Business Strategies and Their Marketing Implications

1. Business Strategies and Their Marketing Implications 3

2. Ideal Characteristics of SBUs • A Homogeneous set of markets to serve with limited number of related technologies • A Unique set of product-markets • Control over factors necessary for successful performance • Responsibility for their own profitability

3. Dimensions That Define Individual SBUs • Technical compatibility • Similarity in the customer needs or the product benefits sought by customers in the target markets. • Similarity in the personal characteristics or behavior patterns of customers in the target markets.

4. 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

5. Definitions of Miles and Snow’s Four Business Strategies • Prospector • Focus on growth through the development of new products and markets. • Defender • Concentrate on maintaining positions in established product-markets while paying less attention to new product development. • Analyzer • Attempt to maintain a strong position in its core product-market(s) • Seek to expand into new product-markets. • Reactors • Businesses with no clearly defined strategy.

6. Emphasis on new product-market growth Heavy emphasis No emphasis Prospector Analyzer Defender Reactor Units with strong core bus.; actively seeking to expand into rel. prod-mkts with differentiated offerings Units primarily concerned with maintaining a differentiated position in mature markets Units with no clearly defined product-market development or competitive strategy Units primarily concerned with attaining growth through aggressive pursuit of new product-market opportunities Units with strong core bus.; actively seeking to expand into rel. prod-mkts with low-cost offerings Units primarily concerned with maintaining a low-cost position in mature markets Exhibit 3.2Combined Typology of Business-Unit Competitive Strategies Differentiation Competitive strategy Cost leadership

7. Emphasis on new product-market growth Heavy emphasis No emphasis Prospector Analyzer Defender Reactor Units with strong core bus.; actively seeking to expand into rel. prod-mkts with differentiated offerings Units primarily concerned with maintaining a differentiated position in mature markets Units with no clearly defined product-market development or competitive strategy Units primarily concerned with attaining growth through aggressive pursuit of new product-market opportunities Units with strong core bus.; actively seeking to expand into rel. prod-mkts with low-cost offerings Units primarily concerned with maintaining a low-cost position in mature markets Let’s combine the two perspectives and examine the book retailing industry Differentiation Competitive strategy Cost leadership

8. Service Businesses • What is a service? • 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.” • Services • Can be thought of as intangibles and goods as tangibles. • Can rarely be experienced in advance of the sale, while goods can be experienced, even tested, before purchase.

9. The Impact of the Internet • The Internet: • Is primarily a communications channel. • Makes it easier for buyers and sellers to compare prices. • Reduces the number of middlemen necessary between manufacturers and end users. • Cuts transaction costs. • Improves the functioning of the price mechanism. • In addition, it makes it easier for firms to customize their offerings and personalize their relationships with their customers.

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

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

12. Environmental Factors Favorable to Different Business Strategies

13. Environmental Factors Favorable to Different Business Strategies (continued)

14. Environmental Factors Favorable to Different Business Strategies (continued)

15. Environmental Factors Favorable to Different Business Strategies (continued)

16. Differences in Marketing Policies and Program Components across Businesses Pursuing Different Strategies

17. Differences in Marketing Policies and Program Components across Businesses Pursuing Different Strategies (continued)

18. 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 • It is very difficult for an entire SBU to make a successful transition from one basic strategy to another.