A company can make use of its business strategy to improve the competitive position of its business units and products/services within the specific market segment or industry.
The generic strategies suggested by Porter i.e. cost leadership, differentiation and focus, could help the company in drawing up the business strategy.
Whereas the corporate strategy asks what industry/industries, should the company be in, the business strategy asks how the company should compete or co-operate in each industry.
Experience Curve Relationship
Good framework for marginal considerations for predicting industrial scenario with respect to: future costs, profit margins and corresponding cash flows for own and competitor's opns
Has done very well in segments such as PC mkt;
Implications - a few large plants with standardised productions would be able to supply global market marketing efforts SH. Be fully coordinated with manufacturing plans; lowering prices SH. Not be inferior quality; more applicable when demand is elastic
Determination of cost
Data reg. competitors
Late market entrants has to operate at lower initial prices to survive
TC = FC + VC ٠ Q
(VC-Unit Var. Cost-R/M, electricity, fuel, packing etc)
TR = p * Q
At B/E point TR = TC
p * QB = FC + VC * QB QB = FC/(P-VC)
[P - VC = Unit Contribution]
Drive an organization into cyclical situations from which an organization finds it difficult to extract itself.
To avoid getting into a doom loop, it is required to constantly upgrade the products, services and efficiency of distribution channels.
To get out of a doom loop - refocus on the small business units and a change has to be brought about in the firm’s culture.