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STRATEGY ANALYSIS

An organization’s core competencies should be focused on satisfying customer needs or preferences in order to achieve above average returns. This is done through Business-level strategies. Business level strategies detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets. Business-level strategy is concerned with a firm’s position in an industry, relative to competitors and to the five forces of competition. 

Customers are the foundation or essence of a organization’s business-level strategies. Who will be served, what needs have to be met, and how those needs will be satisfied are determined by the senior management. 

Who are the customers? 

Demographic, geographic, lifestyle choices (tastes and values), personality traits, consumption patterns (usage rate and brand loyalty), industry characteristics, and organizational size. 

What are the goods and/or services that potential customers need? 

Knowing ones customers is very import in obtaining and sustaining a competitive advantage. Being able to successfully predict and satisfy future customer needs is important. (Perhaps one of Compaq’s mistakes was not understanding who their real customer was and what that customer — end user — wanted.) 

How to satisfy customer needs? 

Organizations must determine how to bundle resources and capabilities to form core competencies and then use these core competencies to satisfy customer needs by implementing value-crating strategies. 

Business-Level Strategies

There are four generic strategies that are used to help organizations establish a competitive advantage over industry rivals. Firms may also choose to compete across a broad market or a focused market. We also briefly discuss a fifth business level strategy called an integrated strategy. 

1. Cost Leadership – Organizations compete for a wide customer based on price. Price is based on internal efficiency in order to have a margin that will sustain above average returns and cost to the customer so that customers will purchase your product/service. Works well when product/service is standardized, can have generic goods that are acceptable to many customers, and can offer the lowest price. Continuous efforts to lower costs relative to competitors is necessary in order to successfully be a cost leader. This can include:

  • Building state of art efficient facilities (may make it costly for competition to imitate)
  • Maintain tight control over production and overhead costs
  • Minimize cost of sales, R&D, and service.