Please use APA format, please use 3 scholarly references for intext-citations with page numbers for each question.Please use the read reference listed below as one of the intext cite references in every question. Please write 300 words before reference is added to bottom.The information for the book is: Parnell, J. A. (2017). Strategic management: Theory and practice (5th ed.). Academic Media Solutions.
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Please use APA format, please use 3 scholarly references for intext-citations with page numbers
for each question. Please use the read reference listed below as one of the intext cite references
in every question. Please write 300 words before reference is added to bottom.
The information for the book is:
Parnell, J. A. (2017). Strategic management: Theory and practice (5th ed.). Academic Media
Solutions.
Conduct online research on FedEx, including both company and non-company sources.
1. From a strategic perspective, discuss recent environmental changes that have caused strategic
issues with which the company is dealing in real time, today. Information concerning recent
changes in the firm is readily available online. (FEDEX) Please use APA format for citations,
please use 3 scholarly references for in-text-citations with page numbers for the question. Please
use the read reference listed as one of the in-text cite references the question. Please write 300
words before reference is added to bottom.
2. What have been the keys to FedEx’s success since its inception? Identify the industry and
primary competitors for Fedex. Using Porter’s strategy typology, define the competitive strategy
employed by FedEx. Provide extensive support. Please use APA format for citations, please use
3 scholarly references for in-text-citations with page numbers for the question. Please use the
read reference listed as one of the in-text cite references the question. Please write 300 words
before reference is added to bottom.
3. Is FedEx positioned effectively in its industry? What specific strategic changes would you
recommend for the company? Please use APA format for citations, please use 3 scholarly
references for in-text-citations with page numbers for the question. Please use the read reference
listed as one of the in-text cite references the question. Please write 300 words before reference
is added to bottom.
Conduct online research on Dollar Tree, including both company and non-company sources.
4. From a strategic perspective, discuss recent environmental changes that have caused strategic
issues with which the company is dealing in real time, today. Information concerning recent
changes in the firm is readily available online. Please use APA format for citations, please use 3
scholarly references for in-text-citations with page numbers for the question. Please use the read
reference listed as one of the in-text cite references the question. Please write 300 words before
reference is added to bottom.
5. How would you categorize Dollar Tree along Miles and Snow’s strategy typology? Provide
extensive support for your answer.
Assume that Dollar Tree competes in the discount retail industry. Identify the strategic groups
that exist and define each in detail. Please use APA format for citations, please use 3 scholarly
references for in-text-citations with page numbers for the question. Please use the read reference
listed as one of the in-text cite references the question. Please write 300 words before reference
is added to bottom.
6. Competition has intensified among discount retailers in recent years. How can Dollar Tree
continue to distinguish itself in this industry? What changes in the competitive strategy—if
any—would you recommend, and why? Please use APA format for citations, please use 3
scholarly references for in-text-citations with page numbers for the question. Please use the read
reference listed as one of the in-text cite references the question. Please write 300 words before
reference is added to bottom.
Business Unit Strategies
CHAPTER
7
Chapter Outline
H
I
G
G
S
,
Porter’s Generic Strategies
The Miles and Snow Strategy
Framework
Business Size, Strategy, and
Performance
Assessing Strategies
Global Concerns
A
N
Source: Dima Sobka/Shutterstock.com.
G
E
L
After a firm’s top managers have settled on a corporate-level strategy, focus
A While the corshifts to how the firm’s business unit(s) should compete.
porate strategy concerns the basic thrust of the firm—where top managers
would like to lead it—the business (or competitive) strategy addresses the
1
competitive aspect—who the business should serve, what needs should be
1 the business can
satisfied, and how core competencies can be developed and
be positioned.
0
Another way of addressing the task of formulating a business strategy is to
8 current opporconsider whether a business should concentrate on exploiting
tunities, exploring new ones, or attempting to balance the
T two. Exploitation
generates returns in the short term, whereas exploration can create forms of
S
sustainable competitive advantage for the long term. The business strategy
developed for an organization seeks in part to resolve this challenge.1
A business unit is an organizational entity with its own mission, set of
competitors, and industry. A firm that operates within only one industry is also
considered a business unit. Strategic managers craft competitive strategies
for each business unit to attain and sustain competitive advantage, a situation
whereby an organization’s successful strategies cannot be easily duplicated by
rivals.2 In most industries, a number of different competitive approaches can
be successful, depending on the business unit’s resources.
Each business competes with a unique competitive strategy, but attempting
to analyze all of the different strategies in a large industry can be quite cumbersome. In the interest of parsimony, it is useful to categorize different strategies
business strategy A strategy
delineating how a business unit
competes with its rivals; also
called competitive strategy.
business unit An organizational
entity with its own unique
mission, set of competitors, and
industry.
155
generic strategies Strategies
that business units can adopt to
guide their organizations.
strategic group A select group
of direct competitors who have
similar strategic profiles.
into a limited number of generic strategies based on their similarities. Businesses adopting
the same generic strategy comprise a strategic group.3 In the airline industry, for example,
one strategic group may comprise carriers such as Southwest Airlines and Frontier that
maintain low costs by offering low fares and no or limited frills on a limited number of
domestic routes. A second strategic group may comprise many traditional carriers such as
Delta, United, and American that serve both domestic and international routes and offer
extra services such as meals and movies on extended flights.
Because industry definitions and strategy assessments are not always clear, identifying strategic groups within an industry is often difficult. Even when the definition of an
industry is clear, its business units may be categorized into any number of strategic groups
depending on the level of specificity desired. There may also be one or two competitors
that seem to be functioning between groups and are difficult to classify. Hence, the concept of strategic groups can be used as a means of understanding and illustrating competition within an industry, but applying it is neither easy nor precise.
The challenging task of formulating and implementing a generic strategy is based on a
number of internal and external factors. Because generic strategies by definition are overly
simplistic, selecting a generic approach is only the first step in formulating a business strategy.4
H strategy and accentuate the organization’s unique set of
It is also necessary to fine-tune the
resource strengths.5 Two generic Istrategy frameworks—one developed by Porter and another
by Miles and Snow—can serve as good starting points for developing business strategies.
G
G
Porter’s Generic Strategies
Scommonly cited generic strategy framework.6 According to
Michael Porter developed the most
Porter’s typology, a business unit,must address two basic competitive concerns. First, manag-
ers must determine whether the business unit should focus its efforts on an identifiable subset
of the industry in which it operates or seek to serve the entire market as a whole. For example,
A malls adopt the focus concept and concentrate their efforts
specialty clothing stores in shopping
on limited product lines primarilyNintended for a small market niche. In contrast, many chain
grocery stores seek to serve the “mass market”—or at least most of it—by selecting an array of
Gthe general public as a whole. The smaller the business, the
products and services that appeal to
more desirable a focus strategy tends
E to be, although this is not always the case.
Second, managers must determine whether the business unit should compete primarily
by minimizing its costs relative L
to those of its competitors (i.e., a low-cost strategy) or by
A
seeking to offer unique and/or unusual
products and services (i.e., a differentiation strategy). Porter views these two alternatives as mutually exclusive because differentiation
efforts tend to erode a low-cost structure by raising production, promotional, and other
expenses. In fact, Porter labeled1business units attempting to emphasize both cost leadership and differentiation simultaneously
as “stuck in the middle.”7
1
Porter’s “stuck-in-the-middle logic” has some merit, as demonstrated by the evolution
0 States in the 2000s and the early 2010s. Between 2011
of grocery shopping in the United
8
and 2012, only one major traditional
grocer—Whole Foods—increased its share price
and posted a significant (12 percent)
increase
in revenues. Stock prices fell 13, 33, and
T
70 percent, respectively, at Kroger, Safeway, and Supervalu. On the cost leadership side,
S share to big-box stores and to discount retailers and
these traditional grocers lost market
clubs, including Walmart, Target, Aldi, Dollar General, and Costco. On the differentiation side, they fell victim to increased competitive pressure from specialty grocer Whole
Foods and upscale chains like Publix. These traditional grocers attempted to emphasize
both quality and low costs but largely failed at both.8 Hence, while businesses able to
combine cost leadership and differentiation strategies successfully can perform very well,
many that attempt to do so fail and end up squeezed between both ends of the market.
Depending on the way strategic managers in a business unit address Porter’s first (i.e., focus or
not) and second (low-cost, differentiation, or low-cost–differentiation) questions, six configurations are possible. A seventh approach—multiple strategies—involves the simultaneous deployment of more than one of the six configurations (see Table 7-1). Porter’s original framework
included only four options, the low-cost and differentiation strategies with and without focus.
156
Chapter 7 Business Unit Strategies
TABLE 7-1 Generic Strategies Based on Porter’s Typology
Emphasis on
Entire Market
Emphasis on
Emphasis on
Emphasis on Low Costs
or Niche
Low Costs
Differentiation
and Differentiation
Entire Market
Low-cost
strategy
Differentiation
strategy
Low-cost–differentiation
strategy*
Niche
Focus–low-cost
strategy
Focus-differentiation
strategy
Focus–low-costdifferentiation strategy*
Emphasis on
Various Factors
Depending on Market
Multiple strategies*
*Porter did not propose these strategies in his typology.
Low-Cost (Cost Leadership) Strategy (without focus)
Businesses that compete with a low-cost strategy tend toHproduce basic, no-frills products and services for a mass market composed of price-sensitive customers. Because they
I
attempt to satisfy most or all of the market, these businesses tend to be large and estabG share through low prices,
lished. Low-cost businesses often succeed by building market
although some charge prices comparable to rivals and enjoy
G a greater margin. Because
customers generally are willing to pay only low to average prices for “basic” products or
services, it is essential that businesses using this strategyS
keep their overall costs as low
as possible. Efficiency is a key to such businesses, as has
, been demonstrated by megaretailer Walmart in the last two decades.
Low-cost businesses tend to emphasize a low initial investment and low operating
A who offer the lowest prices
costs. Such organizations tend to purchase from suppliers
within a basic quality standard. Research and developmentNefforts are directed at improving operational efficiency, and attempts are made to enhance logistical and distribution
G
efficiencies. Such businesses often—but not always—de-emphasize
the development of
new and/or improved products or services that might raiseEcosts, and advertising and promotional expenditures will be minimized (see Strategy at Work 7-1).
A cost leader may be more likely than other businesses L
to outsource or offshore its proA
duction activities if costs are reduced as a result, even if modest
amounts of control over
quality are lost in the process. In addition, the most efficient means of distribution is sought,
even if it is not the fastest or easiest to manage. It is worth noting that successful low-cost
businesses do not emphasize cost minimization to the degree1that quality and service decline
excessively. In other words, cost leadership taken to an extreme
1 can result in the production
of “cheap” goods and services that few customers are willing to purchase.
0 in a low-cost strategy, howOutsourcing and offshoring can be a complex component
8 activities to China in the
ever. Many American apparel retailers relocated production
1990s and 2000s. Labor costs began to increase in China
T in the late 2000s, and by the
early 2010s, Ann Taylor Stores, Coach, Guess, and others began to consider lower-cost
countries such as Bangladesh and Vietnam. Because the S
transportation infrastructure in
these nations is not as developed, total costs could actually increase instead of decrease.9
Low-cost leaders depend on unique capabilities not available to rivals, such as access
to scarce raw materials, large market share, or a high degree of capitalization.10 However,
manufacturers that employ a low-cost strategy are vulnerable to intense price competition that drives profit margins down and limits their ability to improve outputs, augment
their products with superior services, or spend more on advertising and promotion.11 The
prospect of being caught in price wars keeps many manufacturers from adopting a lowcost strategy, although it can affect other businesses as well. Other low-cost leaders have
bought their suppliers to control quality and distribution. Price cutting in the airline industry led to the demise of a number of upstarts even before the events of September 11, 2001,
and made it even more difficult to raise fares shortly thereafter.12
low-cost strategy A generic
business unit strategy in which
a larger business produces,
at the lowest cost possible,
no-frills products and services
industry-wide for a large
market with a relatively elastic
demand.
Chapter 7 Business Unit Strategies
157
Strategy at Work 7-1
The Low-Cost Strategy at Kola Real13
Coca-Cola and PepsiCo enjoy substantial profit margins
on their soft drinks in Mexico’s $15 billion market, where
the two have waged intense battles for market share during the past decade. Although Coke usually came out
on top, the two collectively controlled sales and distribution in almost all of the country’s major markets. In 2003,
Coke had more than 70 percent of Mexican sales, while
Pepsi had 21 percent. Consumers in Mexico drink more
Coke per capita than those in any other nation.
In the early 2000s, both well-known colas were challenged by an unlikely upstart—Kola Real (pronounced
RAY-AL). Introduced in Peru in 1988 and launched in
Mexico in 2001, Kola Real captured 4 percent of the
Mexican market in its first two years and about 20 percent by 2015.
Bottled by the Ananos family from Peru, Kola Real
lacks all of the frills and endorsements associated with
Coke and Pepsi. The strategy is simple: eliminate all pos-
sible costs and offer large sizes at low prices. Whereas
Coke and Pepsi spend nearly 20 percent of revenues
on concentrates, the Ananos family makes its own. And
while Coke and Pepsi spend millions on promotion and
manage their own fleets of attractive trucks, the Ananos
family hires third parties for deliveries—even individuals
with dented pickup trucks—and relies primarily on wordof-mouth advertising.
Central to Kola Real’s success is the fact that
most Mexican cola drinkers are relatively poor and
consider price to be a major factor in their purchase
decisions. In Brazil, so-called “B-brands” (i.e., lowcost generic or store brands) now account for almost
one-third of the country’s cola sales. Fearing this
H happen in Mexico, Coke and Pepsi have fought
could
back
I with price cuts as well, although they will not be
able to challenge Kola Real’s low-cost position on a
G
large-scale
basis.
G
S
,
Although low costs do not necessarily lead to low prices, they usually do. Global retail
giants like Walmart and Carrefour have cut costs through economies of scale so that
they can offer lower prices. Walmart
A increasingly integrates its distribution network and
emphasizes common sourcing throughout the world to shave costs and improve marNlow-cost, low-price strategy in the late 2000s, however.
gins.14 Carrefour strayed from its
This shift, in concert with the economic
downturn, resulted in an $85.3 million loss in
G
2008, a sharp decline from 2008’s
$1.1
billion
profit. Lars Olofsson joined Carrefour as
E
CEO in 2009 and returned the retailer to a low-cost approach.15
L join in an effort to generate collective scale economies to
Occasionally, smaller rivals will
battle an industry leader. This occurred
A in a cooperative effort called ShopRunner in the 2010
Christmas shopping season. Online stores like Babies ‘R’ Us, Rockport, RadioShack, and
others teamed up to battle Amazon by offering a $79 loyalty program that includes unlimited
two-day shipping and free returns.
1 These retailers understand that high-volume online shoppers account for most of the $1401billion U.S. consumers spend online each year. They also
recognize that the ongoing competitive threat from rival Amazon requires innovative and col0
lective action that can lessen the advantage
it enjoys from its massive size and scope.16 In the
2011 Christmas shopping season,8even traditional retailers like Toys ‘R’ Us, Walmart, Best
Buy, and Kohl’s offered free shipping to compete more effectively with Amazon, Newegg.
com, and other online retailers.17 T
Best Buy added deep discounts—particularly on Black Friday (the day after Thanksgiving)—and
achieved a 20 percent increase in web sales and the
S
first increase in overall revenues in six quarters. The massive price cuts hurt margins, however,
as the sales increase was accompanied by a 29 percent decrease in earnings.18 This example
illustrates the advantage that low-cost firms like Amazon have when attacked on price.
A key problem with the low-cost strategy is that cutting costs is not easy. During the
economic downturn of the late 2000s and early 2010s, low-cost restaurant Church’s
Chicken began filtering the shortening used for frying so that a batch could last for fourteen days instead of ten, resulting in an estimated savings of $1 million per year. Shrinking the scoop size of its biscuits from three tablespoons to two saves about $1.8 million
per year. Replacing the cardboard French-fry packaging with paper generates an estimated $700,000 in annual savings.19 Of course, these savings assume that customers will
not respond to these cost-cutting moves by altering their purchase behavior.
158
Chapter 7 Business Unit Strategies
Although low-cost competitors like Church’s tend to be better positioned for economic
slowdowns, all businesses become more concerned about costs when industry revenues
decline. During this sa …
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