1. BUSINESS-LEVEL STRATEGIES
Chapter 5

2. Business-level strategies
Defines an organization’s approach to growth and competition in its chosen business segments
Core Competencies
Core Incompetencies
Goals
BUSINESS- LEVEL
STRATEGY
and
IMPLEMENTATION
- Set of recommendations and action plans
Company Situation Analysis
S’s
W’s
VISION
(GROWTH)
Issues
Goals
Issues
O’s
T’s
Issues
Goals
DF’s, CF’s & KSF’s

3. Generic business-level strategies
Meant to establish a competitive position that distinguishes the organization from competitors and creates value for customers (customer value proposition).
Types of generic competitive strategies:
Differentiation
Low-Cost leadership
Best Cost

4. differentiation Create value through sustainable uniqueness
Customers must be willing to pay more (price premium) for the product/service uniqueness than the firm paid to create it
Controlling costs in non-competence- related activities is key to maintain acceptable price premium
Requires constant product/service innovation to stay ahead of competition and to keep up with customers’ perceived value

5. When does differentiation work best?
IN GENERAL, WHEN CFs ARE WEAK
Examples:
Several ways to differentiate product
High buyer switching costs
Substitute products cannot satisfy the same needs as the industry’s products
Many suppliers are available
Information about sellers’ products are not readily available CF

6. Low-cost leadership
Create value by lowering cost and passing on savings to customers
Sustainable low price for product or service without becoming unprofitable
Product or service must meet performance requirements – safety, quality, innovation
Requires constant drive toward efficiency – high capacity utilization, economies of scale, cost-savings technologies, experience effects

7. When does low-cost leadership work best?
IN GENERAL, WHEN CFs ARE STRONG
Examples:
High fixed costs
Low levels of product differentiation
Substitute products are reasonably priced
Suppliers can easily integrate forward into sellers’ industry
Low switching costs for customers CF

8. Best cost
Create value by lowering cost and passing on savings to customers in some areas while sustaining uniqueness in others.
Combination of differentiation and lost- cost approaches
Requires emphasis on both product or service innovation, and efficiency (which makes it more difficult to execute)

9. When does best cost work best?
IN CASES, WHEN SOME CFs ARE STRONG, AND SOME ARE WEAK
Example:
Customers develop high switching costs (brand loyalty) due to the uniqueness of the product, allowing for economies of scale for firms, which could increase price competition among rivals. Savings from economies of scale are then passed on to customers. CF CF

10. types of growth strategies
Meant to establish growth posture in terms of scope of the firm’s business.
Internal Growth Strategies:
Market penetration – increase market share in current segments; attractive for dominant firms in an industry to increase economies of scale
Market development – identify new market segments for existing products; attractive for firms that follow a differentiation strategy
Product/service development – modify existing products/services or develop new products/services to current and new market segments; attractive for prospector firms that want to establish a first-mover advantage
Vertical integration – move backward or forward along the value chain
External Growth Strategies:
Related diversification – move into businesses that have strategic fits along their value chains
Unrelated diversification – move into businesses that do not have strategic fits with each other

11. Types of growth strategies
International Growth Strategies:
Exporting – transfer goods to other countries for sale
Licensing – sell the right to produce or sell a product to another firm in a foreign market
Franchising – sell the right to use the name and operating methods to another firm in a foreign market
Joint Venture – cooperative agreement (through shared ownership of a new company) among two or more firms to pursue common business objectives in foreign countries
Greenfield Venture – creation of a wholly-owned foreign subsidiary