STRATEGY FOCUS AND understanding of the firm's strategic

DEVELOPMENT intent and mission.

 The development of strategy is the The art of managing these important human
making of top executives and line resources rest with corporate managers
managers by making choices among equipped with the vision for greatness
alternatives. and progress.
 strategic development process begins
with analysis of the internal and external IDENTIFICATION OF CUSTOMERS
environment.
 data and information are put in round Strategic competitiveness is achieved when
table discussions and brain storming. the firm is able to satisfy the needs and
 Everyone is expected to contribute their wants. Firm's success is founded in
ideas and opinion until the chosen constantly seeking to chart new competitive
strategy is finalized. space Customer are the vital component in
 participative system in drawing the the development of new strategies and the
strategy makes people in the firm must adapt flexibility to find new
organization aware of the probable markets as they serve the needs of their old
actions and plans that will be agreed customers.
upon. consider the following dimensions:
 Dictated strategies develop resentment
which will not result in cooperative 1. The Target Customers
efforts for achievement.
 Business level strategy is the process of  refers to the specific segments or
deciding what industry to compete and group of customers
the kind of product and market segment
that will be most attractive to the firm.  Market segmentation is the process of
 choice is important as there exist is an clustering customers into different
established link between the firm's individuals and groups with similar
strategy and the long-term performance needs and wants.
goals.
 Strategic goals wills affect the degree of Based on their level of competencies in the
competitive advantage in the internal and external environment the firm
achievement of the above average return must be able to serve the following specific
on investments. segments.
 external environment is saddled with
opportunities and threats and identifying The Consumer Market Segments
them develop corporate leadership's
awareness of their proposed plans and a. Demographic Segmentation
actions.
 firm's specific strategy is aimed at the  Age of the target customers
desired outcome in terms of market  Income or capability to pay
share and profit.  Gender as either male or female as they
 Strategies are purposeful undertakings differ in wants and needs
that precede taking actions to which they
apply, demonstrate and share b. Socioeconomic Segmentation
  Local Market
 The social class and living condition  International or Global distribution
 Stage in the family life cycle
 Employment classification d. Customer Size Segments

c. Geographic Segmentation  Number of industrial users

 Market Population distribution
 Urban distribution
 Rural distribution networks The increasing differentiation in marker
 National distribution networks segments needs careful data analysis.
 International or global market Sophisticated programs are being used to
determine the market niches that identify the
d. Psychographic Segmentation changing customers' needs and wants in
order to gain the competitive advantage.
 Population lifestyle Using this program allows firm to gain
 Personality traits insights that are needed to segment the
 Social levels and educational status market into specific groups with unique
needs and wants.
e. Consumers' Consumption Patterns
The Generation X, those born between
 Heavy consumers 1965 and 1976, has a different lifestyle and
 Moderate consumers wanted products that are promised in
 Light users advertisements
 Age ranges are between 40 to 50 years
f. Perpetual Factors Segments old, and they are in the prime of life with
sophisticated knowledge of the computer
 Benefit segmentation as to quality and age.
features  uses the internet as a means of knowing
 Perceptual and Information linkages products and then visiting stores and
comparing prices
The Industrial and Commercial  They do not have much time to shop for
Consumers goods, using their spare time in office to
look for new and innovative products.
a.. End-User Segments
The Generation Y, those born between
 Construction companies and developers 1977 to 1986,
 Airlines and Transport Sector  ages at the present date in between 30 to
40 years old.
b. Product Segments  These groups are more mobile and
adventurous and prefer to shop at stores
 Machineries and equipment and make choices of the products.
 Electronics and other components  Some would search the web, and further
 Supplies and materials explore product specifications and
features in shopping malls.
c. Geographic Distributions
 Global market segmentation is the convenient use and at an affordable price to
process of identifying specific segments or the consumers.
consumer groups across countries with
homogenous groups that exhibits similar Typewriters, were used for decades in
buying behavior. writing business letters for communication
in both the educational sector and in
2. The Customeres Needs and Wants industry. The advents of more sophisticated
computers replaced the once valuable
The need of the customer is to buy typewriter. The race now in the market is
products that create value to them innovation and technological
Customers are looking for affordable advancements. High breed cars are
products in terms of cost factor or highly developed for economy and pollution
differentiated featured with acceptable cost.
The firm must be able to identify the CUSTOMER RELATION
particular needs or wants of the customers MANAGEMENT
and develop new or innovative products.
Superior value is the key to effective
Customers change preferences overtime as customer relations as it strengthens the
their social and economic status change binding attachment building customer
loyalty. Receiving superior value enhances
Top level executives and line managers customers' loyalty to the firm's product and
play critical role in recognizing and positive relationship exists to develop
understanding the needs of the customers. profitability.
The valuable insights from field managers
who are in direct contact with the consumer Competitors is not limited to the local
and the careful analysis of the prevailing market as globalization created many
environment in terms of service,…. alternative products for the customer. The
power of the customer increases due to
3. Strategies to Satisfy Customer Needs many choices of the products available and
dominating the market creating the
Customer satisfaction is limitless, and the challenges of superiority and price ceilings.
company must always seek to satisfy
customer needs and wants. Customer's Customer Relation Management (CRM)
level of satisfaction changes overtime software is available for firms to enhance
seeking new and better products. The new their customer relations program. Web-page
or innovative product must be similar or profile is created to monitor customers
more superior to the existing product in the through the internet, making communication
market. channels open to all probable consumers. A
successful CRM program can be the
Dr. Jose P. Rizal wrote the novels Noli Me source of competitive advantage as the firm
Tangere and El Filibusterismo with the use uses knowledge gained from it to improve
of feathers dipped in ink while in Spain. strategy implementation process.
Fountain pens can into being, then used by
students and executives for decades until the TYPES OF BUSINESS LEVEL
various types of ball pen arrived for a more STRATEGY
Business level strategies are intended to
create differences between the firm's Two important cost strategies are:
strategic advantages relative to those present
in the industry. Positioning the firm's 1. Effective Management and control of
strategy is the process of identifying primary activities
whether to enter activities differently with
competitors or performing different a. Production efficiency and materials
activities with its rivals. The firm's higher management system
management decision could be reflective of
their value chain competencies in terms of The primary activities of inbound logistics
their primary and support activities in ways have something to do with purchasing and
that create unique value. delivery of materials to the warehouse and
the inventory control system applied are cost
The unique value is delivered to the factors that could reduce material cost
customer when the firm is able to use its handling
competitive advantage. The integration of its
core competencies forming an activity b. Manpower efficiency and cost control
system that develops superior firm among its
primary and support activities will be the Manpower cost could be another factor.
resultant dimensions. Favorable These include salaries, wages and benefits
positioning is important in the universal which are variable cost. Salaries and
objective of the firm towards the allowances of executives are fixed cost and
development of sustained advantage over its must be maintained at levels that would
rivals. make the product cost competitive in the
market.
Some simple secrets of success are:
c. Effective delivery of product and
1. Keeping costs down services
2. Focusing on customer value
3. Keeping the employees happy and Strategic management of the outbound
contented logistics refers to the delivery of products
4. Keeping simple operations direct to the customers in the case of
consumer products like milk, coffee,
UNIVERSAL BUSINESS LEVEL chocolate products and many others.
STRATEGIES
d. Use of reliable middleman and
Cost Leadership Strategy distributors

This level of strategy focuses on the delivery It means reduced cost in the maintenance of
of products to consumers at a lower cost and equipment and salaries of regular
differentiation against competitors in the salesclerk and truck helpers. Warehousing
market. The primary and support is now the responsibility of the distributors
activities of the firm are factors that will be and its delivery to retailers, thereby creating
the focus of attention in order to reduce the cost reduction in outbound logistics.
inputs of production and delivery to its
target consumers. e. Effective management of finances
 materials could be delivered direct to the
Competitive advantage is developed as production line in time for production. It
parties undertaking dual responsibility create will reduce material damage and
return of investments. obsolescence as changes in material
requirements.
2. Strategic management of support
activities e. Development of alternative substitute

a. Strategic outsourcing of materials The technical competence that was

developed by the supplier's and the firm's
Strategic outsourcing of materials is one technical specialist could be tasked to
prime consideration in the development of develop alternative and to improve materials
competitive competencies as the firm must without necessarily adding cost or even
take advantage of the raw materials resulting in cost reduction that could be
available both in the local and international advantageous to both firms. Both firms
market. could patent this development in product
substitute, where the entrants of the
b. Cooperative supplier relationships competitor could be difficult.

The development of effective outsourcing THE RISK ASSOCIATED WITH COST

could be done with cooperative technical LEADERSHIP STRATEGY
undertakings of the firm and with at least
two suppliers. The firm must not rely only Any strategy implemented is not risk-free
on one supplier of material inputs as they as competitors are keen enough to develop
may take advantage of the firm's new strategies. Cost leadership strategy is
dependence on them. not a monopoly of the firm as innovation is
everybody's business. Nevertheless, the firm
c. Long term relationship with suppliers must keep on guard on the following:

Long term relationship could be 1. The obsolescence of machinery and

established with suppliers in terms of equipment in the production of goods
volume purchase which in turn could be an
added advantage due to volume discounts. The firm may have concentrated on the
Suppliers could be assured also of long- production of its products using the same
term profitability if the firms are committed technology. Technological advancement in
to volume orders. The economies of scale the processing of new and innovative
can reduce the cost of the supplier which in products is a competitive advantage that
turn is an added advantage to both firms. must be given focus while reducing cost of
production.
d. Just-In-Time materials delivery
2. Distribution strategy and dealers'
Just-in-Time delivery agreements could be relations
made possible as the supply of inputs could
be programmed according to the firm's Competitors have ways to penetrate the
manufacturing schedule. The Just-in-Time market with new strategy that could be
delivery system will reduce handling cost as better than that of the firms' in terms of more
liberal credit, rebates and commissions. The firm must therefore develop a thorough
Cost of distribution is another factor that understanding of what the customer wants
must be looked into as competitive and what level of price they are willing to
advantage in cost leadership strategy may pay.
reduce customer perception in product value
and price advantage. Success with differentiated product strategy
results when the firm consistently upgrades
3. Product differentiation and product features that the customer values
improvement in features without significant increase in price. The
firm's unique product is a competitive
Customers will always be looking for new advantage.
product features. Product differentiation is
the vanguard of customer's long patronage The differentiation strategy is a
as new and better products could penetrate continuous process concentrating on
the market. research, It seeks to be different from those
produced by rivals in industry, in as many
4. The presence of imitation dimensions as possible to avoid immediate
imitation.
The rival firms may introduce imitation
products with lower cost but with the same Differentiation and cost strategy are faced
features. Patents and innovations could with the same forces of the external
easily be avoided with the development in environment in the development of
new design and features that could be competencies for earning above average
different from the firm's original design. return on investments.
Most imitation products kill the original as
consumers will always be looking for a The external environmental factors that
better bargain. affect differentiations:

PRODUCT DIFFERENTIATION 1. Competitors presence in the market

STRATEGY
The firms hold on the customer's loyalty and
Differentiation in product features add patronage hinges on the products with
value as the firm's integrated action to differentiated value from that of the
produce and deliver products. While cost competitors. Brand loyal purchasers
leadership strategy focuses on typical increase when products are differentiated in
industry customers, differentiation strategy ways that are meaningful to the consumer
focuses on customers with higher perceived and sensitivity to price difference is reduce.
value than those that ordinarily exit in the
market. 2. The power of customer to exert
pressure
Customers will be willing to pay additional
premium with products they like. Customers are the king and queen in the
Competitive affordability reduces upward market. The uniqueness of differentiated
pressure on the valued customers to pay goods reduces customers' sensitivity to price
differentiated premium products ang thereby increases. The uniqueness of the materials
develops patronage and brand loyalty.
and product features develops brand image firm's product is the same as its
that developed the winning formula. competitors in terms of features and
value.
3. The supplier influence on quality of
materials 3. The narrow difference in product
differentiation
Continuous supply of quality inputs in the
production of goods can assure the delivery  It is the customers' perception that the
of differentiated products to the customers. brand they used to patronize has been
These could be achieved with the overtaken by another brand.
maintenance of good relationship with the  Customers learn new product
supplier and development of strong linkages. specifications and standards and they
begin to compare.
4. Imitation and product substitute  There are many examples in electronic
business.
Products that developed substantial brand
image in the industry are positioned 4. The presence of counterfeit products.
effectively against product substitutes.
Customers could easily distinguish  Some small firms with less investments
imitations form the original. It will require may develop counterfeit products that
new entrant substantial investment in offer similar features and design without
capital and marketing resources to penetrate much differences from the original.
known brands offering differentiated  Less brand loyalist will have difficulty in
products. determining the original from counterfeit
products.
RISK INVOLVED IN
DIFFERENTIATION STRATEGY SEGMENTED FOCUS STRATEGY

1. Customer's perception of product to serve a particular segment of an

features and price industry wide competitors. It is the firm's
intention to focus on a particular segment
 It is the customer's value analysis that and concentrate their competencies to the
the cost leadership product is needs of particular group.
excessively priced.
 The firm then becomes vulnerable to The following risk factors involve:
competitors that are able to offer
combination. 1. The competitor may focus on a narrower
segment.
2. Consistency in providing the desired 2. Competitors may decide to enter the
product value narrow market, thereby slicing the market
pie.
 the tendency that the firm's means of 3. Similarity in product features reduces the
differentiation may cease to provide attractiveness of the market.
value
 Rival's imitation product causes INTEGRATED COST LEADERSHIP
customer to try new offerings as the AND DIFFERENTIATION STRATEGY
In the global market, the firm that produces The development of network and linkages
the lowest cost of products and with with suppliers, distributors and retailers and
differentiation can expect it to perform well the consumers provide another source of
in the market Successful firms re integrating strategic flexibility. Customer Relation
the cost leaderships and product Management (CRM) is the product of
differentiation strategy are in a better information network and linkages that
position along the following areas: develops better understanding of customers'
needs and wants. CRM provides a 360-
1. Adapt quickly to environmental change degree view of the total customer's
2. Learn new skills and technology more satisfaction level. It encompasses all contact
quickly points of all business processes including all
3. Greater leverage against competition in communication sales channels. It further
core competencies determines the tradeoff in customers who
are willing to purchase differentiated
The cost leadership strategy and product features at lower cost which are
differentiation use a variety of flexible vital for firm's using the integrated cost
operating system to be competitive in the leadership and differentiated strategy.
market. Modern information technologies
have helped make flexible manufacturing Information network are also critical to the
system possible. These systems increase the firm that uses enterprise resource planning
flexibility of human resources, the physical system as it identifies and plan the resources
assets and the information resources that needed in the production and the delivery of
enable the firm to create differentiated the products to the intended customers.
products at lower cost. Flexible Enterprise resource planning (ERP)
manufacturing systems allow the company improves efficiency in financial planning
to produce variety of products in moderate, and data analysis as it moves across
flexible quantities with minimum of manual departments that require immediate action.
intervention. The transfer of data facilities improvement
in operational efficiency delivering
The firm that uses the Flexible competitive advantage for the firm. This
Manufacturing Systems (FMS) develop however requires investments in improved
greater competitive advantage as it reduces computerized system of the whole
material handling and establishes a greater information network
flow of material resources in the production
line without much human intervention. The
economies of scale are created, and they can
easily switch to another product by shifting
to a differentiated operation. While
investments in new technology require
capital investments, the return on
investments is generated as competitive
advantage is greater than its cost.

NETWORK LINKAGES AND

INFORMATION SYSTEM