Even small firms with a single business and only a few related product offerings or start-ups with a single product must decide how they will compete. And just like an SBU in a major corporation such as 3M, their competitive strategies should be tailored to their unique resources and competencies and aimed at securing a sustainable advantage over existing or potential competitors. Therefore, the same set of generic competitive strategies are just as appropriate for small firms as for business units within larger ones. For example, Belvedere vodka—made by a small distillery in Poland—has captured a substantial share of the prestige segment of the North American vodka market by stressing the five-century tradition of its production process and the superior quality of its imported product: in other words, by pursuing a very effective differentiated defender strategy.
However, there is one important difference between single-business and multi-SBU organizations. In smaller single-business firms the distinction between business-level competitive strategy and marketing strategy tends to blur and the two strategies blend into one. Belvedere’s competitive strategy, for instance, is essentially the same as the market positioning for its primary product: a product that offers higher quality than competing brands because it is made with old-fashioned methods and ingredients that have not changed for centuries. And the elements of its marketing strategy all flow from that competitive/ market positioning: a premium price, advertising that stresses the product’s long history and old-fashioned production practices, traditional packaging, and the like.
Another difference applies to entrepreneurial start-ups. Most start-ups do not have the resources to succeed by competing as a “me-too” competitor in a well-established and highly competitive product-market. By definition they do not have an established market position to defend. Therefore, while the taxonomy of competitive strategies is still relevant to entrepreneurial firms, in reality most of them—at least those that stand a reasonable chance of success—begin life as prospectors. They compete primarily by developing a unique product or service that meets the needs and preferences of a customer segment that is not being well served by established competitors. The critical question for a start-up firm, though, is, What happens when the new product matures and competitors arrive on the scene? This and similar issues related to strategic change are examined in more detail later.
SERVICE BUSINESS STRATEGY
What is a service? Basically, services can be thought of as intangibles and goods as tangibles. The former can rarely be experienced in advance of the sale, while the latter can be experienced, even tested, before purchase. Using this distinction, a service can be defined as “any activity or benefit that one party can offer to another that is essentially intangible and that does not result in the ownership of anything. Its production may or may not be tied to a physical product.”
We typically associate services with nonmanufacturing businesses, even though service is often an indispensable part of a goods producer’s offering. Services such as applications engineering, system design, delivery, installation, training, and maintenance can be crucial for building long-term relationships between manufacturers and their customers, particularly in consumer durable and industrial products businesses. Thus, almost all businesses are engaged in service to some extent.
\Many organizations are concerned with producing and marketing a service as their primary offering rather than as an adjunct to a physical product. These organizations include public-sector and not-for-profit service organizations, such as churches, hospitals, universities, and arts organizations. The crucial question is this: To be successful, must service organizations employ different...