a homogeneous group of activities that use/share the same technology, the same resources, the same skills … etc . SBUs are essential for Multi -Product organizations . ALMARAI Products The Competitive Strategies Proposed by Michael Porter The Competitive Strategies To developing a strategy, there are two fundamental questions firms have to address:

1. The structure or the attractiveness of the industry in which we are competing.  Sone industries are more profitable than others.  One of the essential parts of developing a strategy is to know how good the game is in the industry you want to compete or invest. 2. A company position within an industry.  In the same industry, firms have different levels of success.  The goal of strategy is to enable a firm to gain a competitive advantage and a superior performance. C ompetitive strategy: It is the positioning of a company in its competitive environment . ( Michael Porter ) Positioning: is more than just positioning a product in a market. Rather, it is a total positioning of a company, involving all the functions: production, logistics, service ,…etc. The Competitive Strategies Figure: Competitive strategies (Michael Porter) Competitive Advantage Competitive Scope Cost Uniqueness Broad target Narrow target Low -Cost (Cost Leadership ) Differentiation Focused Differentiation Focused Low -Cost Low -Cost Strategy Definition :  Companies using this generic strategy will typically earn low margins but achieve high sales volumes .(Economies of scale )  Economies of scale is the cost advantage that arises with increased output of a product . C ompanies adopting Low -cost strategy: - Ikea - Hyundai - Walmart - Southwest Airlines - Lenovo - EasyJet - Kia Motors Low -Cost Strategy is an integrated set of actions taken to produce goods or services with features acceptable to customers at the lowest cost , relative to that of competitors. Low -Cost Strategy Competitive advantages In -Class Assignment : How do companies lower their operating costs ? - Choose a company from the list . - Identify the different actions/activities the company has done to reduce its costs .