chapter 6: business-level strategy
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Copyright 1998 by Houghton Mifflin Company. All rights reserved.
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Chapter 6: Business-Level Chapter 6: Business-Level StrategyStrategy
Text byCharles W. L. HillGareth R. Jones
Multimedia Slides byMilton M. Pressley
Univ. of New Orleans
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-2
PreviewPreview
What Is Business-Level Strategy?What Is Business-Level Strategy? Choosing a Generic Business-Choosing a Generic Business-
Level StrategyLevel Strategy Strategic Groups and Business-Strategic Groups and Business-
Level StrategyLevel Strategy Choosing an Investment Strategy Choosing an Investment Strategy
at the Business Levelat the Business Level
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
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What Is Business-Level What Is Business-Level Strategy?Strategy?
• Business-Level Strategy DefinedBusiness-Level Strategy Defined• Customer NeedsCustomer Needs• Product DifferentiationProduct Differentiation• Market SegmentationMarket Segmentation• Deciding on Distinctive Deciding on Distinctive
CompetenciesCompetencies
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
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Table 6.1: Product/Market/ Distinctive-Competency Choices and Generic Competitive Strategies
Choosing a Generic Choosing a Generic Business-Level StrategyBusiness-Level Strategy
Differentiation Focus
Low(Principally by
Price)Low
(Mass Market)
Manufacturingand MaterialsManagement
CostLeadership
ProductDifferentiation
MarketSegmentation
DistinctiveCompetency
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
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Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)
Advantages and Disadvantages Advantages and Disadvantages of a of a Cost LeadershipCost Leadership Strategy Strategy Related to Threats From:Related to Threats From:– CompetitorsCompetitors– Powerful SuppliersPowerful Suppliers– Powerful BuyersPowerful Buyers– Substitute ProductsSubstitute Products– New EntrantsNew Entrants
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
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Table 6.1: Product/Market/ Distinctive-Competency Choices and Generic Competitive Strategies
Choosing A Generic Business-Choosing A Generic Business-Level Strategy Level Strategy (Continued)(Continued)
Differentiation Focus
Low(Principally by
Price)
High(Principally byUniqueness)
Low(Mass Market)
High(Many Market
Segments)Manufacturingand MaterialsManagement
R&D, Salesand Marketing
CostLeadership
ProductDifferentiation
MarketSegmentation
DistinctiveCompetency
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-7
• QualityQuality• InnovationInnovation• Responsiveness to CustomersResponsiveness to Customers
Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)
Product Differentiation Is Achieved Product Differentiation Is Achieved Principally Through:Principally Through:
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-8
Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)
Advantages and Disadvantages Advantages and Disadvantages of the of the DifferentiationDifferentiation Strategy Strategy Related to Threats From:Related to Threats From:– CompetitorsCompetitors– Powerful SuppliersPowerful Suppliers– Powerful BuyersPowerful Buyers– Substitute ProductsSubstitute Products– New EntrantsNew Entrants
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-9
Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)
Cost Leadership and DifferentiationCost Leadership and Differentiation
CostCostLeadershipLeadership
BenefitsBenefits
DifferentiationDifferentiationBenefitsBenefits
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-10
Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)
Cost Leadership and DifferentiationCost Leadership and Differentiation
CostCostLeadershipLeadership
BenefitsBenefits
DifferentiationDifferentiationBenefitsBenefits
FlexibleFlexibleManufacturingManufacturingTechnologiesTechnologies
CombinedCombinedBenefitsBenefits
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-11
Table 6.1: Product/Market/ Distinctive-Competency Choices and Generic Competitive Strategies
Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)
ProductDifferentiation
MarketSegmentation
DistinctiveCompetency
Differentiation Focus
High(Principally byUniqueness)
Low to High(Price or
Uniqueness)High
(Many MarketSegments)
Low(One or a Few
Segments)
R&D, Sales andMarketing
Any Kind ofDistinctive
Competency
Low(Principally by
Price)
Low(Mass Market)
Manufacturingand MaterialsManagement
CostLeadership
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-12
Figure 6.1: Types of Business-Level StrategiesOffers Products toOnly One Group
of Customers
Offers Products toMany Kinds of
Customers
Offers Low-Priced Products
to Customers
Offers Uniqueor Distinctive Products toCustomers
Focused Cost-Leadership
Strategy
Focused Differentiation
Strategy
DifferentiationStrategy
Cost-Leadership
Strategy
Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-13
Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)
A A FocusedFocused Company’s Company’s Advantages and Disadvantages Advantages and Disadvantages Related to Threats From:Related to Threats From:– CompetitorsCompetitors– Powerful SuppliersPowerful Suppliers– Powerful BuyersPowerful Buyers– Substitute ProductsSubstitute Products– New EntrantsNew Entrants
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-14
STUCKIN THEMIDDLE
MY FIRM HASA COMPETITIVE
ADVANTAGE
MY FIRM HASA COMPETITIVE
ADVANTAGE
Choosing a Generic Business-Choosing a Generic Business-Level Strategy Level Strategy (Continued)(Continued)
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-15
Strategic Groups and Strategic Groups and Business-Level StrategyBusiness-Level Strategy
• Implications for Business-Level Implications for Business-Level StrategyStrategy– Immediate Competitors Are Companies Immediate Competitors Are Companies
Pursuing Same Strategy in the Same Pursuing Same Strategy in the Same Strategic GroupStrategic Group
– Different Strategic Groups Can Have A Different Strategic Groups Can Have A Different Standing with Respect to Each Different Standing with Respect to Each of Porter’s Five Competitive Forcesof Porter’s Five Competitive Forces
• First Mover AdvantageFirst Mover Advantage
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-16
Choosing an Investment Choosing an Investment Strategy at the Business LevelStrategy at the Business Level• Investment Strategy DefinedInvestment Strategy Defined• Competitive PositionCompetitive Position
– Market ShareMarket Share– Distinctive CompetenciesDistinctive Competencies
• Life Cycle EffectsLife Cycle Effects
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
6-17
Table 6.2: Choosing an Investment Strategy at the Business Level
Choosing An Investment Strategy at Choosing An Investment Strategy at the Business Level the Business Level (Continued)(Continued)
Stage of IndustryLife Cycle
Strong CompetitivePosition
Weak CompetitivePosition
Embryonic Share Building Share Building
Growth Growth Market Concentration
Shakeout Share Increasing Market Concentrationor Harvest/Liquidation
Maturity Hold-and-Maintain orProfit
Harvest orLiquidation/Divestiture
Decline Market Concentra-tion, Harvest, orAsset Reduction
Turnaround,Liquidation or
Divestiture
Copyright 1998 by Houghton Mifflin Company. All rights reserved.
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Chapter SummaryChapter Summary
WHAT IS BUSINESS-LEVEL
STRATEGY?
CHOOSING A GENERIC BUSINESS-
LEVEL STRATEGY
STRATEGIC GROUPS AND
BUSINESS-LEVEL STRATEGY
CHOOSING AN INVESTMENT
STRATEGY AT THE BUSINESS LEVEL
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