Strategy Formulation

Topics: Strategic management, Management, Cost leadership Pages: 5 (1482 words) Published: May 6, 2011
Business Strategy
Yeo’s compete directly with one another at what is called the business level of strategic management. Competitors may be individual business units of a larger corporation or they may be stand- alone businesses. Because competition takes place at the business level, strategic management here is crucial to the overall success for Yeo’s . Accordingly, the concept of competitive advantage is both the focus of the three subsequent on strategy formulation. There is three parts that reflect the three major considerations in formulating a business- level strategy. The first part is to discuss alternative competitive advantages (Overall cost leadership, differentiation and focus group) and the strength and limitation of each. Yeo’s company has competitive advantage whenever it can attract customers and defend against competitive force better than its rivals. Successful competitive strategies usually involve building uniquely strong or distinctive edge over rivals. Some example of distinctive competencies are superior technology and product features, better manufacturing technology and skills, superior sales and distribution capabilities and better customer service and convenience. Competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver an unique mix of value. (Michael E. Porter). The essence of strategy lies in creating tomorrow competitive advantages faster than competitor mimic the one you possess today. (Gary Hamel & C.K. Prahalad).

Overall cost leadership strategy
The classic cost leadership strategy involves offering a no-frills product aimed at the most typical customer in a large target market. Anything to do with cost which related to money example raw material is cheap, workers salary is low facilities that Yeo’s can bite with the competitor. Because cost can usually be lowered as a product become more standardized, low-cost manufacturing strive for long production runs and low- cost uniform packages. By targeting broadly defined markets with standard products, production technique can be used to create the greatest possible benefits from economies of scale and experience curve effect. Such as price sensitive customer do not mind about the price but customer care about the taste and quality like Maggie and Kraft. In this case Yeo’s should apply leadership strategy low- cost producers are protected from customer pressure to lower prices. Competitors cannot consistently price below what is known as their survival price, that which allow profit margins just adequate to maintain a business. The low- cost leader has a lower survival price than other competitor does, so customer will not be able to play one competing supplier against another to force prices below a level at which the cost leader can still make profit. Yeo’s would force less efficient suppliers out business, leaving the low-cost supplier with a monopoly. New entrants competing on the basic of price must face the low-cost leader without having the experience necessary to become efficient. Yeo’s company cumulative volume of production increase and the company gains experience in providing a particular good or service, production costs tend to decrease the experience curve effect. To the extent that experience affects costs in a particular industry, the low-cost leader is likely to have already moved far down its experience curve. New entrants lacking this experience will not enjoy a comparable cost reduction benefit and may be forced to enter market using some of the competitive advantages not related to low pricing. Holding the low-cost position may convince rivals not to enter a price war. Price wars can be ruinous to all competitor involved. Customer do not mind of the price whether is cheap or expensive, they only care about good quality and good taste which they trust on Yeo’s product.

Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Diversification Strategies Essay
  • Strategy Formulation Essay
  • Essay about Strategy formulation
  • strategy formulation Essay
  • globalmarket strategy Essay
  • Turnaround Strategy Essay
  • Strategic Formulation for Dell's Computer Essay

Become a StudyMode Member

Sign Up - It's Free