Unit 5: Strategy and Business Environment

1/ When a firm has a competitive advantage over its rival, what generic strategies to
compete with the rival?
- When does a firm have a competitive advantage?
A firm is described as having a competitive advantage when it successfully attracts
more customers, earns more profit, or returns more value to its shareholders than
rival firms
A firm can achieve an advantage by adding value to its products and services or
reducing its costs more than its rivals in the industry.
1/ Generic business-level Competitive Strategies
- Business-level strategy is a general way that a business organizes its activities to
compete against rivals in its industry products
- Michael Porter, who is a Harvard professor, defines three generic business-level
strategies that outline the basic methods of organizing to compete in a product
market.
- It is called generic because these methods can be used in any firm in any industry.
a. Cost Leadership
- A firm offers customers its product or service at a lower price than its rival can.
- To succeed in achieving a competitive advantage over rivals in its product
industry, the successful cost leader tightly controls costs throughout its value chain
activities.
- Supplier relationships are managed to guarantee the lowest prices for parts,
manufacturing is conducted in the least expensive labor markets, and operations
may be automated for maximum efficiency.
- A cost leader must spend as little as possible manufacturing products or offering
services so that it will be profitable when selling that product or service at the
lowest price.
- For example, Walmart is a master of cost leadership, providing a wide range of
products at lower prices than competitors, because it does not spend money on
fancy stores, it extracts low prices from its suppliers, and its pay its employees
relatively low wages.
b. Differentiation
- A differentiation strategy is exactly the opposite of a cost leadership strategy.
- While firms do not look to spend as much as possible to produce output, firms that
differentiate try to add value to their products and services so they can attract
customers, who are willing to pay a higher price.
- Each step in value chain, the differentiator increases the quality, features, and
overall attractiveness of its products or services
 Research and development efforts focus on innovation, customer services are
excellent, and marketing bolsters the value of the firm brand.
- For example, Starbucks is a good example of a differentiator: it makes coffee, but
its customers are willing to pay premium prices for a cup of coffee because they
value the restaurant atmosphere, customer service, and product quality.
c. Focus
- Focus is a little different from the other two.
- A firm that focuses still must choose one of the other strategies to organize its
activities. It will still lower costs or add value.
- The difference here is that the firm choosing to implement a focused strategy will
concentrate its marketing and selling efforts on a smaller market than a broader
cost leader or differentiator.
- For example, Flux is a focused differentiator because it makes a specialized
product that is valued by a small market of customers who are willing to pay
premium prices for high-quality, customized snowboarding equipment.
2/ Corporate strategy
- It is the broadest level of strategy and is concerned with decisions about growing,
maintaining, or shrinking very large companies
- At this business level strategy activities, such as an advertising campaign to
attract new customers for a single product line, are not going to be enough to
significantly impact the company as a whole.
- The corporate CEO essentially manages a group of businesses and develops
strategies to create success for the overall group
- Think of the group of businesses as an investment portfolio: investors try to have
a diverse set of investments to spread risks, maximize performance of the overall
portfolio
- Corporate strategy tries to achieve the same thing, the manager will weigh pros
and cons of each unit and how it is contributing to the success of the overall
corporation
For example, the original business unit of Amazon is an online retailer selling
physical books. The initial tagline was “Earth’s Biggest Bookstore”. Now it
expands far beyond books, and it ventures into physical retail stores.
One tool that corporate strategist uses to understand how each of their businesses
contributes to the corporation as a whole is the BCG Matrix (Boston Matrix)
 - The BCG Matrix gives managers a quick picture of which business units are doing
well, and which are not. The tool has recommendations for businesses in each
quadrant.
+ In the dog quadrant, businesses should be closed or sold.
+ In the cash cow provide income to the corporation.
+ In the star provides growth.
 The BCG Matrix does not apply to firms that operate in one business unit.
3/ International market strategy
- It is similar to corporate strategy because it is concerned with the large-scale
action involved in entering a brand-new geographic market.
- It combines with business-level or corporate-level strategies because the growth
strategy at either scale can involve entering markets in order to reach new
customers.
- For example, for Walmart to grow its 2017 revenue by 5%, it would need to add
$25 billion in new revenue. That’s more revenue than opening some new stores
could generate. CEOs have several ways of growing their corporations
In Walmart’s case, for example, growing has meant expanding its online capabilities to
better compete with Amazon. They have acquired new companies to support this goal,
including Shoebuy, Jet, MoD Cloth, and Flipkart to reach customers and increase their
online product selection, as well as Parcel, to build delivery services.
What is a crisis management plan?
A crisis management plan outlines how your business will react if a crisis occurs. The
plan should identify who will take action and what their roles will be. The goal of a crisis
management plan is to minimize damage and restore business operations as quickly as
possible.

1. Identify your crisis leadership team

Before you can take the first step in crisis management planning, choose a team of
leaders to collaborate with during the crisis planning process. Your team should include
the people who will take action during a crisis. Put this team together at the very
beginning of crisis management planning so everyone knows the ins and outs of your
crisis strategy.
2. Assess risk
To begin the planning process, have a brainstorming session to assess various risks your
company may face. As mentioned above, you can kick off your brainstorming session by
looking at risks associated with your job field.
Use a risk register to identify and analyze the probability of risks occurring. A risk
register can eliminate progress delays and prepare for potential setbacks. It can also help
you visualize which risks are most likely to occur so you can plan a response for these
risks.
3. Determine the business impact
Once you’ve identified the high-probability risks that could affect your company,
determine the business impact of these risks with the help of your crisis leadership team.
Each risk can cause different outcomes, so it’s important to analyze them separately.
Potential business impacts may include customer attrition, damaged reputation, delayed
sales, lost income, or regulatory fines.
4. Plan the response
Next, take each risk you’ve identified and determine what actions your team would need
to take to respond to the threat if it does happen. For example, if you work in software
and your company experiences a cyberattack, you may need someone to secure the
network, someone to release the news to your customers, and another person to handle
damage assessment.
5. Solidify the plan
Once you’ve verbally made sense of the threats your company may face, the business
impact, and how to respond, solidify your plan. A crisis management plan is more than a
written or verbal strategy. It should include key items such as an activation protocol and
emergency contacts, which we’ll discuss in more detail below. You’ll also need to
collaborate with key stakeholders so that everyone understands what to do and when.
6. Review and update
Once your crisis plan is complete, review the final product to ensure there are no gaps.
Revisit your crisis management plan and update it at least once a year because potential
risks can change with time.
Maggi Noodle Recall Crisis: A Case Study
In 2015, Nestle India faced a significant crisis when its popular Maggi noodles were
found to contain excessive levels of lead. This led to a nationwide recall and a ban on the
product. The crisis had a profound impact on the company's reputation and financial
performance.
To address the crisis, Nestle India implemented several strategies. They conducted
thorough investigations to determine the root cause of the lead contamination,
communicated transparently with consumers and regulatory authorities, and implemented
stricter quality control measures. Additionally, Nestle India focused on rebuilding
consumer trust through targeted marketing campaigns and community outreach
programs. These efforts eventually led to the lifting of the ban and the reintroduction of
Maggi noodles to the Indian market.
The Maggi noodle recall serves as a cautionary tale for food manufacturers. It highlights
the importance of prioritizing food safety, maintaining transparency in crisis situations,
and investing in robust quality control systems. By learning from this experience,
companies can better prepare themselves to handle similar challenges and protect their
brand reputation.
What is Crisis Management? Types, Strategies and Examples (themediaant.com)