1. Business-Level Strategy
Business-level strategy: 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

2. The Central Role of Customers
In selecting a business-level strategy, the firm determines
1. who it will serve
2. what needs those target customers have that it will satisfy
3. how those needs will be satisfied

3. Managing Relationships With Customers
Customer relationships are strengthened by offering them superior value
help customers to develop a new competitive advantage
enhance the value of existing competitive advantages

4. Five Generic Strategies
Competitive Advantage
Cost
Uniqueness
Cost Leadership
Differentiation
Broad target
Integrated Cost
Leadership/
Differentiation
Competitive Scope
Narrow target
Focused Cost Leadership
Focused Differentiation

5. Cost Leadership Strategy
An integrated set of actions designed to produce or deliver goods or services at the lowest cost, relative to competitors with features that are acceptable to customers
relatively standardized products
features acceptable to many customers
lowest competitive price

6. Cost Leadership Strategy
Cost saving actions required by this strategy:
building efficient scale facilities
tightly controlling production costs and overhead
minimizing costs of sales, R&D and service
building efficient manufacturing facilities
monitoring costs of activities provided by outsiders
simplifying production processes

7. Differentiation Strategy
An integrated set of actions designed by a firm to produce or deliver goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them
price for product can exceed what the firm’s target customers are willing to pay
nonstandardized products
customers value differentiated features more than they value low cost

8. Differentiation Strategy
Value provided by unique features and value characteristics
Command premium price
High customer service
Superior quality
Prestige or exclusivity
Rapid innovation

9. Differentiation Strategy
Differentiation actions required by this strategy:
developing new systems and processes
shaping perceptions through advertising
quality focus
capability in R&D
maximize human resource contributions through low turnover and high motivation

10. Focused Business-Level Strategies
A focus strategy must exploit a narrow target’s differences from the balance of the industry by:
isolating a particular buyer group
isolating a unique segment of a product line
concentrating on a particular geographic market
finding their “niche”

11. Advantages of Integrated Strategy
A firm that successfully uses an integrated cost leadership/differentiation strategy should be in a better position to:
adapt quickly to environmental changes
learn new skills and technologies more quickly
effectively leverage its core competencies while competing against its rivals

12. Benefits of Integrated Strategy
Successful firms using this strategy have above-average returns
Firm offers two types of values to customers
some differentiated features (but less than a true differentiated firm)
relatively low cost (but not as low as the cost leader’s price)

13. Corporate-Level Strategy
What is Corporate Level Strategy?
Definition: Action taken to gain a competitive advantage through the selection and management of a mix of businesses competing in several industries or product markets.

14. Key Questions of Corporate Strategy
1. What businesses should the corporation be in?
2. How should the corporate office manage the array of business units?
Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts 11

15. Levels and Types of Diversification
Low Levels of Diversification
Single business
> 95% of revenues from a single business unit A
Dominant business
Between 70% and 95% of revenues from a single business unit B A
Moderate to High Levels of Diversification
< 70% of revenues from dominant business; all businesses share product, technological and distribution linkages
Related constrained A B C
Related linked (mixed)
< 70% of revenues from dominant business, and only limited links exist A B C
Very High Levels of Diversification
Unrelated-Diversified
Business units not closely related A B C 15

16. Strategic Leadership Strategic Leadership involves:
The ability to anticipate, envision, maintain flexibility and empower others to create strategic change
Multi-functional work that involves working through others
Consideration of the entire enterprise rather than just a sub-unit
A managerial frame of reference 7

17. Strategic Competitiveness Above-Average Returns
Strategic Leadership
and the Strategic Management Process
Effective
Strategic Leadership
shapes the formulation of
and
Strategic Intent
Strategic Mission
influence
Successful
Strategic Actions
Formulation
of Strategies
Implementation
of Strategies
Strategic Competitiveness
Above-Average Returns 11

18. Factors Affecting Managerial Discretion
External Environment
Industry Structure
Rate of market growth
# and type of competitors
Political/Legal constraints
Product differentiation
Employee interaction
Organizational Characteristics
Resource availability
Size and age
Culture
Managerial Discretion
Interpersonal skills
Tolerance for ambiguity
Commitment to the firm
Aspiration level
Self-confidence
Characteristics of the Manager 15

19. Exercise of Effective Strategic Leadership
Determining
strategic
direction
Establishing
balanced
organizational
controls
Exploiting and
maintaining
core
competencies
Effective Strategic
Leadership
Emphasizing
ethical
practice
Developing
human
capital
Sustaining
an effective
organizational
culture

20. Determining Strategic Direction
Strategic direction means the development of a long-term vision of a firm’s strategic intent
A charismatic leader can help achieve strategic intent
It is important not to lose sight of the strengths of the organization when making changes required by a new strategic direction
Executives must structure the firm effectively to help achieve the vision

21. Exploiting and Maintaining Core Competencies
Core competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rivals
Strategic leaders must verify that the firm’s competencies are emphasized in strategy implementation efforts

22. Exploiting and Maintaining Core Competencies
In many large firms, and certainly in related-diversified ones, core competencies are exploited effectively when they are developed and applied across different organizational units
Core competencies cannot be developed or exploited effectively without developing the capabilities of human capital

23. Developing Human Capital
Human capital refers to the knowledge and skills of the firm’s entire workforce
Employees are viewed as a capital resource that requires investment
No strategy can be effective unless the firm is able to develop and retain good people to carry it out
The effective development and management of the firm’s human capital may be the primary determinant of a firm’s ability to formulate and implement strategies successfully

24. Sustaining an Effective Organizational Culture
An organizational culture consists of a complex set of ideologies, symbols, and core values that is shared throughout the firm and influences the way it conducts business
Shaping the firm’s culture is a central task of effective strategic leadership

25. Sustaining an Effective Organizational Culture
An appropriate organizational culture encourages the development of an entrepreneurial orientation among employees and an ability to change the culture as necessary
Reengineering can facilitate this process

26. Changing Culture and Reengineering
The benefits of business reengineering are maximized when employees believe that:
Every job in the company is essential and important
All employees must create value through their work
Constant learning is a vital part of every person’s job
Teamwork is essential to implementation success
Problems are solved only when teams accept the responsibility for the solution. 36

27. Emphasizing Ethical Practices
Ethical practices increase the effectiveness of strategy implementation processes
Ethical companies encourage and enable people at all organizational levels to exercise ethical judgment

28. Emphasizing Ethical Practices
To properly influence employee judgment and behavior, ethical practices must shape the firm’s decision-making process and be an integral part of an organization’s culture
Leaders set the tone for creating an environment of mutual respect, honesty and ethical practices among employees

29. Establishing Balanced Organizational Controls
Organizational controls provide the parameters within which strategies are to be implemented and corrective actions taken
Financial controls are often emphasized in large corporations and focus on short-term financial outcomes
Strategic control focuses on the content of strategic actions, rather than their outcomes

30. Establishing Balanced Organizational Controls
Successful strategic leaders balance strategic control and financial control (they do not eliminate financial control) with the intent of achieving more positive long-term returns

31. Why do a situation analysis?
Situation analysis concentrates on generating solid answers to a well-defined set of strategic questions and using these answers to:
Appraise the company’s strategic situation and business position
Craft a suitable strategy

32. Situation analysis focuses on:
EXTERNAL FACTORS – the firm’s MACRO-environment (industry and competitive conditions)
INTERNAL FACTORS – the firm’s immediate MICRO-environment (its own internal situation and competitive position)

33. The Key Questions in Company Situation Analysis
How well is the company’s present strategy working?
What are the company’s strengths, weaknesses, opportunities, and threats?
Are the company’s prices and costs competitive?
How strong is the company’s competitive position?
What strategic issues does the company face?

34. SWOT Analysis
SWOT represents the first letter in Strengths, Weaknesses, Opportunities, and Threats.
SWOT analysis
Involves sizing-up a company’s INTERNAL strengths and weaknesses and its EXTERNAL opportunities and threats
Is an easy to use tool for getting a quick overview of a company’s strategic situation

35. Why SWOT Analysis is Important
It is the basis for matching strategy to the company’s situation –
To its internal strengths and weaknesses
To its external threats and opportunities
A winning strategy must always fit the company’s situation.

36. Strengths What is a company Strength?
Something a company is good at doing or a characteristic that gives it an important capability.

37. Weaknesses What are company weaknesses?
Something a company lacks or does poorly (in comparison to others) or a condition that puts it at a disadvantage.

38. Opportunities What are company opportunities?
Those that offer important avenues for profitable growth, those where a company has the most potential for competitive advantage, and those which the company has the financial resources to pursue.

39. Threats What are company Threats?
Certain factors in a company’s external environment that pose a threat to its well-being.

40. Some questions to consider once the SWOT listings have been compiled are:
Does the company have internal strengths or core competencies an attractive strategy can be built around?
Do company weaknesses make a company vulnerable and does it disqualify a company from pursuing industry opportunities?
Which weaknesses does a company need to correct?

41. Some questions to consider once the SWOT listings have been compiled are:
Which opportunities does the company have the skills and resources to pursue with a real chance for success? Which opportunities are the best from the company’s standpoint? (Remember: Opportunity without the means to capture is only an illusion.)
What external threats should management be worried most about and what strategic moves need to be made to craft a good defense?