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STRATEGIC MANAGEMENT

AND BUSINESS POLICYTHIRD EDITION

Chapter 8Business-level strategies

AZHAR KAZMI

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Learning objectives Examine how corporate-level strategies, business definition, and

business model act as the foundations for business strategies Observe how industry structure and positioning of the firm in the

industry help to determine the competitive advantage Discuss and exemplify achieving cost leadership, differentiation,

and focus generic business strategies, conditions under which each

of these are used, their benefits and risks Describe the two types of tactics used for business strategies:

timing and market location Explain business strategies for four different industry conditions Deliberate on leveraging home country advantages and

organisation-specific advantages for international businessstrategies

Discuss the role of digitalisation for cost leadership, differentiation,and focus business strategies 

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Foundations of business strategies

Business strategies are the courses of action adopted by an organisation for eachof its businesses separately to serveidentified customer groups and provide

value to the customer by satisfaction of their needs.

Corporate-level strategies lay down the framework inwhich business strategies operate.

The function of corporate-level strategy is to deal with

a portfolio of businesses in such a manner that theoverall returns are optimised. Business definition is at the core of business strategies.

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Choice of competitive strategy

Industry structure based on fivecompetitive forces: the threat of new 

entrants; the threat of substitute products or 

services; the bargaining power of suppliers; thebargaining power of buyers; and the rivalry among the existing competitors in an industry 

Positioning of firm in the industry Competitive advantage

Competitive scope

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Generic business strategies

Costleadership

Differentiation

FocussedCost

leadership

Focusseddifferentiation

Broadtarget

Narrowtarget

Low-costproducts/services

Differentiatedproducts/services

COMPETITIVE ADVANTAGE

   C   O   M   P   E   T   I   T   I   V

   E

   S   C   O   P   E

Adapted from M.E. Porter: Competitive Advantage: Creating and Sustaining Superior Performance New York: Free Press, 1985, p. 12.

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Cost leadership business strategy

When the competitive advantage of anorganisation lies in lower cost of productsor services relative to what the competitors

have to offer, it is termed as costleadership.

Achieving cost leadership

Conditions under which cost leadership strategy

is used Benefits and risks of cost leadership strategy 

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Differentiation business strategy

When the competitive advantage of anorganisation lies in special featuresincorporated into the product / service

which is demanded by the customers whoare willing to pay for it then the strategyadopted is the differentiation businessstrategy.

Achieving differentiation Conditions under which differentiation is used

Benefits and risks of differentiation strategy 

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Focus business strategy

Focus business strategies essentiallyrely on either cost leadership ordifferentiation but cater to a narrowsegment of the total market.

Achieving focus

Conditions under which focus strategies are

used Benefits and risks of focus strategies

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Tactics for business strategies

Timing tactics First movers and late movers

Advantages and disadvantages of being a first

mover

Market location tactics Market leader

Market challenger Market follower

Market nichers

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Business strategies under differentindustry conditions

TIME

Embryonic Growth Maturity Decline

   M   A   R   K   E   T   S   I   Z   E

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Business strategies

Business strategies and internationalisation Leveraging home country advantages for businesses

Leveraging organisation specific advantages for

businesses Business strategies and digitalisation Digitalisation and competitive advantage

Digitalisation and cost leadership

Digitalisation and differentiation

Digitalisation and focus