MGCR 423 Lecture 4: Chap 4
18 Sep 2017
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sChapter 4 – Business Level Strategy
The fundamental of using any type of strategy = gain strategic competiveness + earn above the average returns.
Business Level Strategy: an integrated and coordinated set of commitments and actions the firm uses to gain
competitive advantage by exploiting core competencies in specific product market.
When competing in a single market product + in a single geographic location:
➔ corporation level strategy / product diversify or international strategy to deal w/ geographical .
Diversified firm = corporate level strategy + business level strategy for each product market in which it competes.
Business Level strategy is the core of the strategy (how a firm intends to compete in a product
market.
NB – 5 business level strategies = generic bc used by any organization in any industry.
1. The purpose of a Business-Level Strategy
OBJ: create etee the fir’s positio ad those of its competitors.
• Decide whether to perform activities differently to to
perform different activities.
• BL“ is a hoie aout ho it ill perfor the alue hai’s
primary/support activities to create superior value for
customer.
• Fit among activities is a key to sustainability of competitive
advantage for all firm.
2. Type of Business-Level Strategies
5 strategies:
- Cost leadership
- Differentiation
- Focused cost leadership
- Focused differentiation
- Integrated cost leadership/differentiation
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How firm integrates the act they perform w/in each BLS = how they differ from one another.
Superior integration increases the likelihood of being able to gain an advantage over competitive +
above the average earnings.
= Each BSL strategies can help the firm establish/exploit a particular competitive advantage w/in a particular
competitive scope.
Two types of competitive advantages
• Lower cost than rivals ➔ ability to perform activities differently / rivals.
• Ability to differentiation + command higher prince ➔ capacity to perform different (and valuable)
activities.
Two types of markets
• Board market ➔ firms use their capabilities to create value for customers on an industry wide basis.
• Narrow market ➔ firms intends to serve the needs of a narrow customer group.
Focused strategies: the firm selects a segment or groups segments in the industry and tailors its strategy to serving
them to the exclusion of others.
= buyers w/ special needs or location (geo region).
The effectiveness of each strategy is contingent both on the opportunities and threats of the firm external
eiroet + o the stregths ad eakesses deried fro the fir’s resoure portfolio.
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find more resources at oneclass.com
3. Cost Leadership Strategy
Cost leadership strategy: integrated set of actions taken to P° goods or services w/ features that are acceptable for
customers at the lowest cost, relative to that of competitors.
▪ Standardized goods/services but w/ competitive levels of differentiation.
▪ Process innovation (e.g., distribution methods) = allow firm to operate more efficiently
➔ Critical to successfully use the strategy.
Firms must have competitive levels of differentiation:
- Create value for customers.
- Use cost leadership to ensure concerns ab/ quality and attractiveness of the product.
- By solely reducing cost = efficiently producing products that customer buy.
- Cost leadership firms target board customer segment.
Cost leaders constantly rethinking how to complete their primary and support act to reduce or
maintain costs while maintaining competitive levels of differentiation.
Economies of scale: allow firm to keep it costs low while offering some of the differentiated services.
Inbound/Outbound logistics: significant portion of total cost ➔ CA in logistics create ++ value w/ a cost leadership
strategy than differentiation strategy.
Outsource manufacturing operation to low cost firm w/ low wage employees.
= BUT create interdependencies between outsourcing firm and supplier/
➔ dependence too great give supplier more power (increase prices).
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
The fundamental of using any type of strategy = gain strategic competiveness + earn above the average returns. Business level strategy: an integrated and coordinated set of commitments and actions the firm uses to gain competitive advantage by exploiting core competencies in specific product market. When competing in a single market product + in a single geographic location: Corporation level strategy / product diversify or international strategy to deal w/ geographical . Diversified firm = corporate level strategy + business level strategy for each product market in which it competes. Business level strategy is the core of the strategy (how a firm intends to compete in a product market. Nb 5 business level strategies = generic bc used by any organization in any industry: the purpose of a business-level strategy. How firm integrates the act they perform w/in each bls = how they differ from one another.
