Chapter 3

Business Strategies
and Their Marketing
Implications

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Strategic Business Units (SBUs)

• Components of a firm engaged in multiple

industries or businesses
• Independently decide objectives, markets, and
competitive strategies to be pursued
• Should be consistent with the firm’s:
• Mission
• Objectives
• The allocation of resources

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Characteristics of SBUs

• Homogeneous set of markets with limited

number of related technologies
• Unique set of product-markets
• Control over factors necessary for successful
performance
• Responsibility for their own profitability

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Dimensions That Define Individual SBUs

• Technical compatibility
• Similarity in the customer needs
• Similarity in the personal characteristics of
customers in the target markets

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Business-Unit Objectives

• Derived from the corporate objective and vary

according to:
• Attractiveness of the industries
• Strength of the competitive positions within those
industries
• Resource allocation decisions by corporate
management

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Allocating Resources within the Business Unit

• Firms use:
• Similar economic value
• Value-based planning
• Portfolio analysis tools

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Generic Business-Level Competitive Strategies

• Michael Porter distinguishes three strategies

• Overall cost leadership
• Differentiation
• Focus
• Robert Miles and Charles Snow classify business
units into four strategic types
• Prospectors
• Defenders
• Analyzers
• Reactors
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Exhibit 3.1 - Definitions of Miles and Snow’s Four Business Strategies

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Exhibit 3.1 - Definitions of Miles and Snow’s Four Business Strategies

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Exhibit 3.2 - Combined Typology of Business-Unit Competitive Strategies

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Single-Business Firms and Start-ups

• Single-business firms
• Distinction between business-level competitive
strategy and marketing strategy tends to blur
• Two strategies blend into one
• Entrepreneurial start-ups
• Do not have an established market position to
defend

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Service Businesses

• Service: Any activity or benefit 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
• Almost all businesses are engaged in service to
some extent

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The Impact of the Internet

• Changed the way firms compete

• Is primarily a communications channel
• Makes it easier for firms to:
• Customize their offerings and personalize their
relationships with their

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Exhibit 3.4 - How Business Strategies Differ in Scope,
Objectives, Resource Deployments, and Synergy

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Exhibit 3.4 - How Business Strategies Differ in Scope,
Objectives, Resource Deployments, and Synergy

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 Exhibit 3.5 - Environmental Factors Favorable to
Different Business Strategies

External Prospector Analyzer Differentiated Low-Cost

Factors Defender Defender

Industry and • Industry in • Industry in • Industry in • Industry in

Market early growth late decline stage decline stage
stage growth • Sales primarily • Sales primary
• Potential • Some due to repeat due to repeat
customer potential purchases purchase
segments segments
unidentified may be
undeveloped

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 Exhibit 3.5 - Environmental Factors Favorable to
Different Business Strategies

External Prospector Analyzer Differentiated Low-Cost

Factors Defender Defender

Technology • Newly • Basic technology • Basic • Basic

emerging well technology fully technology
technology developed but developed and fully
• Applications still evolving stable developed
undeveloped • Product • Major and stable
modifications modifications • Major
and modifications
improvements

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 Exhibit 3.5 - Environmental Factors Favorable to
Different Business Strategies

External Prospector Analyzer Differentiated Low-Cost

Factors Defender Defender

Competition • Few • Large • Small to • Small to

established number of moderate moderate
competitors competitors number of well- number of
• Industry • Industry established well-
structure still structure still competitors established
emerging evolving • Industry competitors
• Single • One or more structure stable • Industry
competitor competitors • Maturity of structure
holds hold large markets stable
commanding shares in • Maturity of
share major markets
segments

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 Exhibit 3.5 - Environmental Factors Favorable to
Different Business Strategies

External Prospector Analyzer Differentiated Low-Cost

Factors Defender Defender

Business’s • SBU has • SBU has good • SBU has no • SBU has
relative strong R&D, R&D, product outstanding superior
strengths product engineering, and strengths in sources of
engineering marketing R&D or product supply
and research engineering and/or
marketing capabilities • Costs are higher process
research and • Low-cost position • SBU’s engineering
marketing or strong sales, outstanding and
capabilities marketing, strengths are in production
distribution process capabilities
engineering and
quality control

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Exhibit 3.7 - Differences in Marketing Policies and
Program Components across Businesses Pursuing
Different Strategies

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Exhibit 3.7 - Differences in Marketing Policies and
Program Components across Businesses Pursuing
Different Strategies

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Changing Business Strategies for a Changing Market

• Effective implementation of different business

strategies requires different:
• Functional competencies and resources
• Organizational structures
• Decision-making and coordination processes
• Reward systems
• Personnel

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