Business-Level Strategy

The topic I will be informing this month is 'Business-Level Strategy', which are also termed as 'SBU
strategies'.
What is an SBU?

A strategic business unit is a part of an organisation for which there is a distinct external market for goods
or services that is different from another SBU.

Example: Nestle has a number of SBU's such as confectionery, Ice cream, mineral water and pet food.
The focus of Business Level Strategies is on the effective exploitation of individual product markets. At
the product level the focus is on achieving competitive advantage in a given market.

Michael Porter identified four main generic strategies: cost leadership,differentiation, focus and no
distinctive strategy.
Cost Leadership:
The objective is to achieve a situation where unit costs are significantly lower than those of other
companies in the industry, thus producing higher profits than competitors and the ability to mount a
defence against competitive threats.

Differentiation:

The effect of differentiation being to increase profits by segmenting the market and enabling different
prices to be charged in different segments. This involves searching for and adding some characteristic
such as superior quality or service associated with the product; it may not be a real effect, but may be an
image consciously created by the company.
Focus:

The previous generic strategies involved different ways of meeting competition and achieving an
advantage: in the first case this was by lower cost and in the second by altering product characteristics.
The focus strategy is different in that it typically involves the identification of market niches where it is
possible to avoid confrontation with competitors. Within the niche the company can focus on cost or
differentiation.
It is not a high volume option, and it pays little attention to market share. The niche may be a part of the
market which requires specialised attention, very fast guaranteed delivery, or some other characteristic
which higher volume producers cannot provide because of the additional cost.
Stuck in the Middle:

A company which does not specialise is likely to be continuously adjusting its competitive focus in
response to changes in the market, with the result that it is ‘stuck in the middle’; such an undefined
strategy is likely to be associated with relatively poor performance, because the marketing effort of such a
company is likely to be confused: at any one time it may not be clear whether marketing managers are
attempting to achieve market share, differentiate the product in the eyes of the consumer, or find
unexploited opportunities.

Ansoff’s matrix
Introduction of Ansoff Matrix
This well known marketing tool was first published in the Harvard Business Review (1957) in an article called
'Strategies for Diversification'. It is used by marketers who have objectives for growth. Ansoff's matrix offers strategic
choices to achieve the objectives. There are four main categories for selection.

The market penetration strategy is the least risky since it leverages many of the firm’s existing resources and
capabilities. In a growing market, simply maintaining market share will result in growth, and there may exist
opportunities increase market share if competitors reach capacity limits. However, market penetration has limits, and
once the market approaches saturation another strategy must be pursues if the firm is to continue to grow.
Market development options include the pursuit of additional market segments or geographical regions. The
development of new market for the product may be good strategy if the firm’s core competencies

re related more to the specific product than to its experience with a specific market segment. Because the firm is
expanding into a new market, a market development strategy typically has more ricks then a market penetration
strategy.
A product development strategy may be appropriate if the firm’s strengths are related to its specific customer rather
than to the specific product itself. In this situation, it can leverage its strengths by developing a new product targeted
to its existing customer. Similar to the case of new market development, new product development carries more rick
then simply attempting to increase market share.
Diversification is the most risky of the four growth strategies since it requires both products and market development
and may be outside the core competencies of the firm. In fact, this quadrant of the matrix has been referred to by
some as the “suicide cell”. However, diversification may be a reasonable choice if the high risk is compensated by the
chance...

strategic alliances

he Nestlé Research Center, Lausanne, Switzerland and GE Global Research, the General Electric
Company’s (NYSE: GE) centralized research and development organization, announce an innovative
collaboration to scientifically assess associations between body composition, metabolic status, diet and
lifestyle habits.

This unique relationship brings together the dynamic competencies of the Nestlé Research Center,
experts in metabolism, nutrition and health research, and GE’s extensive knowledge in diagnostic
technologies. A primary goal of the collaboration is to gain a deeper understanding of the connection
between body composition, metabolic profile and health.

GE Healthcare’s Lunar iDXA system, an innovative imaging technology, will be used by Nestlé scientists
to measure subjects’ body fat, muscle and bone mineral density, extending beyond the limited measures
of body mass index (BMI) and waist-hip-ratio. Researchers will study the correlations between lifestyle
habits, body composition measurements and metabolic data to better understand the biological drivers of
individuals’ metabolism and health.

“Through this collaboration with GE we have the opportunity to use cutting-edge diagnostic tools to
increase our understanding of how nutrition and lifestyle choices impact body composition and metabolic
health,” said Prof. Peter van Bladeren, Head of Nestlé Science and Research. “With this knowledge,
Nestlé can continue to deliver science-based nutritional products to improve and enhance the quality of
peoples’ lives.”
The results will provide direction for the development of non-invasive, rapid, precise and accurate
assessment tools for clinicians to evaluate the impact of nutritional interventions on metabolic status and
overall health. Additionally, this data will help researchers identify specific metabolic parameters that can
potentially be improved via diet and lifestyle.

“In the face of a worldwide obesity epidemic, providing better tools to track the functional benefits of
weight management, nutrition and lifestyle has become an international healthcare priority,” said Mark
Little, Senior Vice President and Director, GE Global Research. “The use of GE’s diagnostic tools will
provide Nestlé scientists with more information on how diet and lifestyle measures can be optimized to
help people lead healthier lives and ultimately make healthcare systems more efficient by more effectively
managing and treating obesity.”

About Nestlé Science and Research

Nestlé Science & Research, encompassing the Nestlé Research Center and its extensive network of
external alliances, is a leading research entity in food, nutrition and life sciences. Based on Nestlé’s
research emphasis, Nestlé Science & Research builds strategic alliances with the best scientific
institutions in the world to bring a full breadth of knowledge to its nutrition, health and wellness research.
A diverse staff of premier researchers from a broad range of scientific competencies together with
external collaborators worldwide are central to fulfilling Nestlé’s vision of Good Food, Good Life.

Nestlé Research is very active in consumer health benefit areas, employing a multidisciplinary approach
to science and research. Integrating diverse scientific disciplines and expertise ranging from biology, food
technology, nutrigenomics and sociology, Nestlé strives to bring practical nutrition solutions to
consumers. Learn more about the Nestlé Research Center atwww.research.nestle.com.

About GE
GE (NYSE: GE) is Imagination at Work -- a diversified technology, media and financial services company
focused on solving some of the world’s toughest problems. With products and services ranging from
aircraft engines, power generation, water processing and security technology to medical imaging,
business and consumer financing, and media content, GE serves customers in more than 100 countries
and employs more than 300,000 people worldwide. For more information, visit the Company's Web site
at www.ge.com.