Chapter 6: Business-Level Strategy

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

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Chapter 6: Business-Level Chapter 6: Business-Level StrategyStrategy

Text byCharles W. L. HillGareth R. Jones

Multimedia Slides byMilton M. Pressley

Univ. of New Orleans


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PreviewPreview

What Is Business-Level Strategy?What Is Business-Level Strategy? Choosing a Generic Business-Choosing a Generic Business-

Level StrategyLevel Strategy Strategic Groups and Business-Strategic Groups and Business-

Level StrategyLevel Strategy Choosing an Investment Strategy Choosing an Investment Strategy

at the Business Levelat the Business Level


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What Is Business-Level What Is Business-Level Strategy?Strategy?

• Business-Level Strategy DefinedBusiness-Level Strategy Defined• Customer NeedsCustomer Needs• Product DifferentiationProduct Differentiation• Market SegmentationMarket Segmentation• Deciding on Distinctive Deciding on Distinctive

CompetenciesCompetencies


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Table 6.1: Product/Market/ Distinctive-Competency Choices and Generic Competitive Strategies

Choosing a Generic Choosing a Generic Business-Level StrategyBusiness-Level Strategy

Differentiation Focus

Low(Principally by

Price)Low

(Mass Market)

Manufacturingand MaterialsManagement

CostLeadership

ProductDifferentiation

MarketSegmentation

DistinctiveCompetency


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Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)

Advantages and Disadvantages Advantages and Disadvantages of a of a Cost LeadershipCost Leadership Strategy Strategy Related to Threats From:Related to Threats From:– CompetitorsCompetitors– Powerful SuppliersPowerful Suppliers– Powerful BuyersPowerful Buyers– Substitute ProductsSubstitute Products– New EntrantsNew Entrants


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Choosing A Generic Business-Choosing A Generic Business-Level Strategy Level Strategy (Continued)(Continued)


Low(Principally by

Price)

High(Principally byUniqueness)

Low(Mass Market)

High(Many Market

Segments)Manufacturingand MaterialsManagement

R&D, Salesand Marketing

CostLeadership


MarketSegmentation



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• QualityQuality• InnovationInnovation• Responsiveness to CustomersResponsiveness to Customers


Product Differentiation Is Achieved Product Differentiation Is Achieved Principally Through:Principally Through:


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Advantages and Disadvantages Advantages and Disadvantages of the of the DifferentiationDifferentiation Strategy Strategy Related to Threats From:Related to Threats From:– CompetitorsCompetitors– Powerful SuppliersPowerful Suppliers– Powerful BuyersPowerful Buyers– Substitute ProductsSubstitute Products– New EntrantsNew Entrants


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Cost Leadership and DifferentiationCost Leadership and Differentiation

CostCostLeadershipLeadership

BenefitsBenefits

DifferentiationDifferentiationBenefitsBenefits


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Cost Leadership and DifferentiationCost Leadership and Differentiation

CostCostLeadershipLeadership

BenefitsBenefits

DifferentiationDifferentiationBenefitsBenefits

FlexibleFlexibleManufacturingManufacturingTechnologiesTechnologies

CombinedCombinedBenefitsBenefits


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MarketSegmentation



High(Principally byUniqueness)

Low to High(Price or

Uniqueness)High

(Many MarketSegments)

Low(One or a Few

Segments)

R&D, Sales andMarketing

Any Kind ofDistinctive

Competency

Low(Principally by

Price)

Low(Mass Market)

Manufacturingand MaterialsManagement

CostLeadership


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Figure 6.1: Types of Business-Level StrategiesOffers Products toOnly One Group

of Customers

Offers Products toMany Kinds of

Customers

Offers Low-Priced Products

to Customers

Offers Uniqueor Distinctive Products toCustomers

Focused Cost-Leadership

Strategy

Focused Differentiation

Strategy

DifferentiationStrategy

Cost-Leadership

Strategy



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A A FocusedFocused Company’s Company’s Advantages and Disadvantages Advantages and Disadvantages Related to Threats From:Related to Threats From:– CompetitorsCompetitors– Powerful SuppliersPowerful Suppliers– Powerful BuyersPowerful Buyers– Substitute ProductsSubstitute Products– New EntrantsNew Entrants


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STUCKIN THEMIDDLE

MY FIRM HASA COMPETITIVE

ADVANTAGE

MY FIRM HASA COMPETITIVE

ADVANTAGE



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Strategic Groups and Strategic Groups and Business-Level StrategyBusiness-Level Strategy

• Implications for Business-Level Implications for Business-Level StrategyStrategy– Immediate Competitors Are Companies Immediate Competitors Are Companies

Pursuing Same Strategy in the Same Pursuing Same Strategy in the Same Strategic GroupStrategic Group

– Different Strategic Groups Can Have A Different Strategic Groups Can Have A Different Standing with Respect to Each Different Standing with Respect to Each of Porter’s Five Competitive Forcesof Porter’s Five Competitive Forces

• First Mover AdvantageFirst Mover Advantage


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Choosing an Investment Choosing an Investment Strategy at the Business LevelStrategy at the Business Level• Investment Strategy DefinedInvestment Strategy Defined• Competitive PositionCompetitive Position

– Market ShareMarket Share– Distinctive CompetenciesDistinctive Competencies

• Life Cycle EffectsLife Cycle Effects


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Table 6.2: Choosing an Investment Strategy at the Business Level

Choosing An Investment Strategy at Choosing An Investment Strategy at the Business Level the Business Level (Continued)(Continued)

Stage of IndustryLife Cycle

Strong CompetitivePosition

Weak CompetitivePosition

Embryonic Share Building Share Building

Growth Growth Market Concentration

Shakeout Share Increasing Market Concentrationor Harvest/Liquidation

Maturity Hold-and-Maintain orProfit

Harvest orLiquidation/Divestiture

Decline Market Concentra-tion, Harvest, orAsset Reduction

Turnaround,Liquidation or

Divestiture


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Chapter SummaryChapter Summary

WHAT IS BUSINESS-LEVEL

STRATEGY?

CHOOSING A GENERIC BUSINESS-

LEVEL STRATEGY

STRATEGIC GROUPS AND

BUSINESS-LEVEL STRATEGY

CHOOSING AN INVESTMENT

STRATEGY AT THE BUSINESS LEVEL

Chapter 6: Business-Level Strategy

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