Professional Documents
Culture Documents
Business Level Strategy
Business Level Strategy
ACTIONS:
STRATEGY
FORMULATION
Business
Level
Strategy
A
business-‐level
strategy
is
an
integrated
and
coordinated
set
of
commitments
and
acFons
the
firm
uses
to
gain
a
compeFFve
advantage
by
exploiFng
core
competencies
in
specific
product
markets.
ü how
it
intends
to
compete
in
individual
product
markets
ü choices
are
important
because
long-‐term
performance
is
linked
to
a
firm’s
strategies
Choices
ü the
choices
about
how
the
firm
will
compete
can
be
difficult
given
the
complexity
of
successfully
compeFng
in
the
global
economy
Every
firm
must
form
and
use
a
business-‐level
strategy
Other
strategies
• corporate-‐level,
every
firm
• merger
and
may
not
use
acquisi5on,
all
the
• interna5onal,
and
strategies
• coopera5ve
Customers
are
the
founda5on
of
successful
business-‐level
strategies
Returns
earned
from
relaFonships
Strategic
saFsfied
a
group
of
compeFFveness
=
customers
Market SegmentaFon
Industrial
Markets
1.
End-‐use
segments
(idenFfied
by
SIC
code)
2.
Product
segments
(based
on
technological
differences
or
producFon
economics)
3.
Geographic
segments
(defined
by
boundaries
between
countries
or
by
regional
differences
within
them)
4.
Common
buying
factor
segments
(cut
across
product
market
and
geographic
segments)
5.
Customer
size
segments
What:
Determining
Which
Customer
Needs
to
SaFsfy
• Firms
develop
an
acFvity
map
to
show
how
they
integrate
the
ac5vi5es
they
perform.
• Firms
using
the
cost
leadership
strategy
must
understand
that
in
terms
of
sources
of
differenFaFon
that
accompany
the
cost
leader’s
product,
the
customer
defines
acceptable.
• Fit
among
acFviFes
is
a
key
to
the
sustainability
of
compe55ve
advantage
for
all
firms
“Strategic
fit
among
many
acFviFes
is
fundamental
not
only
to
compeFFve
advantage
but
also
to
the
sustainability
of
that
advantage.
It
is
harder
for
a
rival
to
match
an
array
of
interlocked
acFviFes
than
it
is
merely
to
imitate
a
parFcular
sales-‐force
approach,
match
a
process
technology,
or
replicate
a
set
of
product
features.
PosiFons
built
on
systems
of
acFviFes
are
far
more
sustainable
than
those
built
on
individual
acFviFes.”
Human
Resources
Develop
policies
to
ensure
efficient
hiring
Support
and
retenFon
to
keep
costs
low.
FuncFons
Implement
training
to
ensure
high
employee
efficiency
PotenFal
Entrants
New
entrants
must
be
willing
and
able
to
accept
no-‐be]er-‐than
average
returns
unFl
they
gain
the
experience
required
to
approach
the
cost
leader’s
efficiency.
Product
SubsFtutes
Human
Resources
Recruit
highly
qualified
employees
and
invest
in
training
that
provides
them
with
the
latest
technological
knowledge
and
the
capabiliFes
to
provide
breakthrough
services.
-‐
is
an
integrated
set
of
acFons
taken
to
produce
goods
or
services
that
serve
the
needs
of
a
parFcular
compeFFve
segment.
-‐ The
objecFve
of
using
this
strategy
is
to
efficiently
produce
products
with
some
differenFated
features.
1. The
primary
risk
of
this
strategy
is
that
a
firm
might
produce
products
that
do
not
offer
sufficient
value
in
terms
of
either
low
cost
or
differenFaFon.
2. In
such
cases,
the
company
is
“stuck
in
the
middle.”
Firms
stuck
in
the
middle
compete
at
a
disadvantage
and
are
unable
to
earn
more
than
average
returns.
CompeFve
Rivalry
and
CompeFFve
Dynamics
CompeFFve
rivalry
oken
increases
significantly
during
recessions,
and
some
selected
businesses
in
parFcular
industries
actually
experience
heightened
demand.
When
economic
Fmes
are
bad,
many
people
change
their
shopping
behavior.
In
parFcular,
people
buy
what
they
need
in
goods
but
also
search
for
ways
to
escape
their
daily
negaFve
environment
(e.g.,
through
entertainment)
and
find
ways
to
experience
some
form
of
enjoyment
(e.g.,
eat
sweets).
People
frequently
will
reduce
major
expenses
where
possible
(e.g.,
increase
carpooling
to
work,
use
coupons
for
purchases)
but
will
also
spend
extra
money
for
some
enjoyment,
such
as
candy.
We
can
conclude
that
compeFFve
dynamics
within
industries
vary
considerably
and
not
all
are
affected
negaFvely
by
economic
recessions.
Yet,
changes
in
the
market
can
be
quite
challenging
as
markets
are
complex
—new
compeFtors
enter
and
consumer
tastes
change,
with
some
of
the
changes
likely
to
be
long
term,
conFnuing
even
aker
good
economic
Fmes
return.
CompeFtors
-‐
is
the
ongoing
set
of
compeFFve
acFons
and
compeFFve
responses
that
occur
among
firms
as
they
maneuver
for
an
advantageous
market
posiFon.
-‐
occurs
when
firms
compete
against
each
other
in
several
product
or
geographic
markets.
CompeFFve dynamics
Refer
to
all
compeFFve
behaviors—that
is,
the
total
set
of
acFons
and
responses
taken
by
all
firms
compeFng
within
a
market.
From
CompeFtors
to
CompeFFve
Dynamics
A
Model
of
CompeFFve
Rivalry
CompeFtor
Analysis
The
first
step
the
firm
takes
to
be
able
to
predict
the
extent
and
nature
of
its
rivalry
with
each
compeFtor.
A
compeFFve
acFon
is
a
strategic
or
tac5cal
ac5on
the
firm
takes
to
build
or
defend
its
compe55ve
Advantages
or
improve
its
market
posi5on.
A
compeFFve
response
is
a
strategic
or
tac5cal
ac5on
the
firm
takes
to
counter
the
effects
of
a
compe5tor’s
compe55ve
ac5on.
A
strategic
acFon
or
a
strategic
response
is
a
market-‐based
move
that
involve
a
significant
commitment
of
organiza5onal
resources
and
is
difficult
to
implement
and
reverse.
A
tacFcal
acFon
or
a
tacFcal
response
is
a
market-‐based
move
that
is
taken
to
fine-‐tune
a
strategy;
it
involves
fewer
resources
and
is
rela5vely
easy
to
implement
and
reverse.
Likelihood
of
A]ack
First-‐Mover IncenFves
A
first
mover
is
a
firm
that
takes
an
ini5al
compe55ve
ac5on
in
order
to
build
or
defend
its
compe55ve
advantages
or
to
improve
its
market
posi5on.
The
first-‐mover
concept
has
been
influenced
by
the
work
of
the
famous
economist
Joseph
Schumpeter,
who
argued
that
firms
achieve
compe55ve
advantage
by
taking
innova5ve
ac5ons.
In
general,
first
movers
“allocate
funds
for
product
innova5on
and
development,
aggressive
adver5sing,
and
advanced
research
and
development.”
The
first
mover
can
gain…
(1)
The
loyalty
of
customers
who
may
become
commi]ed
to
the
goods
or
services
of
the
firm
that
first
made
them
available,
and
Actor’s ReputaFon
In
the
context
of
compe55ve
rivalry,
an
actor
is
the
firm
taking
an
ac5on
or
a
response
while
reputa#on
is
“the
posi5ve
or
nega5ve
aQribute
ascribed
by
one
rival
to
another
based
on
past
compe55ve
behavior.”
A
posi5ve
reputa5on
may
be
a
source
of
above-‐average
returns,
especially
for
consumer
goods
producers.
Thus,
a
posi5ve
corporate
reputa5on
is
of
strategic
value
and
affects
compe55ve
rivalry.
To
predict
the
likelihood
of
a
compe5tor’s
response
to
a
current
or
planned
ac5on,
firms
evaluate
the
responses
that
the
compe5tor
has
taken
previously
when
aQacked—past
behavior
is
assumed
to
be
a
predictor
of
future
behavior.
Dependence
on
the
Market