Business-Level Strategy

The topic I will be informing this month is 'Business-Level Strategy', which are also termed as 'SBU strategies'.

What is an SBU?

A strategic business unit is a part of an organisation for which there is a distinct external market for goods or services that is different from another SBU.

Example: Nestle has a number of SBU's such as confectionery, Ice cream, mineral water and pet food.

The focus of Business Level Strategies is on the effective exploitation of individual product markets. At the product level the focus is on achieving competitive advantage in a given market.

Michael Porter identified four main generic strategies: cost leadership, differentiation, focus and no distinctive strategy.

Cost Leadership:

The objective is to achieve a situation where unit costs are significantly lower than those of other companies in the industry, thus producing higher profits than competitors and the ability to mount a defence against competitive threats.

Differentiation:

The effect of differentiation being to increase profits by segmenting the market and enabling different prices to be charged in different segments. This involves searching for and adding some characteristic such as superior quality or service associated with the product; it may not be a real effect, but may be an image consciously created by the company.

Focus:

The previous generic strategies involved different ways of meeting competition and achieving an advantage: in the first case this was by lower cost and in the second by altering product characteristics. The focus strategy is different in that it typically involves the identification of market niches where it is possible to avoid confrontation with competitors. Within the niche the company can focus on cost or differentiation.

It is not a high volume option, and it pays little attention to market share. The niche may be a part of the market which requires specialised attention, very fast guaranteed delivery, or some other characteristic which higher volume producers cannot provide because of the additional cost.

Stuck in the Middle:

A company which does not specialise is likely to be continuously adjusting its competitive focus in response to changes in the market, with the result that it is ‘stuck in the middle’; such an undefined strategy is likely to be associated with relatively poor performance, because the marketing effort of such a company is likely to be confused: at any one time it may not be clear whether marketing managers are attempting to achieve market share, differentiate the product in the eyes of the consumer, or find unexploited opportunities.

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Please email me if anyone needs information on any topic

Vertical Integration (Part I)

The degree to which a firm owns its upstream suppliers and its downstream buyers is referred to as vertical integration. Because it can have a significant impact on a business unit's position in its industry with respect to cost, differentiation, and other strategic issues, the vertical scope of the firm is an important consideration in corporate strategy.

There are 3 different types of vertical integration:

1. Backward vertical integration (expansion of activities upstream)
   
2. Forward vertical integration (expansion of activities downstream)
   
3. Balanced vertical integration (the company sets up subsidiaries that both supply them with inputs and distribute their outputs.)
   

The concept of vertical integration can be visualized using the value chain. Consider a firm whose products are made via an assembly process. Such a firm may consider backward integrating into intermediate manufacturing or forward integrating into distribution, as illustrated below:

Example of Backward and Forward Integration

No Integration Raw Materials Intermediate Manufacturing Assembly Distribution End Customer

Backward Integration Raw Materials Intermediate Manufacturing Assembly Distribution End Customer

Forward Integration Raw Materials Intermediate Manufacturing Assembly Distribution End Customer

Two issues that should be considered when deciding whether to vertically integrate is cost and control.

• The cost aspect depends on the cost of market transactions between firms versus the cost of administering the same activities internally within a single firm.
• The second issue is the impact of asset control, which can impact barriers to entry and which can assure cooperation of key value-adding players.

For examples of vertical integration click here.

Corporate Culture - Charles Handy

"Corporate cultures describe the way the organisation is managed, not the set of values shared by employees." (Charles Handy)

Charles Handy popularised a typology of organisations and cultures. Handy also uses four Greek gods to illustrate his basic approaches and the organizational cultures that result.

Power 'ZEUS' Culture:

There is one source of power and influence. This is most likely to be the owner(s) of the organisation, who strive to maintain absolute control over employees. there are few procedures and rules of a formal kind.

Role 'APOLLO' Culture:

In this version of culture, people describe their job by its duties, not by its purpose. It is a bureaucratic organisation, where the structure determines the authority and responsibility of individuals and there is a strong emphasis on hierarchy and status.

Person 'DIONYSUS' Culture:

This is characterised by the fact that it exists to satisfy the requirements of the particular individual(s) involved in the organisation. The person culture is to be found in a small, highly participatory organisation where individuals undertake all the duties themselves.

Task 'ATHENA' Culture:

this is a 'can-do' attitude, often created by the project teams or matrix structures in an organic manner, respective to change.

Business Blogging (Part III)

Enter the Conversation

The world of business is intertwined with conversations.

• The industry is talking, your customers are talking, your competitors are talking
• You need to be a part of those conversations. If you don't, your market will pass you by. If you stay silent, people will begin to look at you as uninventive, arrogant, or secretive. I will argue for the importance of these conversations and how you can enter in a positive way.

A conversation is authentic communication with the aim to build a relationship over time. The relationship involves give and take (shared linking and comments, for example), but also much more.

You need to be a part of the conversation

Your customers are asking to be a part of your company. They are actually demanding it. Your customers are no longer satisfied with seeing your brand - they want to see the people behind your brand.

If you cannot foster dialogue with your customers, how do you expect to retain them? You need a relationship now to both sell your product/service and to retain your customers.

In gratitude for you taking a genuine interest in them, your customers are more likely to be loyal to you, to spread positive word of mouth, and to give you insight on how to improve your product.

How do you enter the conversation?

The blog is your conversation. Here are some great tips on how to make your blog your most effective communication tool.

• Be authentic
• You need to care about the customer enough to take down some walls. Be clear, be honest, and be real.
• Blogs are real time - if a post takes you an hour, it's taking too long. You are crafting far beyond your authenticity.
• Customers value transparency. This means that you should admit when you make mistakes, be open if there are problems, talk about your successes, and make an effort to post regularly and with some passion.
• Invite interaction

Your customers are knocking on your door to talk to you. And this does not mean they want to phone you up or complain. They might just want to know what's new, what you think, why you are the leader in what you do, and that you care.

Blogs are a very easy tool. You have your comment box. Your customers will use it. And the media will also get involved here too. If you show them you know your stuff, it will pay off.

• Make sure to watch your comments - interact back online so others can see. At the same time, take it to the next level by sending off an email.
• Say thanks for the comment - get that conversation going to the next level. You never know when it will pay off for a big sale or a great article about you.

Track backs are your conversations too. It's your way to jump into a conversation - you link to others in your topic, they link to you. Suddenly you have a web of knowledge.

How can you post to invite conversation?

• post relevant information, fairly often (it's best to start posting a lot at first to attract the spiders and your biggest readers)
• offer some insight and opinion
• ask questions
• link to people who've talked on the same topic - supplement their arguments or go against them, either is fine
• linking out attracts linking in
• weigh your posts as a mix of short timely posts and longer more authoritative posts
• use your strongest key phrases in the titles of your articles
• although your content may revolve around your industry, leave self promotion to less than 25% of your posts

The Best Tip - write with energy and a passion for what you do.