PUJA
h6000
cap_4_hitt.pptx
PART 2: STRATEGIC ACTIONS:
STRATEGY FORMULATION
CHAPTER 4: BUSINESS-LEVEL STRATEGY
Authored by:
Marta Szabo White, Ph.D
Georgia State University
THE STRATEGIC MANAGEMENT PROCESS
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KNOWLEDGE OBJECTIVES
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● Define business-level strategy.
● Discuss the relationship between customers and business-level strategies in terms of who, what, and how.
● Explain the differences among business-level strategies.
● Use the five forces of competition model to explain how above-average returns can be earned through each business-level strategy.
● Describe the risks of using each of the business-level strategies.
BUSINESS–LEVEL STRATEGY: HOW TO COMPETE IN A SPECIFIC INDUSTRY
■ An integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets
■ It is the core strategy
■ Every firm must form and use a business-level strategy for each one of its businesses
■ Business-level strategy choices matter because long-term performance is linked to a firm’s strategies
IMPORTANT DEFINITION
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BUSINESS-LEVEL STRATEGY
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
ONE
BUSINESS-
LEVEL
STRATEGY
A single-product market/single geographic location firm employs one business-level strategy and one corporate-level strategy identifying what or which industry the firm will compete in
SEVERAL BUSINESS-LEVEL STRATEGIES
A diversified firm employs a separate business-level strategy for each product market area in which it competes and one or more corporate-level strategies dealing with product and/or geographic diversity
CUSTOMERS: THEIR RELATIONSHIP TO BUSINESS-LEVEL STRATEGIES
KEY ISSUES in BUSINESS-
LEVEL
STRATEGY
Who will be served?
What needs will be satisfied?
How will those needs be satisfied?
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CUSTOMERS: THEIR RELATIONSHIP TO BUSINESS-LEVEL STRATEGIES
EFFECTIVELY
MANAGING
RELATIONSHIPS
WITH
CUSTOMERS
REACH
Access and Connection
to Customers
RICHNESS
Depth and Detail of Two-Way Flow
of Information Between
the Firm and Customer
AFFILIATION
Facilitating Useful Interactions
With Customers
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FIVE GENERIC BUSINESS-LEVEL STRATEGIES
FIGURE 4.2
Five Business Level Strategies
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BUSINESS-LEVEL STRATEGY EFFECTIVENESS
■ None of the five business-level strategies is inherently or universally superior to the others
■ The effectiveness of each strategy is contingent upon:
● External opportunities/threats
● Internal strengths/weaknesses
■ KEY: A successful business-level strategy must match external opportunities/threats with internal strengths, i.e., its core competencies
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COST LEADERSHIP STRATEGY
An integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors with features that are acceptable to customers
■ Relatively standardized products
■ Features acceptable to many customers
■ Lowest competitive price
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COST LEADERSHIP STRATEGY:
STRATEGIC FOCUS
WALMART, DOLLAR STORES, AND AMAZON: WHO IS BUYING WHOSE LUNCH?
■ Walmart deviated from its cost-leadership strategy designed to take market share away from Target by introducing organic foods, remodeling some stores, and reducing the variety of products offered, thereby increasing prices on some goods.
■ Recognizing its mistake, Walmart has re-focused on low costs and prices, increased its product diversity, and is opening 40 new express stores.
■ Will Walmart will be able to recapture its cost leadership position in the market after giving it up to rivals?
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DIFFERENTIATION STRATEGY
An integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them
■ Focus is on non-standardized products
■ Appropriate when customers value differentiated features more than they value low cost
■ Firms must still be able to produce differentiated products at competitive costs to reduce upward pressure on the price that customers pay
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FOCUSED STRATEGIES
An integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment
Target markets include:
■ a Particular buyer group (e.g., youths or senior citizens)
■ Different segment of a product line (e.g., products for professional painters or the do-it-yourself group)
■ Different geographic market (e.g., northern or southern Italy by using a foreign subsidiary)
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FOCUSED STRATEGIES
Types of focused strategies:
■ Focused cost leadership strategy
■ Focused differentiation strategy
To implement a focus strategy, firms must be able to:
Complete various value chain activities in a competitively superior manner in order to develop and sustain a competitive advantage and earn above-average returns
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
