3.1 Generic Competitive Strategies

0:00hello my name is Robert and welcome to third module in the course where we are learning about business strategies and in this particular module we are discussing generic competitive strategies later on during the module we will go through interactive business strategies so before we begin with competitive or interactive strategies we need to make clear and have a definition of what strategic business unit is let's go for the definition strategic business unit supplies goods or services for a distinct domain of activity so I think it's quite simple to imagine strategic business unit if we have small organization for instance we are a restaurant which have seven employees

0:42well we are one strategic business unit because we address certain domain of activity we address the same customers and so on and so on however it becomes much more complicated when we talk about large organizations with say 10,000 employees and we try to identify strategic business unit in there well first of all why is it so important to identify some strategic business units well there are three reasons first of all lesbians or strategic business units help us to de-centralized the initiative into smaller units so if we imagine that we are a car producer if we have the strategic business units well-defined we are able to decentralize our business we

1:30are able to say hey guys you are going to take care about the production of our cars you guys are going to take care about the sales so you see we are able to de-centralized this or a huge domain of activity second point well lesbians or strategic business units will be able to serve different needs in various market where we operate so if we keep the example of car manufacturer we are producing cars maybe in one location but we are selling it on in three different markets three different countries each of these three different countries is going to help differ so for instance if we sell the cars on

2:11India market well the consumers there are going to be more price sensitive then on some other market maybe and you see we need to construct the strategic business unit in the way so that they will serve and address the needs of particular markets Third Point if we have strategic business units well defined we support the idea of accountability if you have larger organizations again it's quite hard for top management or corporate management to see whether some activity within our organization is doing well or it is not doing so well if we say okay you guys are strategic business unit these are your goals this is what I want

2:56you to achieve and if we do so then we can control very well whether this business unit has achieved its goals or not so we look at our Chinese market our India market and we are able to say hey Chinese market was not performing so well this year the market in India was performing very well so accountability especially in larger organizations is quite the P all right so we went through the definition of strategic business unit and we have discussed three different reasons why definition of strategic business unit is so important now I have already mentioned to you that it's not so easy to find strategic

3:36business unit especially in larger organizations now if we are supposed to sow and create a strategic business unit how can we go forward how can we do it well there are two ways we can look at so-called market-based criteria so we look at the market that we serve and we try to sort of Reason backwards towards our organization and say huh this group of employees this unit is serving this particular market and so I can call this group of employees as a strategic business unit because they serve particular market or I can go the other way around can have capabilities-based criteria so I will differentiate my strategic

4:24business unit in a way that they possess same strategic capabilities so for instance one unit is producing hearts the other unit is selling the car so they clearly have different strategic capabilities so they are going to be separated as strategic business unit so we have the definition of strategic business unit we have the reasons why it is so important and we also have two different ways how we can define strategic business unit if we are especially larger organization now we move forward as we would like to really get to some generic competitive strategies but first of all we need to understand the concept of competitive advantage and what a competitive

5:08actually means well I have a nice definition for you competitive strategy is concerned with how a strategic business unit you see we have it here I choose competitive advantage in its domain of activity in turn competitive advantage is about how an SBU Koreans value for its users both greater than the cost of supplying them and superior to the arrival of SBU now you see we have competitive advantage in here that we can split this term into two parts in order to be competitive we need to sort of provide minimal viable quality and minimum viable value for the customer so if we are producing cars in order to be

5:56competitive our car needs to have four wheels need to be able to be used on roads and needs to drive at least 200 kilometers on one gas stove or something like that so you see those are the minimum requirements if we fulfill them then we can call ourselves competitive now the other part of the term advantage when do we achieve advantage well if we are better than our competitors so we look at the other car manufacturers and think about him are we providing greater value than the if we do so then we achieved not only that we are competitive but that we have competitive advantage so now we explain

6:40this term what is a competitive advantage now understanding what the strategic business abilities and understanding what the competitive advantages we can turn again to mr. Porter and his great model where he describes generic competitive strategies we are finally getting there what I promise you in the beginning of this video so let's see how can we define the generic competitive strategies thanks to our knowledge of competitive advantage and strategic business unit here you see the model made by Porter on the vertical axis we have competitive scope company either focuses on broad target sometimes called generalist or a narrow target sometimes called specialist on the horizontal axis we see a source of

7:29competitive advantage this can be either lower cost or differentiation now we see three different strategies at first if we have broad target and lower cost we go for cost leadership if we are differentiated and how broad target we are doing differentiation finally if we have narrow target we will have focus strategy now it depends whether we have lower cost or differentiation to whether we will be cost focused or differentiation focused and these model this matrix that we have just discussed is going to be all over our upcoming videos because you see we have the three main generic competitive strategies described here and we are going to talk

8:18in detail about each one of these in the upcoming videos so that is all for this video what I wanted to introduce you to the generating competitive strategies and I'm looking forward to seeing the upcoming videos