Business Level Strategies

Strategic Management
 Business Level Strategies
• Business-level strategy
addresses the question of
how a firm will compete
in a particular industry.
• It is a general way of
positioning a firm within
an industry.
Business Level Strategies
 Competitive dimensions
• According to Porter, two
competitive dimensions
are the keys to business-
level strategy.
• The first dimension is a
firm’s source
of competitive
advantage.
• The second dimension is
firms’ scope
 Cost Leadership
• Perhaps the most famous
cost leader is Walmart,
which has used a cost
leadership strategy to
become the largest
company in the world.
• The firm’s advertising
slogans such “Alway
as
s Low Prices” and
“Save
Money. Live Better”
communicate Walmart’s
emphasis on price slashing
to potential customers.
 Common characteristics
• The ability to charge low prices
and still make a profit is
challenging.
• Cost leaders manage to do so
by emphasizing efficiency.
• As part of the effort to be
efficient, most cost leaders
spend little on advertising,
market research, or research
and development.
• Many cost leaders rely on
economies of scale to achieve
efficiency. Economies of scale
are created by selling more
items.
 Examples of Cost leadership
• McDonald's -
has been McDonald's
successful with this
extremely
strategy by offering basic
fast-food meals at low
prices. They able to
keep
are prices low through a
division of labor that allows
it to hire and train
inexperienced employees
rather than trained cooks.
 Examples of Cost leadership
• Ikea -The
furniture
Swedish retailer Ikea
revolutionized the
furniture industry
offering cheap but stylish
by
furniture. Ikea is able to
keep its prices low by
sourcing its products in
low-wage countries and
by offering a very basic
level of service.
 Examples of Cost leadership
• Southwest Airlines -
Southwest attempts to
offer the lowest prices
possible by being more
efficient than traditional
airlines. They minimize
the time that their planes
spend on the tarmac in
order to keep them flying
and to keep profits up.
 Differentiation
• A firm following
a
differentiation strateg
attempts to y
customer to convinc
pay
spremium pricea for eits
good
or services providing
by unique and
features. desirable
 Examples of Differentiation
• Apple - Steve Jobs said
this about the difference
between Dell and Apple:
Apple and Dell are the
only ones in this industry
making money. They
make it being Wal-
by Mart. make it by
We
innovation.
Examples of Differentiation
Examples of Differentiation
Examples of Differentiation
 Focused cost leadership strategy
• A focused cost leadership strategy
requires competing based on
price to target a narrow market.
• A firm that follows this strategy
does not necessarily charge the
lowest prices in the industry.
Instead, it low prices
relative charges to firms that
compete within the target
market. other
 Examples of Focused cost leadership

Redbox uses vending machines placed outside grocery stores and other retail
outlets to rent DVDs of movies for $1.
 Focused Differentiation strategy
• A focused differentiation
strategy requires offering
unique features that fulfill the
demands of a narrow market.
• Some firms using focuse
a
differentiation d
concentrate their effortsstrateg
on a
particular sales channel,
y such
as selling over the Internet
only.
 Examples of Focused Differentiation

The dedication of Mercedes-Benz to cutting-edge technology, styling, and

safety innovations has made the firm’s vehicles prized by those who are rich
enough to afford them.