chapter 3 © 2014 by mcgraw-hill education. this is proprietary material solely for authorized...

Business Strategies and Their Marketing Implications

Chapter 3

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.


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


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


Dimensions That Define Individual SBUs

• Technical compatibility• Similarity in the customer needs • Similarity in the personal

characteristics of customers in the target markets


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


Allocating Resources within the Business Unit

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


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


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


Exhibit 3.2 - Combined Typology of Business-Unit Competitive Strategies


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


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


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


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


Exhibit 3.5 - Environmental Factors Favorable to Different Business Strategies

External Factors

Prospector Analyzer DifferentiatedDefender

Low-Cost Defender

Industry and Market

• Industry in early growth stage

• Potential customer segments unidentified

• Industry in late

growth • Some

potential segments may be undeveloped

• Industry in decline stage

• Sales primarily due to repeat purchases

• Industry in decline stage

• Sales primary due to repeat purchase



External Factors


Low-Cost Defender

Technology

• Newly emerging technology

• Applications undeveloped

• Basic technology well developed but still evolving

• Product modifications and improvements

• Basic technology fully developed and stable

• Major modifications

• Basic technology fully developed and stable

• Major modifications



External Factors


Low-Cost Defender

Competition

• Few established competitors

• Industry structure still emerging

• Single competitor holds commanding share

• Large number of competitors

• Industry structure still evolving

• One or more competitors hold large shares in major segments

• Small to moderate number of well-established competitors

• Industry structure stable

• Maturity of markets

• Small to moderate number of well-established competitors

• Industry structure stable

• Maturity of markets



External Factors


Low-Cost Defender

Business’s relativestrengths

• SBU has strong R&D, product engineering and marketing research and marketing capabilities

• SBU has good R&D, product engineering, and marketing research capabilities

• Low-cost position or strong sales, marketing, distribution

• SBU has no outstanding strengths in R&D or product engineering

• Costs are higher

• SBU’s outstanding strengths are in process engineering and quality control

• SBU has superior sources of supply and/or process engineering and production capabilities


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


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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