Summary of Business-Level Strategy

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Management Chapter 6
Levels of strategy:

Superior performance
Competitive advantages
Corporate strategy---what business/industry
Business strategy—how to compete
Functional strategy---execute to support
Business strategic goals by @ all department

1. Superior performance: the ability to generate high profitability and increase profits over time

High profitability

Superior performance
Requires eg. Specific strategy,
Technology, capabilities etc

Growth in profits over time

2. Competitive advantage: Advantage obtained when a firm outperforms its rivals with a specific strength
Distinctive competency: A set of unique strength which is key to the company’s competitiveness (apple’s innovation strength, Li& Fung’s One-stop shop model). It is the mother or host of related competitive advantages. A unique strength that rivals lack.

(E.g. Dell’s fast order fulfillment system, Toyota’s JIT, Starbuck’s shop atmosphere)
Sustainable advantage: A distinctive competency that rivals cannot easily match or imitate
Depends on:
Value-does it enable a company to exploit a business opportunity (e.g. user friendly iphone)
Imitability- how costly to copy it
(-Barrier to imitation: Factors that make it difficult for a firm to imitate the competitive position of a rival
- Legacy constraints: Prior investments in a particular way of doing business that are difficult to change and limit a firm’s ability to imitate a successful rival
Substitutability- how likely it will be substituted by another product
Organization- does the company’s infrastructure (policies, systems and culture) support the maintenance of the advantage 3. Business-level Strategy: Strategy concerned with deciding how a firm should compete in the industries in which it has elected to participate A. Competitive theme: differentiation or low cost

1) Low-cost strategy: Focusing managerial energy and attention on doing everything possible to lower the costs of the organization. (Oasis Airline) economies of scale
Lower costs

Economies of scale
Higher profitability and profit growth
Lower prices

Increased demand

2) Differentiation strategy: Increasing the value of a product offering in the eyes of consumers.( Rolex watches. LV handbags) B. Segmenting the market: Markets are characterized by different types of consumers. (E.g. Costco, focus on value-conscious customer, high-end products, differ from Wal-mart) Consumer markets segmentation characteristics: * Geographic

* Demographic
* Psychographic
* Behavioralistic

Higher profitability and profit growth
Successful differentiation
Increase prices more than costs
Economies of scale and lower costs

Moderate or no price increase
Increased demand

C. Choosing segments to serve:
Focus Strategy: Serving a limited number of segments.
Broad market strategy: Serving the entire market.

D. Segmentation and strategy
Broad low cost
Broad differentiation
Focused low cost
Focused differentiation
Segments served

E. The low cost-differentiation frontier---efficiency frontier high


Low cost

Low cost

Valued innovation: using innovation to offer more value at a lower cost than competitors Implementing business-level strategy
4. Implementing business-level
A. Configuring the value chain:
* Primary activities: Activities having to do with the design, creation, and delivery of the product; its marketing; and its support and after sales services. * Support activities: Activities that provide inputs that allow the primary activities to occur, such as procurement function, human resources function, information systems. * Organization architecture: The operations of the firm are embedded within the internal organization...
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