Understanding Business Strategy

1. Understanding Business Strategy 1 Part 3: Strategy Chapter 5: Business-Level Strategy

2. Less partnershipsmore relationships

3. Business-Level Strategies A business-level strategy is an action plan the firm develops to describe how it will compete in its chosen industry or market segment. How to compete day-to-day Wal-Mart An effective business-level strategy has a clear statement of the value to be created for customers. 3

4. Types of Business-Level Strategies 4

5. Types of Business-Level Strategies Firms choose from five, generic, business-level strategies Cost leadership Differentiation Focused cost leadership Focused differentiation Integrated cost leadership/differentiation Two key dimensions: competitive advantage & competitive scope 5

6. Types of Business-Level Strategies A firm’s capabilities and core competencies enable it either to produce standardized products at lower costs than those of their competitors or to produce unique products that differ from competitors’ products that create value for customers. Examples: Procter & Gamble’s Tide and Porsche’s 911 Carrera 6

7. Types of Business-Level Strategies By standardized products, we mean products that are widely available and have a large customer demand. E.g. automotive tires Unique products have features different from or in addition to the standardized product’s features. E.g. Guinness Beer 7

8. Cost Leadership Strategy an action plan the firm develops to produce goods or services at the lowest cost Price its product lower than competitors Gain a larger share of its target market Firms using a cost leadership strategy commonly have economies of scale because of the large quantities of standardized products produced. 8

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