Business Level strategies
Levels of strategy
• Corporate strategy (eg. Virgin, Nestle)
Strategic Management
Business‐level strategy
Different ways of competing at the level of the individual Business Unit (SBU)
How can competitive advantage be sustained? Hyper‐competition
– Which industries/markets should we be in?
– How is the corporate portfolio managed?
• Business strategy (eg. Virgin Atlantic, Nestle babyfood)
– Tactics used by an SBU to compete in the market
• Generic strategies and how to sustain these
• Hypercompetition
• Operational strategy
– How resources, processes and employees are configured to deliver business and corporate strategy
Sheena Davies
What is a Strategic Business Unit?
Porter’s generic strategies
If there is an distinct market for the product area/brand/line which requires its own strategy
.
and/or the value‐chain activities are the same or similar
Competitive advantage
Uniqueness
perceived by the customer e.g. Kodak film cameras are in a different SBU to digital cameras because they use
different manufacturing technology even though aimed at same customers through same distribution channels.
Low cost
e.g. Electrolux dishwashers and washing machines are in the same SBU because they use similar technology and are aimed at same customers.
e.g. Ford transit vans and Ford Ka’s are in different SBUs because they are aimed at different markets (even though they may use very similar technology).
Broad
Competitive
Scope
Narrow
The way in which SBUs are configured is very important. The aim is strategic distinctness at the same time as minimizing repetition.
Cost leadership Cost focus Differentiation
Differentiation focus (Michael Porter, 1980, p39)
Generic strategy: cost leadership
Economies of scale and scope
Economies of learning (experience)
Production techniques
Product design
Input costs
Capacity utilization
Managerial efficiency
How do
• Corporate strategy (eg. Virgin, Nestle)
Strategic Management
Business‐level strategy
Different ways of competing at the level of the individual Business Unit (SBU)
How can competitive advantage be sustained? Hyper‐competition
– Which industries/markets should we be in?
– How is the corporate portfolio managed?
• Business strategy (eg. Virgin Atlantic, Nestle babyfood)
– Tactics used by an SBU to compete in the market
• Generic strategies and how to sustain these
• Hypercompetition
• Operational strategy
– How resources, processes and employees are configured to deliver business and corporate strategy
Sheena Davies
What is a Strategic Business Unit?
Porter’s generic strategies
If there is an distinct market for the product area/brand/line which requires its own strategy
.
and/or the value‐chain activities are the same or similar
Competitive advantage
Uniqueness
perceived by the customer e.g. Kodak film cameras are in a different SBU to digital cameras because they use
different manufacturing technology even though aimed at same customers through same distribution channels.
Low cost
e.g. Electrolux dishwashers and washing machines are in the same SBU because they use similar technology and are aimed at same customers.
e.g. Ford transit vans and Ford Ka’s are in different SBUs because they are aimed at different markets (even though they may use very similar technology).
Broad
Competitive
Scope
Narrow
The way in which SBUs are configured is very important. The aim is strategic distinctness at the same time as minimizing repetition.
Cost leadership Cost focus Differentiation
Differentiation focus (Michael Porter, 1980, p39)
Generic strategy: cost leadership
Economies of scale and scope
Economies of learning (experience)
Production techniques
Product design
Input costs
Capacity utilization
Managerial efficiency
How do
References: Look at the environment Henry (2008) Understanding Strategic Management, OUP. Johnson, Scholes and Whittington (2005) Exploring Corporate Strategy, 8th Edition, FTPH. Kim, C and Mauborgne, R (2005) Blue Ocean Strategy, Harvard Business Press, Boston, MA. Porter, M (1980) Competitive Strategy, Free‐Press Porter, M (1996) ‘What is strategy?’, Harvard Business Review,