Business-Level Strategy

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Business-Level Strategy

• BUSI 7130/7136
• Chris Shook

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Agenda

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

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Business-Level Strategy

• How to create competitive advantage in each
  business in which the company competes.

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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Broad Target Market
Breadth of Competitive Scope
Narrow Target Market
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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Cost Leadership
Differen- tiation
Broad Target Market
Breadth of Competitive Scope
Focused Differen- tiation
Focused Low Cost
Narrow Target Market
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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Cost Leadership
Broad Target Market
Breadth of Competitive Scope
Narrow Target Market
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Cost Leadership Business Level Strategy
Key Criteria
Relatively standardized products
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Cost Leadership Business Level Strategy
Key Criteria
Relatively standardized products
Features acceptable to many customers
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Cost Leadership Business Level Strategy
Key Criteria
Relatively standardized products
Features acceptable to many customers
Lowest competitive price
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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Cost Leadership
Differen- tiation
Broad Target Market
Breadth of Competitive Scope
Narrow Target Market
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Differentiation Business Level Strategy
Key Criteria
Value provided by unique features and value
characteristics
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Differentiation Business Level Strategy
Key Criteria
Value provided by unique features and value
characteristics
Command premium price
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Differentiation Business Level Strategy
Key Criteria
Value provided by unique features and value
characteristics
Command premium price
High customer service
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Differentiation Business Level Strategy
Key Criteria
Value provided by unique features and value
characteristics
Command premium price
High customer service
Superior quality
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Differentiation Business Level Strategy
Key Criteria
Value provided by unique features and value
characteristics
Command premium price
High customer service
Superior quality
Prestige or exclusivity
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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Cost Leadership
Differen- tiation
Broad Target Market
Breadth of Competitive Scope
Focused Differen- tiation
Focused Low Cost
Narrow Target Market
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Focused Business Level Strategies
Focused Business Level Strategies involve the
same basic approach as Broad Market Strategies
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Focused Business Level Strategies
Focused Business Level Strategies involve the
same basic approach as Broad Market Strategies
However.....
Opportunities may exist because
Large firms may overlook small niches

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Focused Business Level Strategies
Focused Business Level Strategies involve the
same basic approach as Broad Market Strategies
However.....
Opportunities may exist because
Large firms may overlook small niches

Firm may lack resources to compete industrywide

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Focused Business Level Strategies
Focused Business Level Strategies involve the
same basic approach as Broad Market Strategies
However.....
Opportunities may exist because
Large firms may overlook small niches

Firm may lack resources to compete industrywide


May be able to serve a narrow market segment more
effectively than industrywide competitors
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Focused Business Level Strategies
Focused Business Level Strategies involve the
same basic approach as Broad Market Strategies

Focused Differentiators may thrive by selecting a
small market that is underserved by large players
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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Cost Leadership
Differen- tiation
Broad Target Market
Breadth of Competitive Scope
Focused Differen- tiation
Focused Low Cost
Narrow Target Market
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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Cost Leadership
Differen- tiation
Broad Target Market
Integrated Low Cost/ Differentiation
Breadth of Competitive Scope
Focused Differen- tiation
Focused Low Cost
Narrow Target Market
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What is Strategy?

• Porter, 1996

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What does the article say about OE ?
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What does it say about unique activities?
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What about trade-offs?
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Is Growth Always Good?
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Fit
Type of Fit Definition Goal
First-Order Simple Consistency Single Mindedness
Second-Order Reinforcing Activities Synergy
Optimization of Effort Optimization Elimination of Activities
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Geometry of Competition
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Summary

• Competitive advantage is very rare.
• Most competitors dont have a competitive
  advantage
• Despite
• Good products
• Good customer relations
• Excellent capabilities
• Competitive position is very real.

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Alternate Paths to Outperforming Industry Average
Ind Avg Price
Ind Ave Cost
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• Low cost producers have a cost savings greater
  than its price reduction
• Differentiated producer commands a price premium
  in excess of its added costs

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Geometry of Competition

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

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Positioning Related to Capabilities

• Capabilities drive offerings
• Assets Activities
• -gtCapabilities
• -gtOfferingsA firm must
  have
• Competitive offerings
• Frontier capabilities
• A fit between the two

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Advantage Curve for Steinway and Yamaha
Steinway
Yamaha
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Stuck in the Middle
A
B
C
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Win in the Middle
A
C
B
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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)