Business-Level Strategy BUSI 7130/7136

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Business-Level Strategy BUSI 7130/7136

  1. 1. Business-Level Strategy BUSI 7130/7136 Chris Shook
  2. 2. Agenda <ul><li>Overview of Business Level Strategy </li></ul><ul><li>What is Strategy </li></ul><ul><li>Geometry of Competition </li></ul>
  3. 3. Business-Level Strategy <ul><li>How to create competitive advantage in each business in which the company competes. </li></ul>
  4. 4. Generic Business Level Strategies Cost Uniqueness Source of Competitive Advantage
  5. 5. Breadth of Competitive Scope Broad Target Market Narrow Target Market Cost Generic Business Level Strategies Source of Competitive Advantage Uniqueness
  6. 6. Breadth of Competitive Scope Source of Competitive Advantage Broad Target Market Narrow Target Market Cost Focused Differen- tiation Cost Leadership Differen- tiation Focused Low Cost Generic Business Level Strategies Uniqueness
  7. 7. Breadth of Competitive Scope Source of Competitive Advantage Broad Target Market Narrow Target Market Cost Cost Leadership Generic Business Level Strategies Uniqueness
  8. 8. Relatively standardized products Key Criteria Cost Leadership Business Level Strategy
  9. 9. Relatively standardized products Features acceptable to many customers Key Criteria Cost Leadership Business Level Strategy
  10. 10. Relatively standardized products Features acceptable to many customers Lowest competitive price Key Criteria Cost Leadership Business Level Strategy
  11. 11. Breadth of Competitive Scope Source of Competitive Advantage Broad Target Market Narrow Target Market Cost Cost Leadership Differen- tiation Generic Business Level Strategies Uniqueness
  12. 12. Value provided by unique features and value characteristics Key Criteria Differentiation Business Level Strategy
  13. 13. Value provided by unique features and value characteristics Command premium price Key Criteria Differentiation Business Level Strategy
  14. 14. Value provided by unique features and value characteristics Command premium price Key Criteria Differentiation Business Level Strategy High customer service
  15. 15. Value provided by unique features and value characteristics Command premium price Superior quality Key Criteria Differentiation Business Level Strategy High customer service
  16. 16. Value provided by unique features and value characteristics Command premium price Superior quality Key Criteria Differentiation Business Level Strategy Prestige or exclusivity High customer service
  17. 17. Breadth of Competitive Scope Source of Competitive Advantage Broad Target Market Narrow Target Market Cost Cost Leadership Differen- tiation Generic Business Level Strategies Focused Differen- tiation Focused Low Cost Uniqueness
  18. 18. Focused Business Level Strategies Focused Business Level Strategies involve the same basic approach as Broad Market Strategies
  19. 19. Focused Business Level Strategies involve the same basic approach as Broad Market Strategies Large firms may overlook small niches However..... Opportunities may exist because: * Focused Business Level Strategies
  20. 20. Firm may lack resources to compete industrywide Large firms may overlook small niches However..... Opportunities may exist because: * * Focused Business Level Strategies Focused Business Level Strategies involve the same basic approach as Broad Market Strategies
  21. 21. Firm may lack resources to compete industrywide Large firms may overlook small niches However..... Opportunities may exist because: * * * Focused Business Level Strategies Focused Business Level Strategies involve the same basic approach as Broad Market Strategies May be able to serve a narrow market segment more effectively than industrywide competitors
  22. 22. Focused Differentiators may thrive by selecting a small market that is underserved by large players * Focused Business Level Strategies Focused Business Level Strategies involve the same basic approach as Broad Market Strategies
  23. 23. Breadth of Competitive Scope Source of Competitive Advantage Broad Target Market Narrow Target Market Cost Cost Leadership Differen- tiation Generic Business Level Strategies Focused Differen- tiation Focused Low Cost Uniqueness
  24. 24. Breadth of Competitive Scope Source of Competitive Advantage Broad Target Market Narrow Target Market Cost Cost Leadership Differen- tiation Generic Business Level Strategies Focused Differen- tiation Focused Low Cost Integrated Low Cost/ Differentiation Uniqueness
  25. 25. What is Strategy? Porter, 1996
  26. 26. What does the article say about OE ?
  27. 27. What does it say about unique activities?
  28. 28. What about trade-offs?
  29. 29. Is Growth Always Good?
  30. 30. Fit Elimination of Activities Optimization Optimization of Effort Synergy Reinforcing Activities Second-Order Single Mindedness Simple Consistency First-Order Goal Definition Type of Fit
  31. 31. Geometry of Competition
  32. 32. Summary <ul><li>Competitive advantage is very rare. </li></ul><ul><ul><li>Most competitors don’t have a competitive advantage </li></ul></ul><ul><ul><ul><li>Despite </li></ul></ul></ul><ul><ul><ul><ul><li>Good products </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Good customer relations </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Excellent capabilities </li></ul></ul></ul></ul><ul><li>Competitive position is very real. </li></ul>
  33. 33. Ind Avg Price Ind Ave Cost Alternate Paths to Outperforming Industry Average
  34. 34. <ul><li>Low cost producers have a cost savings greater than its price reduction </li></ul><ul><li>Differentiated producer commands a price premium in excess of its added costs </li></ul>
  35. 35. Geometry of Competition <ul><li>Where are you in relation to your competitors? </li></ul><ul><li>Two types of multidimensional positioning </li></ul><ul><ul><li>Positioning related to capabilities </li></ul></ul><ul><ul><li>Positions related to offerings </li></ul></ul>
  36. 36. Positioning Related to Capabilities <ul><li>Capabilities drive offerings </li></ul><ul><li>Assets & Activities </li></ul><ul><li>->Capabilities </li></ul><ul><li>->Offerings A firm must have </li></ul><ul><ul><li>Competitive offerings </li></ul></ul><ul><ul><li>Frontier capabilities </li></ul></ul><ul><ul><li>A fit between the two </li></ul></ul>
  37. 37. Advantage Curve for Steinway and Yamaha Yamaha Steinway
  38. 38. Stuck in the Middle A B C
  39. 39. Win in the Middle A B C
  40. 40. A Guide to Action <ul><li>Change the offerings (i.e. move the dot) </li></ul><ul><li>Create new capabilities (i.e. shift the curve) </li></ul><ul><li>Influence customer preferences </li></ul><ul><li>Change dimensions of competition (change the axis) </li></ul>

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