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)