Business Level Strategies Taruna

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Chapter 4: Business-Level Strategy

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Business-Level Strategy (Defined)

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.

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Core Competencies and Strategy

Resources and superior capabilities that aresources of competitive advantage over afirms rivals

Providing value to customers and gainingcompetitive advantage by exploiting corecompetencies in individual product markets

CoreCompetencies

Strategy

Business-levelStrategy

An integrated and coordinated set ofactions taken to exploit core competenciesand gain competitive advantage

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Customers: Their Relationship to

Business-Level Strategies

Key Issuesin

Business-levelStrategy

Who will beserved?

What needs willbe satisfied?

How will thoseneeds be satisfied?


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Business-Level Strategies

Two types ofcompetitive advantagefirms mustchoose between Cost (Are our costs LOWER than rivals costs?)

Uniqueness (Are weDIFFERENT

than rivals?)

Two types of competitive scopefirms mustchoose between Broad target

Narrow target These combine to yield 5 different generic

business level strategies.

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Five Business-Level Strategies

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LOW COST LEADERSHIP

STRATEGIES Low cost leadership strategies are based on a firms

ability to offer a product or service at a lower cost

than its rivals.

When a firm is able to build a substantial cost

advantage over other competitors it can pass on its

benefits to customers and gain a large market share.

Competitive advantage: The low-cost leader and

operates with margins greater than competitors Competitive scope: Broad



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Types of Business-Level Strategies

Cost Leadership Strategy

Integrated set of actions designed to produce or deliver

goods or services with features that are acceptable tocustomers at the lowest cost, relative to competitors.

Must have competitive levels of quality, service, and

other features and lowest overall costs

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Examples of Value-Creating Activities

Associated with the Cost Leadership Strategy

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DIFFERENTIATION

STRATEGIES When firm appeal to a broad cross-section of the

market through offering differentiating features that

make customers willing to pay premium prices, e.g.,

superior technology, quality, prestige.

Success with this type of strategy requires

differentiation features that are hard or expensive for

competitors to duplicate.



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DIFFERENTIATION

STRATEGIES Targeted customers perceive product value

Customizedproducts differentiating on as manyfeatures as possible.

Differentiation Competitive advantage:

Differentiation/uniqueness

Competitive scope: Broad



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Examples of Value-Creating Activities Associated

with the Differentiation Strategy

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FOCUS STRATEGIES

Focus strategies aim to sell good or services

to narrow or specific target market, niche or

segment. Focus builds competitive advantage

through high specialization and concentrationof resources in a given niche.

Firms can build focus in one of the two ways.

Focused Cost Leadership and

Focused Differentiation.



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Focus strategies

Competitive advantage: Cost Leadership or

Differentiation

Competitive scope: Narrow

An integrated set of actions taken to produce goods orservices that serve the needs of a particular competitive

segment

Attractive when:

Firm lacks resources to compete in the broader market

Firm may be able to more effectively serve a narrow market

segment than larger industry-wide competitors

Niche is attractive

Large firms may overlook small nichesTaruna Dureja Banga


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Focused cost Leadership:

A market niche strategy, concentrating on anarrow customer segment and competingwith lowest prices, which, again, requires

having lower cost structure than competitors. Focused Cost Leadership

Competitive advantage: Low-cost

Competitive scope: Narrow industry segment



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Types of Business-Level Strategies

Focused Differentiation

Focused Differentiation: a second market nichestrategy, concentrating on a narrow customersegment and competing through differentiating features

e.g., a high-fashion women's clothing boutique.

Competitive advantage: Differentiation

Competitive scope: Narrow industry segment

Apple,

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Integrated Cost Leadership/Differentiation

Efficiently produce products with differentiated attributes

Efficiency: Sources of low cost

Differentiation: Source of unique value

Involves engaging in primary and support activities that

allow a firm to simultaneously pursue low cost anddifferentiation

Low price with somewhat highly differentiated features

More value for the money

Often called best-cost strategy

Examples: Toyota, Target

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Integrated Cost Leadership/Differentiation

Risks of Integrated Strategies

Harder to implement than other strategies

Must simultaneously reduce costs while increasing

differentiation

Can get stuck in the middleresulting in no advantages and

poor performance

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