Business strategy

1. STRATEGIC MANAGEMENT
AND BUSINESS POLICY
THIRD EDITION
Chapter 8
Business-level strategies
AZHAR KAZMI

2. (c) Dr. Azhar Kazmi 2008 2
Learning objectives
 Examine how corporate-level strategies, business definition, and
business model act as the foundations for business strategies
 Observe how industry structure and positioning of the firm in the
industry help to determine the competitive advantage
 Discuss and exemplify achieving cost leadership, differentiation,
and focus generic business strategies, conditions under which each
of these are used, their benefits and risks
 Describe the two types of tactics used for business strategies:
timing and market location
 Explain business strategies for four different industry conditions
 Deliberate on leveraging home country advantages and
organisation-specific advantages for international business
strategies
 Discuss the role of digitalisation for cost leadership, differentiation,
and focus business strategies

3. (c) Dr. Azhar Kazmi 2008 3
Foundations of business strategies
 Business strategies are the courses of
action adopted by an organisation for each
of its businesses separately to serve
identified customer groups and provide
value to the customer by satisfaction of
their needs.
 Corporate-level strategies lay down the framework in
which business strategies operate.
 The function of corporate-level strategy is to deal with
a portfolio of businesses in such a manner that the
overall returns are optimised.
 Business definition is at the core of business
strategies.

4. (c) Dr. Azhar Kazmi 2008 4
Choice of competitive strategy
 Industry structure based on five
competitive forces: the threat of new
entrants; the threat of substitute products or
services; the bargaining power of suppliers;
the bargaining power of buyers; and the rivalry
among the existing competitors in an industry
 Positioning of firm in the industry
 Competitive advantage
 Competitive scope

5. (c) Dr. Azhar Kazmi 2008 5
Generic business strategies
Cost
leadership
Differentiation
Focussed
Cost
leadership
Focussed
differentiation
Broad
target
Narrow
target
Low-cost
products/services
Differentiated
products/services
COMPETITIVE ADVANTAGE
COMPETITIVE
SCOPE
Adapted from M.E. Porter: Competitive Advantage: Creating and Sustaining Superior Performance
New York: Free Press, 1985, p. 12.

6. (c) Dr. Azhar Kazmi 2008 6
Cost leadership business strategy
 When the competitive advantage of an
organisation lies in lower cost of products
or services relative to what the competitors
have to offer, it is termed as cost
leadership.
 Achieving cost leadership
 Conditions under which cost leadership
strategy is used
 Benefits and risks of cost leadership strategy

7. (c) Dr. Azhar Kazmi 2008 7
Differentiation business strategy
 When the competitive advantage of an
organisation lies in special features
incorporated into the product / service
which is demanded by the customers who
are willing to pay for it then the strategy
adopted is the differentiation business
strategy.
 Achieving differentiation
 Conditions under which differentiation is used
 Benefits and risks of differentiation strategy

8. (c) Dr. Azhar Kazmi 2008 8
Focus business strategy
 Focus business strategies essentially
rely on either cost leadership or
differentiation but cater to a narrow
segment of the total market.
 Achieving focus
 Conditions under which focus strategies are
used
 Benefits and risks of focus strategies

9. (c) Dr. Azhar Kazmi 2008 9
Tactics for business strategies
 Timing tactics
 First movers and late movers
 Advantages and disadvantages of being a first
mover
 Market location tactics
 Market leader
 Market challenger
 Market follower
 Market nichers

10. (c) Dr. Azhar Kazmi 2008 10
Business strategies under different
industry conditions
TIME
Embryonic Growth Maturity Decline
MARKET
SIZE

11. (c) Dr. Azhar Kazmi 2008 11
Business strategies
 Business strategies and internationalisation
 Leveraging home country advantages for businesses
 Leveraging organisation specific advantages for
businesses
 Business strategies and digitalisation
 Digitalisation and competitive advantage
 Digitalisation and cost leadership
 Digitalisation and differentiation
 Digitalisation and focus