6-1
Chapter 6: Business-Level
Strategy
Text by
Charles W. L. Hill
Gareth R. Jones
Multimedia Slides by
Milton M. Pressley
Univ. of New Orleans
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-2
Preview
What Is Business-Level Strategy?
Choosing a Generic BusinessLevel Strategy
Strategic Groups and BusinessLevel Strategy
Choosing an Investment Strategy
at the Business Level
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-3
What Is Business-Level
Strategy?
•
•
•
•
•
Business-Level Strategy Defined
Customer Needs
Product Differentiation
Market Segmentation
Deciding on Distinctive
Competencies
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
Choosing a Generic
Business-Level Strategy
6-4
Table 6.1: Product/Market/ Distinctive-Competency
Choices and Generic Competitive Strategies
Cost
Leadership
Differentiation
Focus
Low
Product
(Principally by
Differentiation
Price)
Low
Market
(Mass Market)
Segmentation
Distinctive
Competency
Manufacturing
and Materials
Management
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-5
Choosing a Generic BusinessLevel Strategy (Continued)
Advantages and Disadvantages
of a Cost Leadership Strategy
Related to Threats From:
–
–
–
–
–
Competitors
Powerful Suppliers
Powerful Buyers
Substitute Products
New Entrants
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-6
Choosing A Generic BusinessLevel Strategy (Continued)
Table 6.1: Product/Market/ Distinctive-Competency
Choices and Generic Competitive Strategies
Cost
Leadership
Differentiation
Focus
Low
High
(Principally by (Principally by
Price)
Uniqueness)
Low
High
Market
(Mass Market) (Many Market
Segmentation
Segments)
Manufacturing
R&D, Sales
Distinctive
and Materials and Marketing
Competency
Management
Product
Differentiation
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-7
Choosing a Generic BusinessLevel Strategy (Continued)
Product Differentiation Is Achieved
Principally Through:
• Quality
• Innovation
• Responsiveness to Customers
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-8
Choosing a Generic BusinessLevel Strategy (Continued)
Advantages and Disadvantages
of the Differentiation Strategy
Related to Threats From:
–
–
–
–
–
Competitors
Powerful Suppliers
Powerful Buyers
Substitute Products
New Entrants
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
Choosing a Generic BusinessLevel Strategy (Continued)
6-9
Cost Leadership and Differentiation
Cost
Leadership
Benefits
Differentiation
Benefits
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
Choosing a Generic BusinessLevel Strategy (Continued)
6-10
Cost Leadership and Differentiation
Flexible
Manufacturing
Technologies
Cost
Leadership
Benefits
Combined
Benefits
Differentiation
Benefits
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-11
Choosing a Generic BusinessLevel Strategy (Continued)
Table 6.1: Product/Market/ Distinctive-Competency
Choices and Generic Competitive Strategies
Cost
Leadership
Low
(Principally by
Price)
Low
(Mass Market)
Differentiation
Focus
High
(Principally by
Uniqueness)
High
(Many Market
Segments)
Low to High
(Price or
Uniqueness)
Low
Market
(One or a Few
Segmentation
Segments)
Manufacturing R&D, Sales and Any Kind of
Distinctive
and Materials
Distinctive
Marketing
Competency
Management
Competency
Product
Differentiation
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
Choosing a Generic BusinessLevel Strategy (Continued)
6-12
Figure 6.1: Types of Business-Level Strategies
Offers Products to
Only One Group
of Customers
Offers Products to
Many Kinds of
Customers
Offers LowPriced Products
to Customers
Focused CostLeadership
Strategy
CostLeadership
Strategy
Offers Unique
or Distinctive
Products to
Customers
Focused
Differentiation
Strategy
Differentiation
Strategy
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-13
Choosing a Generic BusinessLevel Strategy (Continued)
A Focused Company’s
Advantages and Disadvantages
Related to Threats From:
–
–
–
–
–
Competitors
Powerful Suppliers
Powerful Buyers
Substitute Products
New Entrants
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-14
Choosing a Generic BusinessLevel Strategy (Continued)
MY FIRM HAS
A COMPETITIVE
ADVANTAGE
MY FIRM HAS
A COMPETITIVE
ADVANTAGE
STUCK
IN THE
MIDDLE
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-15
Strategic Groups and
Business-Level Strategy
• Implications for Business-Level
Strategy
– Immediate Competitors Are Companies
Pursuing Same Strategy in the Same
Strategic Group
– Different Strategic Groups Can Have A
Different Standing with Respect to
Each of Porter’s Five Competitive
Forces
• First Mover Advantage
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-16
Choosing an Investment
Strategy at the Business Level
• Investment Strategy Defined
• Competitive Position
– Market Share
– Distinctive Competencies
• Life Cycle Effects
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
Choosing An Investment Strategy at
the Business Level (Continued)
6-17
Table 6.2: Choosing an Investment Strategy
at the Business Level
Stage of Industry Strong Competitive
Life Cycle
Position
Share Building
Embryonic
Growth
Growth
Shakeout
Share Increasing
Maturity
Decline
Weak Competitive
Position
Share Building
Market Concentration
Market Concentration
or Harvest/Liquidation
Hold-and-Maintain or
Harvest or
Profit
Liquidation/Divestiture
Market ConcentraTurnaround,
tion, Harvest, or
Liquidation or
Asset Reduction
Divestiture
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-18
Copyright 1998 by Houghton Mifflin Company. All rights reserved.