Business-Level Strategy BUSI 7130/7136 Chris Shook.

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Presentation transcript:

Business-Level Strategy BUSI 7130/7136 Chris Shook

Agenda Overview of Business Level Strategy What is Strategy Geometry of Competition

Business-Level Strategy How to create competitive advantage in each business in which the company competes.

Generic Business Level Strategies CostUniqueness Source of Competitive Advantage

Breadth of Competitive Scope BroadTargetMarket NarrowTargetMarket Cost Generic Business Level Strategies Source of Competitive Advantage Uniqueness

Breadth of Competitive Scope Source of Competitive Advantage BroadTargetMarket NarrowTargetMarket Cost Focused Differen- tiation Focused Differen- tiation Cost Leadership Cost Leadership Differen- tiation Differen- tiation Focused Low Cost Generic Business Level Strategies Uniqueness

Breadth of Competitive Scope Source of Competitive Advantage BroadTargetMarket NarrowTargetMarket Cost Cost Leadership Cost Leadership Generic Business Level Strategies Uniqueness

Relatively standardized products Key Criteria Cost Leadership Business Level Strategy

Relatively standardized products Features acceptable to many customers Key Criteria Cost Leadership Business Level Strategy

Relatively standardized products Features acceptable to many customers Lowest competitive price Key Criteria Cost Leadership Business Level Strategy

Breadth of Competitive Scope Source of Competitive Advantage BroadTargetMarket NarrowTargetMarket Cost Cost Leadership Cost Leadership Differen- tiation Differen- tiation Generic Business Level Strategies Uniqueness

Value provided by unique features and value characteristics Key Criteria Differentiation Business Level Strategy

Value provided by unique features and value characteristics Command premium price Key Criteria Differentiation Business Level Strategy

Value provided by unique features and value characteristics Command premium price Key Criteria Differentiation Business Level Strategy High customer service

Value provided by unique features and value characteristics Command premium price Superior quality Key Criteria Differentiation Business Level Strategy High customer service

Value provided by unique features and value characteristics Command premium price Superior quality Key Criteria Differentiation Business Level Strategy Prestige or exclusivity High customer service

Breadth of Competitive Scope Source of Competitive Advantage BroadTargetMarket NarrowTargetMarket Cost Cost Leadership Cost Leadership Differen- tiation Differen- tiation Generic Business Level Strategies Focused Differen- tiation Focused Differen- tiation Focused Low Cost Uniqueness

Focused Business Level Strategies Focused Business Level Strategies involve the same basic approach as Broad Market Strategies

Large firms may overlook small niches However..... Opportunities may exist because: * * Focused Business Level Strategies

Firm may lack resources to compete industrywide Large firms may overlook small niches However..... Opportunities may exist because: * * * * Focused Business Level Strategies Focused Business Level Strategies involve the same basic approach as Broad Market Strategies

Firm may lack resources to compete industrywide Large firms may overlook small niches However..... Opportunities may exist because: * * * * * * Focused Business Level Strategies Focused Business Level Strategies involve the same basic approach as Broad Market Strategies May be able to serve a narrow market segment more effectively than industrywide competitors

Focused Differentiators may thrive by selecting a small market that is underserved by large players * * Focused Business Level Strategies Focused Business Level Strategies involve the same basic approach as Broad Market Strategies

Breadth of Competitive Scope Source of Competitive Advantage BroadTargetMarket NarrowTargetMarket Cost Cost Leadership Cost Leadership Differen- tiation Differen- tiation Generic Business Level Strategies Focused Differen- tiation Focused Differen- tiation Focused Low Cost Uniqueness

Breadth of Competitive Scope Source of Competitive Advantage BroadTargetMarket NarrowTargetMarket Cost Cost Leadership Cost Leadership Differen- tiation Differen- tiation Generic Business Level Strategies Focused Differen- tiation Focused Differen- tiation Focused Low Cost Integrated Low Cost/ Differentiation Integrated Low Cost/ Differentiation Uniqueness

What is Strategy? Porter, 1996

What does the article say about OE ?

What does it say about unique activities?

What about trade-offs?

Is Growth Always Good?

Fit Type of FitDefinitionGoal First-OrderSimple Consistency Single Mindedness Second-OrderReinforcing Activities Synergy Optimization of Effort OptimizationElimination of Activities

Geometry of Competition

Summary Competitive advantage is very rare. –Most competitors don’t have a competitive advantage Despite –Good products –Good customer relations –Excellent capabilities Competitive position is very real.

Ind Avg Price Ind Ave Cost Alternate Paths to Outperforming Industry Average

Low cost producers have a cost savings greater than its price reduction Differentiated producer commands a price premium in excess of its added costs

Geometry of Competition Where are you in relation to your competitors? Two types of multidimensional positioning –Positioning related to capabilities –Positions related to offerings

Positioning Related to Capabilities Capabilities drive offerings Assets & Activities ->Capabilities ->Offerings A firm must have –Competitive offerings –Frontier capabilities –A fit between the two

Advantage Curve for Steinway and Yamaha Yamaha Steinway

Stuck in the Middle ABC

Win in the Middle A B C

A Guide to Action Change the offerings (i.e. move the dot) Create new capabilities (i.e. shift the curve) Influence customer preferences Change dimensions of competition (change the axis)