Solved by verified expert:1. BLOGSStarting from the second module, students should locate a recent news article(no more than six months old please)that is relevant to the subjects/concepts introduced in that module/chapter and prepare a short analysis/summary of the news article. The analysis/summary should be posted onto your blog site on Canvas before the due date. Each blog entry should consist of a link to the article you have found and your analysis as to why and how it is related to the topic introduced in that module (one paragraph with 150-200 words). Please do not use sources such as newspaper columns, commentaries, blogs, case studies, white papers, research reports and the like as your chosen news articles. According to Merriam-Webster, news is a report of recent events. ( follow CH4 ppt)2. Please watch the YouTube video “Whole Foods: How Radical CEO Created Grocery Empire” ()Links to an external site. and answer the following questions. You are encouraged to comment on others’ answers. (1) What external opportunities is Whole Foods Market trying to capitalize on? (5 points)(2) What customer need does the firm satisfy? Who are their targeted customers? (5 points)(3) What strengths or core competencies does the firm use to satisfy the customer need? (5 points)3. Answer the following questions. You are encouraged to comment on others’ answers. Answer the following questions in a single Word document. Your answer to each question should be proofread to avoid grammatical and spelling errors, and should not exceed 250 words.https://fod.infobase.com/p_ViewPlaylist.aspx?Assig…Ryanair is an American airline company. True FalseQuestion 2 Ryanair designs their own advertisements to save costs. True FalseQuestion 3 Ryanair sell their tickets through travel agencies. True FalseQuestion 4 Which of the following is a service that Ryanair customers can expect to receive? Preassigned seats Free snack foods during a flight Free wheelchair assistance Baggage serviceQuestion 5 How much estimated discount off the list price did Ryanair receive when purchasing airplanes from Boeing? 20% 30% 40% 50%Question 6 Which of the following is NOT a reason why Ryanair chose to use small secondary airports in Europe? These airports are less congested than the major airports. These airports offer lower landing charges to Ryanair. Some of these airports subsidize Ryanair for opening new routes from/to them. These airports are close to country borders.Question 7 Which generic business-level strategy does Ryanair use? Cost leadership Differentiation Focus Broad differentiationQuestion 8 Discuss how Ryanair uses its functional competencies to pursue its business-level strategy. Focus on the airline’s value chain functions e.g. purchasing, operations, marketing & sales, customer service etc.Question 9 What challenges does Ryanair have? Focus on the external threats and internal weaknesses of the airline.
ch04__1_.pptx
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Chapter 4
Business-Level Strategy
Business-Level Strategy (Defined)
• An integrated and coordinated set of
commitments and actions the firm uses to gain a
competitive advantage by exploiting core
competencies in specific product markets.
Customers: Their Relationship
with Business-Level Strategies
Who will be
served?
Key Issues
in
Business-level
Strategy
What needs will
be satisfied?
How will those
needs be satisfied?
From Pet Food to PetSmart
What is the industry of PetSmart? What
other firms are competing in this industry?
What product or service does PetSmart
offer?
What market segments does PetSmart
serve?
What strengths does PetSmart have to
pursue the current strategy?
Customer Needs
•
Customer needs
The desires, wants, or cravings that can be
satisfied through product attributes
Customers choose a product based on:
1. The way the product is differentiated from other products of
its type
2. The price of the product
•
Product differentiation
Designing products to satisfy customers’ needs
in ways that competing products cannot.
Customer Groups and Market Segmentation
•
Market Segmentation
The way customers can be grouped based on important
differences in their needs or preferences
•
Main Approaches to Segmenting Markets
1. Ignore differences in customer segments –
Make a product for the typical or average customer
2. Recognize differences between customer groups –
Make products that meet the needs of all or most customer groups
3. Target specific segments –
Choose to focus on and serve just
one or two selected segments
Identifying Customer Groups and Market
Segments
Three Approaches to Market Segmentation
How: Determining Core Competencies
Necessary to Satisfy Customer Needs
• Firms must decide:
– who to serve, what customer needs to meet, and how
to use core competencies to implement value creating
strategies that satisfy target customers’ needs.
• Only firms with capacity to continuously improve,
innovate and upgrade their competencies can
expect to meet and/or exceed customer
expectations across time.
Purpose of Business-Level (BL) Strategies
• Two types of competitive advantage firms must
choose between
– Cost (Are we LOWER than others?)
– Uniqueness (Are we DIFFERENT? How?)
• Two types of ‘competitive scope’ firms must
choose between
– Broad target
– Narrow target
• These combine to yield 5 different BL strategies
– Generic = can be used in any organization competing
in any industry
Business Level Strategies
Cost Leadership Strategy
• 1. Cost Leadership (CL)
– Competitive advantage: THE low-cost leader and
operates with margins greater than competitors
– Competitive scope: Broad
– Integrated set of actions designed to produce or deliver
goods or services with features that are acceptable to
customers at the lowest cost, relative to competitors
– No-frill, standardized goods
– Continuously reduce costs of value chain activities
• Inbound/outbound logistics account for significant cost
Cost Leadership Strategy: Competitors
• Due to cost leader’s
advantageous
position:
– rivals hesitate to
compete on basis of
price.
– lack of price
competition leads to
greater profits.
Rivalry with Existing
Competitors
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
Cost Leadership Strategy: Buyers
• Can mitigate buyers’
power by:
– driving prices far
below competitors,
causing them to exit,
thus shifting power
with buyers
(customers) back to
the firm.
Bargaining Power
of Buyers
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
Cost Leadership Strategy: Suppliers
• Can mitigate
suppliers’ power by:
– being able to absorb
cost increases due to
low cost position.
– being able to make
very large purchases,
reducing chance of
supplier using power.
Bargaining Power
of Suppliers
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
Cost Leadership Strategy: New Entrants
The Threat of
Potential Entrants
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
• Can frighten off new
entrants due to:
– their need to enter on a
large scale in order to
be cost competitive.
– the time it takes to
move down the
industry learning curve.
Cost Leadership Strategy: Substitutes
Product
Substitutes
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
• Cost leader is well
positioned to:
– lower prices in order to
maintain its value position.
– make investments to add
features unavailable in
substitutes.
– buy intellectual property
and patents developed by
potential substitutes.
Cost Leadership Strategy (cont’d)
• Competitive Risks
– Processes used to produce and distribute good or
service may become obsolete due to competitors’
innovations.
– Too much focus on cost reductions may occur at
expense of customers’ perceptions of differentiation.
– Competitors, using their own core competencies, may
successfully imitate the cost leader’s strategy.
Differentiation Strategy
• 2. Differentiation
– Competitive advantage: Differentiation
– Competitive scope: Broad
– Integrated set of actions designed by a firm to produce or deliver
goods or services at an acceptable cost that customers perceive as
being different in ways that are important to them
– Target customers perceive product value
– Customized products – differentiating on as many
features as possible
Differentiation Strategy: Competitors
Rivalry with
Existing Competitors
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
• Defends against
competitors because
customer’s brand
loyalty to differentiated
product offsets price
competition.
Differentiation Strategy: Buyers
Bargaining Power
of Buyers
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
• Can mitigate buyers’
power because well
differentiated
products reduce
customer sensitivity to
price increases.
Differentiation Strategy: Suppliers
Bargaining Power
of Suppliers
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
• Can mitigate suppliers’
power by:
– absorbing price
increases due to higher
margins.
– passing along higher
supplier prices because
buyers are loyal to a
differentiated brand.
Differentiation Strategy: New Entrants
The Threat of
Potential Entrants
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
• Can defend against new
entrants because:
– new products must
surpass proven products.
– new products must be at
least equal to performance
of proven products, but
offered at lower prices.
Differentiation Strategy: Substitutes
Product
Substitutes
Threat of
new
entrants
Rivalry
among
competing
firms
Threat of
substitute
products
Bargaining
power of
suppliers
Bargaining
power of
buyers
• Well-positioned relative
to substitutes because:
– brand loyalty to a
differentiated product
tends to reduce
customers’ testing of new
products or switching
brands.
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 the differentiated
features of the firm’s products.
Focus Strategies
• An integrated set of actions taken to produce
goods or services that serve the needs of a
particular competitive segment.
– Particular buyer group—youths or senior citizens
– Different segment of a product line—professional
craftsmen versus do-it-yourselfers
– Different geographic markets—east coast versus west
coast
Focus Strategies (cont’d)
• Types of focused strategies
– Focused cost leadership strategy
– Focused differentiation strategy
• To implement a focus strategy, firms must be
able to:
– complete various primary and support activities in a
competitively superior manner, in order to develop
and sustain a competitive advantage and earn aboveaverage returns.
A Look at Whole Foods Market
• What opportunities or trends in the external
environment is Whole Foods trying to capitalize
on?
• What customer need is the firm trying to satisfy?
Is the need consistent with low price or
differentiation?
• What market segment is the firm serving?
• What strengths or core competencies does the
firm have to serve the customer needs?
• What generic strategy is used by the firm?
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 (cont’d)
• Commitment to strategic flexibility is necessary for implementation of
integrated cost leadership/ differentiation strategy.
– Flexible manufacturing systems (FMS)
– Information networks (CRM)
– Total quality management (TQM) systems
• Competitive Risks of Integrated Strategies
– Although becoming more popular the RISK is getting ‘stuck in the middle’
– Cost structure is not low enough for attractive pricing of products and
products not sufficiently differentiated to create value for target customer –
therefore, fail to successfully implement either low cost or differentiation
strategy
– Result: Don’t earn above-average returns
…
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