Exam 4: Business Level Strategy

The goal of business-level strategy is to earn above-average returns.

Case Scenario 1: International Cow Packers. International Cow Packers (ICP) is a $12 billion meat processor (slaughter, processing, and packing). Founded in 1943, ICP has grown to become the largest beef and pork processor in the United States (revenues come 90% from beef and 10% from pork) and also has a growing export market to Japan. The company follows a focused cost-leadership strategy, delivering USDA-graded meats primarily to the institutional (schools, prisons, hospitals) and supermarket channels. ICP's entire value chain is organized to deliver volume product at the industry's lowest per-unit cost. Its supplier industries, primarily cattle and swine feedlots, have relatively little power since prices for these raw materials are determined in the commodity markets. While entry barriers to the industry are high due to high minimum start-up costs, industry rivalry is extremely intense - primarily due to the fact that three large companies (including ICP) control 80% of the market for processed meats. The threat of substitutes is high with an increasing trend for consumers to favor poultry and other non-beef proteins. Buyers are also powerful since supermarkets are relatively concentrated at a regional level and end-consumers have ample choices. -(Refer to Case Scenario 1) The focused cost-leadership strategy followed by International Cow Packers Inc. (ICP) is appropriate given the industry characteristics of low supplier power, high entry barriers, intense industry rivalry, high threat of substitutes, and powerful buyers.

Before the firm decides what products to offer and what benefits and features they will have, the firm must decide all the following questions EXCEPT

The best of the generic business strategies is the integrated cost leadership/differentiation strategy.

An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse's company transferred her to St. Paul. The decorator is distressed because the customers in his target market have, in his words, "banal and bourgeois taste." What is the decorator's problem?

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?

Changing consumer needs is illustrated by Starbucks' allowing consumers to have an experience rather than just a cup of coffee and to design their own drinks.