I. How Do Businesses Compete? （Q1,Q2)
1. Business strategies are primarily concerned with allocating resources across functional activities and product-markets to give the unit a sustainable advantage over its competitors. 2. The unit’s core competencies and resources, together with the customer and competitive characteristics of its industry, determine the viability of any particular competitive strategy. 3. Most SBUs pursue a single competitive strategy—one that best fits their market environments and competitive strengths—across all or most of the product-markets in which they compete. A. Generic Business-Level Competitive Strategies
1. Michael Porter distinguishes three strategies that businesses pursue to gain and maintain competitive advantages in their various product-markets: i. overall cost leadership;
ii. differentiation—building customer perceptions of superior product quality, design, or service; and iii. focus, in which the business avoids direct confrontation with its major competitors by concentrating on narrowly defined market niches. 2. Robert Miles and Charles Snow identified another set of business strategies based on a business’s intended rate of product-market development (Exhibit 9.1). They classify business units into four strategic types: i. Prospectors focus on growth through the development of new products and markets. ii. Defender businesses concentrate on maintaining their positions in established product-markets while paying less attention to new product development. iii. Analyzers attempt to maintain a strong position in their core product-market(s) and also seek to expand into new—usually closely related—product-markets. iv. Reactors are businesses with no clearly defined strategy. 3. Even though both the Porter and Miles and Snow typologies have received popular acceptance and research support, neither is complete by itself. 4. Exhibit 9.2 combines the two typologies to provide a more comprehensive overview of business strategies. 5. It classifies business strategies on two primary dimensions: the unit’s desired rate of product-market development (expansion) and the unit’s intended method of competing in its established product-markets. B. Do the Same Competitive Strategies Work for Single-Business Firms and Start-ups? 1. The same sets of generic competitive strategies are just as appropriate for small firms as for business units within larger ones. 2. However, there is one important difference between single-business and multi-SBU organizations. 3. 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. 4. 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. 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 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. C. Do the Same Competitive Strategies Work for Service Businesses? 1. Basically, services can be thought of as intangibles and goods as tangibles. 2. Services can rarely be experienced in advance of the sale, while goods can be experienced, even tested, before purchase. 3. 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.” 4. The framework used to classify business-level competitive strategies in Exhibit 9.2 is equally valid for service businesses. D. Do the Same Competitive...
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