1. Business-Level Strategy
Chapter Five
© 2006 by Nelson, a division of Thomson Canada Limited. 5-1

2. Chapter 3
Strategic
External The Strategic
Inputs
.
Environment Strat . Intent
Chapter 4 Strat . Mission Management .
Internal
Environment
Process
Strategy Formulation Strategy Implementation
Strategic Actions
Chapter 55
Chapter Chapter 6 Chapter 7 Chapter 11 Chapter 12
Bus. – - Level
Bus. Level Competitive Corp. - Level Corporate Structure
Strategy
Strategy Dynamics Strategy Governance & Control
Chapter 8 Chapter 9 Chapter 10 Chapter 13 Chapter 14
Acquisitions & International Cooperative Strategic Entrepreneurship
Restructuring Strategy Strategies Leadership & Innovation
Outcomes
Strategic
Chapter 2 Chapter 1 Feedback
Above Average Strategic
Returns Competitiveness
© 2006 by Nelson, a division of Thomson Canada Limited. 5-2

3. Strategic Management
Competitiveness and Globalization
Knowledge Objectives:
2. Define business-level strategies.
3. Discuss the relationship between customers &
business-level strategies in terms of who, what and
how.
4. Explain the differences among business-level
strategies.
5. Use the five forces of competition model to explain
how above average returns can be earned through
each business-level strategy.
6. Describe the risks of using each of the business-level
strategies.
© 2006 by Nelson, a division of Thomson Canada Limited. 5-3

4. Core Competency, Strategy and
Business Level Strategy
Core The resources and capabilities that are
Competency determined to be a source of competitive
advantage for a firm over its rivals.
An integrated & coordinated set of actions
Strategy taken to exploit core competencies & gain a
competitive advantage.
Business Actions taken to provide customers value
Level and gain a competitive advantage by
Strategy exploiting core competencies in specific,
individual product markets.
© 2006 by Nelson, a division of Thomson Canada Limited. 5-4

5. Key Issues of Business-level
Strategy
• What good or service to offer customers.
• How to manufacture or create the good or
service.
• How to distribute the good or service in the
marketplace.
© 2006 by Nelson, a division of Thomson Canada Limited. 5-5

6. The Central Role of Customers
In selecting a business-level strategy, the firm
determines
1. Who it will serve.
2. What needs those target customers have
that it will satisfy.
3. How those needs will be satisfied.
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7. Basis for Customer Segmentation
Consumer Markets
1. Demographic factors (age, income, gender, etc.)
2. Socioeconomic factors
(social class, stage in the family life cycle)
3. Geographic factors
(culture, region or country differences)
4. Psychological factors (lifestyle, personality traits)
5. Consumption patterns
(heavy, moderate, and light users)
6. Perceptual factors
(benefit segmentation, perceptual mapping)
7. Brand loyalty patterns
© 2006 by Nelson, a division of Thomson Canada Limited. 5-7

8. Basis for Customer Segmentation
Industrial Markets
1. End use segments (identified by NAIC code)
2. Product segments (based on technological
differences or production economics)
3. Geographic segments
(defined by boundaries between countries or by
regional differences within them)
4. Common buying factor segments (cut across
product/market and geographic segments)
5. Customer size segments
© 2006 by Nelson, a division of Thomson Canada Limited. 5-8

9. Generic Business Level Strategies
Source of Competitive Advantage
Cost Uniqueness
Broad Cost Differentiation
Target
Market Leadership
Breadth of
Competitive
Focused Focused
Scope
Narrow Differentiation
Target
Cost
Market Leadership
© 2006 by Nelson, a division of Thomson Canada Limited. 5-9

10. Generic Business Level Strategies
Source of Competitive Advantage
Cost Uniqueness
Cost
Broad
Target Leadership
Market
Breadth of
Competitive
Scope
Narrow
Target
Market
© 2006 by Nelson, a division of Thomson Canada Limited. 5-10

11. Value Creating Activities Common to a
Cost Leadership Business Level Strategy
Firm Infrastructure
Activities
M
Support
Human Resource Management A
R
Technological Development G
IN
Procurement
Service
Operations
Outbound
Marketing
Logistics
Logistics
Inbound
& Sales
IN
G
R
A
M
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-11

12. Value Creating Activities common to a
Inbound
Cost Leadership Business Level Strategy
Logistics Simplified Planning Relatively Few
Cost Effective
MIS Systems Firm Infrastructure
Practices to Reduce
Planning Costs
Management Layers
to Reduce Overhead
Activities
Activities
Human ResourceImprove Worker Efficiency and MA
Highly efficient Programs to
Support
Support
Effective Training
Consistent Pol.
to Reduce Management
systems to link
Turnover Costs Effectiveness
R
Easy-to-Use Manufacturing
suppliers’ prod.s
Technological Developmentwith
Investments in Technology in order G
Technologies to Reduce Costs Associated
IN
with the firm’s Processes
Systems and Procedures to find
Manufacturing
Frequent Evaluation Processes
Procurement
the Lowest Cost Products to production Suppliers’
Purchase Raw Materials
Operations to Monitor
Performances
processes Small, Highly Effective Product
Outbound
Highly Efficient Efficient Plant Delivery
Service
Logistics
Logistics
Systems to Link Scale to Minim- Schedule that Trained Sales Installations to
Marketing
Logistics
Inbound
Suppliers’ Prod- ize Manufactur- Reduces Costs Force Reduce
Inbound
& Sales
IN
ucts with the ing Costs Frequency and
Firm’s Produc- Selection of Low Products Priced Severity
RG
tion Processes Timing of Asset Cost Transport to Generate of Recalls
Purchases Carriers Sales Volume
A
Located in Close Policy Choice of
Proximity with Plant Tech.
Efficient Order
Sizes
National
Scale M
Suppliers Advertising
Organizational Interrelationships
Learning with Sister Units
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-12

13. Value Creating Activities common to a
Cost Leadership Business Level Strategy
Operations Relatively Few
Cost Effective Simplified Planning Practices
Management Layers
MIS Systems
Activities Economies of
to Reduce Planning Costs
to Reduce Overhead
Activities
Support
Support
scale to reduce M
Effective Training
Human ResourcePrograms to Improve
Consistent Policies to
Reduce Turnover Costs Managementproduction costs A
Worker Efficiency and
Easy-to-Use Manufacturing Effectiveness Technology in
Investments in
RG
Technological Development of
Technologies
Construction
order to Reduce Costs
Associated with Manufacturing
IN
Processes
Systems and Procedures to find the Lowest
Procurementefficient-scale
Frequent Evaluation Processes
Cost Products to Purchase Raw Materials
to Monitor Suppliers’
Service
Operations
production
Performances
Outbound
Highly Efficient Efficient Plant Delivery Small, Highly Effective Product
Logistics
Operations
Systems to Link Scale to Schedule that
facilities
Trained Sales Installations to
Logistics
Logistics
Inbound
Inbound
Suppliers’ Prod- Minimize Reduces Costs Force Reduce
ucts with the Manufacturing Selection of Low Products Priced Frequency and
IN
RG
Firm’s Produc- Costs of Asset
Timing Severity
Cost Transport to Generate
tion Processes Purchases of Recalls
Carriers Sales Volume
A
Located in Close Policy Choice of Efficient Order
Proximity with Plant TechnologySizes
National
Scale M
Suppliers Advertising
Organizational
Learning
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-13

14. Value Creating Activities common to a
Outboun
Cost Leadership Business Level Strategy
d
Logistics
Simplified Planning Relatively Few
Firm Infrastructure
Cost Effective
MIS Systems Delivery
Practices to Reduce Management Layers
to Reduce Overhead
Activities Planning Costs
schedule that
M
Activities
Support
Support
Effective Training Programs to
Human Resource
Consistent Policies to
Reduce Turnover Costs Management A
reduces costs
R
Improve Worker Efficiency and
Effectiveness
G
Investments in TechnologySelection of low
Easy-to-Use Manufacturing
Technological Developmentwith transport
Technologies
in order
cost
to Reduce Costs Associated IN
Manufacturing Processes
Systems and Procedures to Frequent Evaluation Processes carriers
Procurement
find the Lowest Cost Products Frequent Evaluation Processes
to Monitor Suppliers’
to Monitor Suppliers’
Service
to Purchase Raw Materials
Efficient
Service
Performances
Performances
Outbound
Highly Efficient Efficient Plant Delivery Small, Highly Effective Product
order sizes
Operations
Logistics
Systems to Link Scale to Minim- Schedule that Trained Sales Installations to
Outbound
Marketing
Logistics
Logistics
Inbound
& Sales
Suppliers’ Prod- ize Manufactur- Reduces Costs Force Reduce
ucts with the ing Costs
Selection of Low Products Priced
Frequency and
IN
RG
Firm’s Produc- Timing of Asset Severity
Cost Transport to Generate
tion Processes Purchases of Recalls
Carriers Sales Volume
A
Located in Close Policy Choice of
Proximity with Plant Tech.
Efficient Order
Sizes
National
Scale M
Suppliers Advertising
Organizational Interrelationships
Learning with Sister Units
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-14

15. Value Creating Activities common to a
Marketing
Cost Leadership Business Level Strategy
& Sales
Simplified Planning Relatively Few
MIS Systems
Activities Firm Infrastructure
Cost Effective
Practices to Reduce Management Layers
Planning Costs to Reduce Overhead Small, highly
Activities
Support
Support
Consistent Pol. to Reduce Effective Training Programs to trained sales
M
Human Resource Management
Turnover Costs Improve Worker Efficiency and
Effectiveness A
force
R
Technological Development
Easy-to-Use Manufacturing Investments in Technology in order
to Reduce Costs Associated with G
Technologies
Manufacturing Processes IN
Products priced
Systems and Procedures to find Frequent Evaluation Processes to to generate
Procurement
the Lowest Cost Products to Monitor Suppliers’ Performances
Service
Purchase Raw Materials
sales volume
Service
Outbound
Highly Efficient Efficient Plant Delivery Small, Highly Effective Product
Logistics
Marketing
Operations
Systems to Link Scale to Minim- Schedule that Trained Sales Installations to
Marketing
Logistics
& Sales
Inbound
& Sales
Suppliers’ Prod- ize Manufactur- Reduces Costs Force Reduce
ucts with the ing Costs
Selection of Low Products Priced
Frequency and
IN
RG
Firm’s Produc- Timing of Asset Cost Transport Severity
to Generate
tion Processes Purchases of Recalls
Carriers Sales Volume
A
Located in Close Policy Choice of
Proximity with Plant Tech.
Efficient Order
Sizes
National
Scale M
Suppliers Advertising
Organizational Interrelationships
Learning with Sister Units
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-15

16. Value Creating Activities common to a
Cost Leadership Business Level Strategy
Firm Infrastructure
Cost Effective Service
Simplified Planning
Practices to Reduce
Relatively Few
Management Layers
MIS Systems Planning Costs Effective product
to Reduce Overhead
Activities
Activities
Support
Support
Human ResourceWorker Efficiency and Effectiveness MA to
installations
Effective Training Programs to Improve
Consistent Pol. to
Reduce Turnover Costs Management
reduce R
Investments in Technology in order to Reduce
Technological Development
Easy-to-Use Manufacturing G
Technologies recalls
Costs Associated with Manufacturing Processes
IN
Systems and Procedures to find Frequent Evaluation Processes to
Procurement
the Lowest Cost Products to Monitor Suppliers’ Performances
Service
Purchase Raw Materials
Service
Operations
Highly Efficient Efficient Plant Delivery Small, HighlyEffective Product
Service
Outbound
Marketing
Logistics
Systems to Link Scale to Minim- Schedule that Trained SalesInstallations to
Logistics
Inbound
& Sales
Suppliers’ Prod- ize Manufactur- Reduces Costs Force Reduce
ucts with the ing Costs Selection of Low Products Priced Frequency andIN
RG
Firm’s Produc- Severity
Timing of Asset Cost Transport to Generate
tion Processes Carriers Sales Volume of Recalls
Purchases
A
Located in Close Policy Choice of
Proximity with Plant Tech.
Efficient Order
Sizes
National
Scale M
Suppliers Advertising
Organizational Interrelationships
Learning with Sister Units
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-16

17. Value Creating Activities common to a
Cost Leadership Business Level Strategy
Simplified Planning Relatively Few
MIS Systems
Activities Firm Infrastructure
Cost Effective Practices to Reduce
Planning Costs
Management Layers
to Reduce Overhead
Activities
Support
Support
Consistent Pol. to
Human Resource Management
Effective Training Programs to Improve M
Reduce Turnover Costs Worker Efficiency and Effectiveness
A
R
Easy-to-Use Manufacturing
Technological Development
Investments in Technology in order
G
Technologies to Reduce Costs Associated with
Manufacturing Processes IN
Systems and Procedures to find Frequent Evaluation Processes
Procurement
Procurement
Procurement
M Service
the Lowest Cost Products to
Operations
Operations to Monitor Suppliers’
Service
Purchase Raw Materials Performances
Outbound
Outbound
Logistics
Logistics
Highly Efficient Efficient Plant Delivery Small, Highly Effective Product
Marketing
Marketing
Logistics
Logistics
Systems to Link Scale to Minim- Schedule that Trained Sales Installations to
Inbound
Inbound
& Sales
& Sales
Suppliers’ Prod- ize Manufactur- Reduces Costs Force Reduce
Procurement
IN
ucts with the ing Costs Selection of Low Products Priced Frequency and
Firm’s Produc- Timing of Asset Cost Transport to Generate Severity
RG
tion Processes Purchases Carriers Sales Volume of Recalls
Systems and procedures toOrder National Frequent evaluation
A
Located in Close Policy Choice of Efficient
find thewith Plant Tech. products
Proximity lowest cost
Suppliers
Sizes processes to monitor
Scale
Advertising
to purchaseOrganizational Interrelationships suppliers’ performances
raw materials
Learning with Sister Units
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-17

18. Value Creating Activities common to a
Cost Leadership Business Level Strategy
Simplified Planning Relatively Few
Cost Effective
MIS Systems Firm Infrastructure
Practices to Reduce
Planning Costs
Management Layers
to Reduce Overhead
Activities
Activities
Support
Support
Human Resource Management
Consistent Pol. to Reduce Effective Training Programs to
M
Turnover Costs Improve Worker Efficiency and
Effectiveness AR
Easy-to-Use Manufacturing
Technological Development
Investments in Technology in order G
Technological Development
Technologies to Reduce Costs Associated with
Manufacturing Processes
IN
Systems and Procedures to find Frequent Evaluation Processes
Procurement
the Lowest Cost Products to to Monitor Suppliers’
Service
Service
Operations
Purchase Raw Materials Performances
Outbound
Highly Efficient Efficient Plant Delivery Small, Highly Effective Product
Technological Development
Logistics
Marketing
Logistics
Systems to Link Scale to Minim- Schedule that Trained Sales Installations to
Inbound
& Sales
Suppliers’ Prod- ize Manufactur- Reduces Costs Force Reduce
Easy-to-Use
ucts with the ing Costs Investments in technology in IN
order
Selection of Low Products Priced Frequency and
to reduce costs associated G
Firm’s Produc- Timing of Asset Cost Transport to Generate Severity
manufacturing
tion Processes Purchases
technologies Choice of
Carriers Sales Volume
Rwith
of Recalls
A
manufacturing processes
Located in Close Policy
Proximity with Plant Tech.
Efficient Order National
Sizes Scale M
Suppliers Advertising
Organizational Interrelationships
Learning with Sister Units
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-18

19. Value Creating Activities common to a
Cost Leadership Business Level Strategy
Simplified PlanningRelatively Few
Firm Infrastructure
Cost Effective
MIS Systems
Activities
Activities Practices to Reduce
Planning Costs
Management Layers
to Reduce Overhead
Activities
Support
Support
Support
Human Resource Management MA
Human Resource Management
Consistent Pol. Effective Training Programs to
to Reduce Improve Worker Efficiency and
Turnover Costs R Effectiveness
Easy-to-Use Manufacturing
Technological Development
Technological Development G Investments in Technology in order
Technologies
IN to Reduce Costs Associated with
Manufacturing Processes
HumanProcurement
Resource Management
Systems and Procedures to find
Procurement
the Lowest Cost Products to
Operations Frequent Evaluation Processes
to Monitor Suppliers’
Service
Consistent policies to
Purchase Raw Materials
Intense & effective training
Performances
Outbound
Highly Efficient Efficient Plant Delivery Small, Highly Effective Product
Logistics
reduce turnover costs programs to improve worker
Marketing
Logistics
Systems to Link Scale to Minim- Schedule that Trained Sales Installations to
Inbound
& Sales
Suppliers’ Prod- ize Manufactur- Reduces Costs Force Reduce
ucts with the ing Costs efficiency and effectiveness
Selection of Low Products Priced Frequency and IN
RG
Firm’s Produc- Timing of Asset Cost Transport to Generate Severity
tion Processes Purchases Carriers Sales Volume of Recalls
A
Located in Close Policy Choice of
Proximity with Plant Tech.
Efficient Order
Sizes
National
Scale M
Suppliers Advertising
Organizational Interrelationships
Learning with Sister Units
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-19

20. Value Creating Activities common to a
Cost Leadership Business Level Strategy
Simplified Planning Relatively Few
MIS SystemsFirm Infrastructure
Firm Infrastructure
Cost Effective
Practices to Reduce
Planning Costs
Management Layers
to Reduce Overhead
Activities
Activities
Support
Support
Human Resource Management
Consistent Pol. Effective Training Programs to
M
to Reduce
Turnover Costs
Improve Worker Efficiency and
Effectiveness AR
Firm Infrastructure
Easy-to-Use Manufacturing
Technological Development
Investments in Technology in order G
Technologies to Reduce Costs Associated with
Manufacturing Processes
IN
Cost effective Relatively few
Systems and Procedures to find Simplified planning
Frequent Evaluation Processes
MIS systems Procurement to policies to reduce
the Lowest Cost Products to to Monitor Suppliers’
managerial layers
Service
Purchase Raw Materials Performances
Outbound
Highly Efficient Efficient Plant Delivery Small, Highly Effective Product
reduce overhead costs planning costs
Logistics
Operations
Marketing
Logistics
Systems to Link Scale to Minim- Schedule that Trained Sales Installations to
Inbound
& Sales
Suppliers’ Prod- ize Manufactur- Reduces Costs Force Reduce
ucts with the ing Costs Selection of Low Products Priced Frequency and
Firm’s Produc- Timing of Asset Cost Transport to Generate Severity
GIN
AR
tion Processes Purchases Carriers Sales Volume of Recalls
Located in Close Policy Choice of
Proximity with Plant Tech.
Efficient Order
Sizes
National
Scale M
Suppliers Advertising
Organizational Interrelationships
Learning with Sister Units
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-20

21. How to Obtain a Cost Advantage
1 Determine and Control Cost Drivers
2 Reconfigure the Value Chain as needed
Alter production process
Change in automation
New raw material
New advertising media Forward integration
New distribution channel Backward integration
Direct sales in place Alter location relative
of indirect sales to suppliers or buyers
© 2006 by Nelson, a division of Thomson Canada Limited. 5-21

22. Cost Leadership Strategy and the
Five Forces of Competition
R
Co ival
hr e Pr
t o f uc t
ea od
s
mp ry
eti Am
ng on
Rivalry with Existing
T ut
Su
bs
tit
Fi g
rm
s Competitors
Can use cost leadership strategy
Five Forces of of B u g Powe r
Thr trants
Thre trants
yer s
to advantage since:
En
En
eat o
Competition
at of
a inin
q competitors avoid price wars
f Ne
New
Barg
w
Bargaining Power
with cost leaders, creating
of Suppliers higher profits for the entire
industry
© 2006 by Nelson, a division of Thomson Canada Limited. 5-22

23. Cost Leadership Strategy and the
Five Forces of Competition
R
s Co ival
o f uc t mp ry
hr e Pr
T ut
t
ea od eti Am
ng on
Fi g
Bargaining Power of Buyers
tit rm
Su
bs s
(Customers)
Five Forces of of B u g Powe r
Thr trants
Thre trants
yer s Can mitigate buyers’ power by:
En
En
eat o
Competition
at of
Driving prices far below
a inin
f Ne
New
Barg
competitors and cause exit and
w
Bargaining Power
of Suppliers shift power back to firm.
© 2006 by Nelson, a division of Thomson Canada Limited. 5-23

24. Cost Leadership Strategy and the
Five Forces of Competition
R
t o f uc t
ea od
s Co ival
mp ry
eti Am
Bargaining Power of Suppliers
hr e Pr
T ut ng on
Fi g
tit rm
bs s
Su
Can mitigate suppliers’ power by:
of B u g Powe r
Five Forces of being able to absorb cost
Thr trants
Thre trants
q
yer s
En
En
eat o
Competition
at of
increases due to low cost
a inin
f Ne
New
position
Barg
w
Bargaining Power
of Suppliers
q being able to make very large
purchases, reducing chance of
supplier using power
© 2006 by Nelson, a division of Thomson Canada Limited. 5-24

25. Cost Leadership Strategy and the
Five Forces of Competition
R
s Co ival
o f uc t
hr e Pr
T ut
t
ea od
mp ry
eti Am
ng on
Threat of New Entrants
Fi g
tit rm
bs s
Su
Can frighten off new entrants due to:
Five Forces of of B u g Powe r
Thr trants
Thre trants
yer s q their need to enter on a large scale
En
En
eat o
Competition
at of
a inin
in order to be cost competitive
f Ne
New
Barg
w
q the time it takes to move down the
Bargaining Power
of Suppliers learning curve
© 2006 by Nelson, a division of Thomson Canada Limited. 5-25

26. Differentiation Strategy and the Five
Forces of Competition
R
s Co ival
o f uc t mp ry
hr e Pr
T ut
t
ea od eti Am
ng on
Fi g
Threat of Substitute Products
tit rm
bs s
Su
of B u g Powe r
Well positioned relative to substitutes
Five Forces of
Thr trants
Thre trants
yer s
because:
En
En
eat o
Competition
at of
a inin
q brand loyalty to a differentiated
f Ne
New
Barg
product tends to reduce customers’
w
Bargaining Power
of Suppliers testing of new products or switching
brands.
© 2006 by Nelson, a division of Thomson Canada Limited. 5-26

27. Major Risks of Cost Leadership
Business Level Strategy
Dramatic technological change could
take away your cost advantage.
Competitors may learn how to imitate
Value Chain.
Focus on efficiency could cause Cost
Leader to overlook changes in customer
preferences.
© 2006 by Nelson, a division of Thomson Canada Limited. 5-27

28. Generic Business Level Strategies
Source of Competitive Advantage
Cost Uniqueness
Broad Cost
Target
Differentiation
Market Leadership
Breadth of
Competitive
Scope
Narrow
Target
Market
© 2006 by Nelson, a division of Thomson Canada Limited. 5-28

29. Differentiation strategy
“An integrated set of actions designed by a
firm to produce or deliver goods or
services that customers perceive as being
different in ways that are important to
them.”
© 2006 by Nelson, a division of Thomson Canada Limited. 5-29

30. How to Obtain a Differentiation
Advantage
Control if needed Reconfigure to
maximize
Cost Drivers Value Chain
• Lower buyers’ costs
• Raise performance of product or service
• Create sustainability through:
- customer perceptions of uniqueness
- customer reluctance to switch to non-unique product
© 2006 by Nelson, a division of Thomson Canada Limited. 5-30

31. Value Creating Inbound common to a
Activities
Logistics
Differentiation Business Level Strategy
Compensation programs A companywide emph-
Firm Infrastructure of
intended to encourage
worker creativity & prod.
Activities
Support asiis on producing high
Superior handling
quality products
Activities
M
Support
Highly Developed Information Extensive use of subjective Superior
incoming raw
Human Resource Management
Systems to better understand rather than objective
materials to
performance measures
customers’ purchasing preferences
personnel
training AR
minimize damagewill allow capability in G
Coordination among R&D, Strong
Technological firm to consistently produce basic research IN
the Development
Investments in tech. that
product development and
marketing
and improve the
Systems and procedures used to
highly differentiated products
Purchase of highest quality
materials
Procurement parts
find the highest quality raw quality of the final
Operations replacement
product and Strong Coordin-
Service
Consistent Accurate Complete field
Outbound
Logistics
manufacturing responsive ation among stocking of
Marketing
Logistics
Inbound
& Sales
of attractive order functions in replacement
products processing R&D, Marketing parts
IN
RG
procedures and Product
Development
Rapid
responses to
Extensive
A
customers
unique
Rapid and timely personal
product relationships M
deliveries to with buyers
manufacturing Premium
specifications customers
Pricing
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-31

32. Value Creating Activities common to a
Operations
Differentiation Business Level Strategy
Highly Developed Information
Consistent
Firm Infrastructure
Systems to better understand
manufacturing of
customers’ purchasing preferences
Activities
Compensation programs
Support
Human Resource Management MA
intended to encourage attractive products
worker creativity & prod.
Coordination among R&D, Strong
RG
Technological Development capability in
product development and
marketing
Rapid responses
basic research IN
to customers
Systems and procedures used to find
Procurement
the highest quality raw materials unique
Service
Operations
Accurate andmanufacturingComplete field
Outbound
Superior Consistent Strong Coordin-
Logistics
Operations
manufacturing responsive specifications stocking of
ation among
Marketing
Logistics
handling of
Inbound
& Sales
incoming raw of attractive order functions in replacement
R&D, Marketing parts
IN
materials to products processing
minimize procedures and Product
G
damage and Development
AR
Rapid Extensive
improve the Rapid and timely
responses to personal
quality of the product
M
customers relationships
final product deliveries to
unique with buyers
manufacturing customers
Premium
specifications Pricing
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-32

33. Outbound
Value Creating Activities common to a
Logistics
Differentiation Business Level Strategy
Highly Developed Information A companywide emph-
Firm Infrastructure
Systems to better understand asiis on producing high
customers’ purchasing preferences quality products
Activities Accurate and
Activities
responsive
Support
Compensation programs Extensive use of subjective Superior
Human Resource Management MA
Support
intended to encourage rather than objective personnel
worker creativity & prod. performance measures order
Coordination among R&D,
training
processing G
Investments in tech. that will allow Strong R
Technological firmdifferentiated products procedures IN
product development and
marketing
the
Development capability in
highly
to consistently produce
basic research
Systems and procedures used to find the
Procurement
Purchase of highest quality
highest quality raw materials replacement parts Rapid and timely
Service
product deliveries
Outbound
Superior Consistent Accurate and Strong Coordin- Complete field
Operations
Outbound
Logistics
ation among
functions in to customers
Marketing
Logistics
handling of manufacturing responsive stocking of
Logistics
& Sales
incoming raw of attractive order replacement
Inbound
R&D, Marketing parts
IN
materials to products processing
minimize procedures and Product
G
damage and Development
AR
Rapid Extensive
improve the Rapid and timely personal
responses to
quality of the product
M
customers relationships
final product deliveries to
unique with buyers
manufacturing customers Premium
specifications Pricing
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-33

34. Marketing
Value Creating Activities common to a
Highly Developed Information
& Sales
Differentiation Business Level StrategyA companywide emph-
Strong coordination
Firm Infrastructure
Systems to better understand asiis on producing high
customers’ purchasing preferences quality products among functions in
Activities
Compensation programs Extensive use of subjective Superior
M
Support
R&D, marketing &
Human Resource Management
intended to encourage
worker creativity & prod.
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IN
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© 2006 by Nelson, a division of Thomson Canada Limited. 5-34

35. Value Creating Activities common to a
Differentiation Business Level Strategy
Firm Infrastructure Service
Highly Developed Information
Systems to better understand
A companywide emph-
asiis on producing high
customers’ purchasing preferences quality products
Activities
Activities
Complete field
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Compensation programs Extensive use of subjective Superior
stocking M
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intended to encourage
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Systems and procedures used to find Purchase of highest quality
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Operations
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Marketing
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© 2006 by Nelson, a division of Thomson Canada Limited. 5-35

36. Value Creating Activities common to a
Differentiation Business Level Strategy
Highly Developed Information A companywide emph-
Firm Infrastructure
Systems to better understand asiis on producing high
Activities
customers’ purchasing preferences quality products
Support
Activities
Support
Compensation programs Extensive use of subjective Superior
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intended to encourage rather than objective personnel M
worker creativity & prod. performance measures training A
R
Coordination among R&D,
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Investments in tech. that will allow Strong
G
product development and
marketing
the firm to consistently produce
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capability in
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Systems and procedures used to
Procurement
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find the highest quality raw
Operations Purchase of highest quality
replacement parts
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materials
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Superior Consistent Accurate and Strong Coordin- Complete field
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Marketing
Logistics
handling of manufacturing responsive ation among stocking of
Inbound
& Sales
incoming raw of attractive order functions in replacement
IN
Procurement
materials to products processing R&D, Marketing parts
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customers relationships
final product deliveries to
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customers
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Premium
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Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-36

37. Value Creating Activities common to a
Differentiation Business Level Strategy
Highly Developed Information A companywide emphasis
Firm Infrastructure
Systems to better understand on producing high quality
customers’ purchasing preferences products
Activities
Activities
Support
Support
M
Compensation programs Extensive use of subjective Superior
Human Resource Management
intended to encourage
worker creativity & prod.
rather than objective personnel
A
performance measures training
R
Technological firmdifferentiated products capability in GIN
Coordination among R&D, Investments in tech. that will allow Strong
product development and the Development
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to consistently produce
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Systems and procedures used to Purchase of highest quality
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find the highest quality raw
Operations replacement
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materials
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handling of manufacturing responsive ation among stocking of
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materials to products processing R&D, Marketing parts
Coordination among
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procedures and Product Strong
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Development
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damage and
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ogies to produce highly Extensive
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responses to
product development
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product basic research
M
customers relationships
final product unique deliveries to with buyers
manufacturing customers Premium
specifications Pricing
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-37

38. Value Creating Activities common to a
Differentiation Business Level Strategy
Highly Developed Information A companywide emph-
Firm Infrastructure
Systems to better understand asiis on producing high
Activities
customers’ purchasing preferences quality products
Activities
Support
Activities
Support
M
Support
Compensation programs Extensive use of subjective Superior
Human Resource Management
Human Resource Management
intended to encourage rather than objective personnel
A
worker creativity & prod. performance measures training
R
Coordination among R&D,
Technological Development
Investments in tech. that will allow Strong
G
product development and
marketing
the firm to consistently produce
highly differentiated products IN
capability in
basic research
Human Procurement
Resource Management
Systems and procedures used to
find the highest quality raw
Purchase of highest quality
replacement parts
Service
materials
Compensation programs Extensive use of Superior
Outbound
Strong Coordin-
Operations
Logistics
Superior Consistent Accurate and ation among Complete field
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Logistics
which encourage worker
handling of manufacturing responsivesubjective perform-
functions in personnel
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A
responses to
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customers relationships
final product unique deliveries to with buyers
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specifications Pricing
Primary Activities
© 2006 by Nelson, a division of Thomson Canada Limited. 5-38