Business-Level

Strategy
 We’ll cover
• Levels of Strategy
• Business Level Strategy
• Reach, Richness, and Affiliation
• Porter’s generic strategies
According to Michael Porter,
the essence of business-level strategy
is “to perform activities differently or
to perform different activities than
rivals.”
The who, what, and how of selecting a
business-level strategy are
determined when a firm establishes
(4)who will be served;
(5)what needs those target customers
have that it will satisfy; and
(3) how those needs will be satisfied.
Managing Relationships With
Customers
• Customer relationships are strengthened
by offering them superior value
– help customers to develop a new
competitive advantage
– enhance the value of existing
competitive advantages
• Successful companies chart new
competitive space in order to serve new
customers as they simultaneously try to
find new ways to better server existing
customers
 Managing Relationships With
Customers
• Establish a competitive advantage along
these dimensions:
Reach
– the firm’s access and connection to
customers
Richness
– the depth and detail of the two-way flow
of information between the firm and
customers
Affiliation
– facilitating useful interactions with
 The Central Role of
Customers
In selecting a business-level
strategy, the firm determines
1. who it will serve
2. what needs those target
customers have that it will
satisfy
3. how those needs will be
satisfied
 Basis for Customer
Segmentation

Customers
Consumer Industrial
Markets Markets
 Core Competencies and Strategy

The resources and capabilities that have

Core been determined to be a source of
competencies competitive advantage for a firm over its
rivals

An integrated and coordinated set of

Strategy actions taken to exploit core competencies
and gain a competitive advantage

Actions taken to provide value to customers

Business-level and gain a competitive advantage by
strategy exploiting core competencies in specific,
individual product markets
 Business-Level Strategy
An integrated and coordinated set of
commitments and actions the firm uses to
gain a competitive advantage by exploiting
core competencies in specific product
markets
Key Issues
•What good or service to offer customers
•How to manufacture or create the good or
service
•How to distribute the good or service in the
marketplace
 Types of Business-Level
Strategies
• Business-level strategies are
intended to create differences
between the firm’s position
relative to those of its rivals
• To position itself, the firm must
decide whether it intends to
perform activities differently or
to perform different activities as
compared to its rivals
Porter’s Generic Strategies
Competitive Advantage
Cost Uniqueness
Cost Differentiation
Broad Leadershi
target
Competitive Scope

p
Integrated
Cost
Leadershi
Narrow

p/
target

Differentia
Focused tion Focused
Differentiati
Cost
on
Leadershi 11
 Cost Leadership Strategy
An integrated set of actions designed
to produce or deliver goods or services
at the lowest cost, relative to
competitors with features that are
acceptable to customers
– relatively standardized products
– features acceptable to many
customers
– lowest competitive price
 Cost Leadership Strategy

What are the cost saving actions

required by this strategy ?
 How to Obtain a Cost
Advantage
Determine Reconfigure, if
and control needed

Cost DriversValue Chain

• Alter production process • New raw material

• Change in automation • Forward integration
• New distribution channel
• Backward integration
• New advertising media • Change location
• Direct sales in relative to
place of indirect suppliers or buyers
sales
 Questions Leading to
Lower Costs
1. How can an activity be performed
differently or even eliminated?
2. How can a group of linked value
activities be regrouped or reordered?
3. How might coalitions with other firms
lower or eliminate costs?