Business level strategy and their impact on the performance of an
industrial enterprise : Case study of Pran group.
MBA Program ,Summer 2015.
GMT 607:Strategic Management.
School Of Business Administration
United International University
Table of content-
Serial number Topic Page no.
1. Business level strategy 03
2. Types of business level strategies 03
3. Case study: Pran group 07
4. Competitive forces 07
5. Competitive forces analysis 09
1. Business level strategy
An organization's core competencies should be focused on satisfying customer needs or preferences in
order to achieve above average returns. This is done through Business-level strategies. Business level
strategies detail actions taken to provide value to customers and gain a competitive advantage by
exploiting core competencies in specific, individual product or service markets. Business-level strategy is
concerned with a firm's position in an industry, relative to competitors and to the five forces of
Customers are the foundation or essence of a organization's business-level strategies. Who will be served,
what needs have to be met, and how those needs will be satisfied are determined by the senior
2. Types of business level strategies
There are four generic strategies that are used to help organizations establish a competitive advantage
over industry rivals. Firms may also choose to compete across a broad market or a focused market. We
also briefly discuss a fifth business level strategy called an integrated strategy.
2.1 Cost Leadership – Organizations compete for a wide customer based on price. Price is based on
internal efficiency in order to have a margin that will sustain above average returns and cost to the
customer so that customers will purchase your product/service. Works well when product/service is
standardized, can have generic goods that are acceptable to many customers, and can offer the lowest
price. Continuous efforts to lower costs relative to competitors is necessary in order to successfully be a
cost leader. This can include:
• Building state of art efficient facilities (may make it costly for competition to imitate)
• Maintain tight control over production and overhead costs
• Minimize cost of sales, R&D, and service.
• Tunnel Vision
Value Chain – A framework that firms can use to identify and evaluate the ways in which their resources
and capabilities can add value. The value of the analysis lays in being able to break the organization's
operations or activities into primary (such as operations, marketing & sales, and service) and support (
staff activities including human resources management & procurement) activities. Analyzing the firm's
value-chain helps to assess your organizations to what you perceive your competitors value-chain,
uncover ways to cut costs, and find ways add value to customer transactions that will provide a
2.2. Differentiation - Value is provided to customers through unique features and characteristics of an
organization's products rather than by the lowest price. This is done through high quality, features, high
customer service, rapid product innovation, advanced technological features, image management, etc.
(Some companies that follow this strategy: Rolex, Intel, Ralph Lauren)
Create Value by:
• Lowering Buyers' Costs – Higher quality means less breakdowns, quicker response to problems.
• Raising Buyers' Performance – Buyer may improve performance, have higher level of enjoyment.
• Sustainability – Creating barriers by perceptions of uniqueness and reputation, creating high
switching costs through differentiation and uniqueness.
Risks of Using a Differentiation Strategy
• Loss of Value
2.3. Focused Low Cost- Organizations not only compete on price, but also select a small segment of the
market to provide goods and services to. For example a company that sells only to the U.S. government.
2.4. Focused Differentiation - Organizations not only compete based on differientation, but also select a
small segment of the market to provide goods and services.
Focused Strategies - Strategies that seek to serve the needs of a particular customer segment (e.g., federal
Companies that use focused strategies may be able serve the smaller segment (e.g. business travelersbetter
than competitors who have a wider base of customers. This is especially true when special needs make it
difficult for industry-wide competitors to serve the needs of this group of customers. By serving a
segment that was previously poorly segmented an organization has unique capability to serve niche.
Risks of Using Focused Strategies:
• Maybe out focused by competitors (even smaller segment)
• Segment may become of interest to broad market firm(s)
2.5. Using an Integrated Low-Cost/Differentiation Strategy
This new strategy may become more popular as global competition increases. Firms that use this strategy
may see improvement in their ability to:
• Adaptability to environmental changes.
• Learn new skills and technologies
• More effectively leverage core competencies across business units and products lines which
should enable the firm to produce produces with differentiated features at lower costs.
Thus the customer realizes value based both on product features and a low price. Southwest airlines is one
example of a company that does uses this strategy.
However, organizations that choose this strategy must be careful not to: becoming stuck in the middle i.e.,
not being able to manage successfully the five competitive forces and not achieve strategic
competitiveness. Must be capable of consistently reducing costs while adding differentiated features.
3. Case study: PRAN GROUP
Agricultural Marketing Co. Ltd (PRAN GROUP) was established in 1980. PRAN stands for Programme
for Rural Advancement Nationally. Now they are the largest processors of fruits & vegetables in
Bangladesh. The Group comprises of 10 companies. The head offices are located at Dhaka with
production facilities around the country.
AMCL (PRAN) Group ("The company") belongs to Food and Beverage Industry. The food and beverage
industry faces the insatiable demands of retail consumers. To meet their constantly evolving requests the
industry must continually update existing product lines as well as new products to be identified as the
3.1 Competitive Force
The profit potential of each of the industries in which the firm is competing is important because the
profitability of various industry differs systematically and predictably over time. The average profitability
of an industry is highly influenced by the “5 forces”.
• Competitive Force 1: Rivalry among Existing Firms:
The average level of profitability is primarily influenced by the nature of rivalry among existing firms in
the industry. The competitors of the industry are fighting intensely to grab their market share.
Industry Growth Rate - Industry is growing rapidly as the consumers both in rural and urban areas are
becoming habituated more and more gradually on processed food than home made food items.
Concentration and Balance of Competitions - The number of firms in the industry is large. As there is no
unique dominant firm or several equal sized players to dominate the market, price competition is severe.
Degree of Differentiation and Switching Cost – Products are almost identical and switching cost of
consumers is insignificant.
The ratio of Fixed to Variable costs: The ratio of Fixed to Variable costs in this industry is very high. So
firms have an incentive to reduce prices to utilize installed capacity.
• Competitive Force 2: Threats of New Entrants:
As the industry is growing rapidly, there is possibility of moderate threat of potential new entry of new
companies though there is hardly any scope for earning abnormal profit because there are a lot of firms in
the industry and these firms are competing among themselves. Again, though there is no significant legal
barrier but due to high fixed cost, it has created a high entry barrier for the potential new entrance.
• Competitive Force 3: Threats of Substitute Products:
Relevant substitutes are not necessarily those that have the same form as the existing products but those
that perform the same function. The threats of substitutes depend on the relative price and performance of
competing product and services and on customers’ willingness to substitute. Threat of substitute product
in this industry is very low.
• Competitive Force 4: Bargaining Power of Buyers:
Bargaining power of buyers is very high. Because the products are almost identical and switching cost for
the buyers are very low.
• Competitive Force 5: Bargaining Power of Suppliers:
Bargaining power of suppliers is very low as there are a lot of suppliers in the market.
On the basis of the analysis of the ‘Five Forces’, we can say that the industry is currently profitable
though there are extreme rivalry among the firms in the industry, severe bargaining power of the buyers
and threat of new entries. Despite these factors, the industry has been able to place itself in a profitable
position because Industry is growing rapidly as the consumers both in rural and urban areas are becoming
habituated more and more gradually on processed food than home made food items.
3.2 Competitive Strategy Analysis:
The profitability of a firm is influenced not only by its industry structure but also by the strategic choices
it makes in positioning itself in the industry.
There are three Strategic Formulations.
• Overall cost leadership.
a. Overall cost leadership:
When the business works hard to achieve the lowest production and distribution costs so that it can price
the products lower than the competitors and win large market share. Pran Group fallows this Strategic
Formulation. They always tray to reduce production and distribution cost thus they can offer product in
lowest price then their competitor. They win large market share for lowest price and good quality
When the business concentrate on getting superior performance in an important customer benefit area
valued by a large part of the market. The firm seeks for quality leadership. Pran Group does not fallow
Differentiation Strategic Formulation.
When a business focuses on one or more narrow market segments. And for attracting the customers it
may use either cost leadership or differentiation. Pran Group does not fallow Focus Strategic