BMA202 Lecture 5 BusLevel Strategies

broad target narrow target.

Competitive scope has several dimensions:

the group of product and customer segments served

the array of geographic markets in which the firm competes.


firms use core competencies to implement value-creating strategies
only firms with the capacity to continuously improve, innovate and upgrade their competencies can expect to meet, and hopefully exceed, customers’ expectations across time.




low cost with acceptable features
highly differentiated features with acceptable cost.
How: Determining Core Competencies Necessary to Satisfy Customer Needs
focused cost leadership
源自文库
focused differentiation
integrated cost leadership/differentiation.
Types of Business-Level Strategy (cont.)

Each business-level strategy involves a particular competitive scope:
BMA202 Strategic Management
Lecture 5: Business Level Strategies
Learning Outcomes

By the end of this lecture you should be able to:

define business-level strategy discuss the relationship between customers and businesslevel strategies in terms of who, what and how explain the differences among business-level strategies use the five forces of competition model to explain how aboveaverage returns can be earned through each business-level strategy describe the risks of using each of the business-level strategies.

Types of Business-Level Strategy

To position the firm, management may choose from five business-level strategies:

cost leadership


differentiation

Needs (what) are related to the benefits and features of a good or service. A basic need of all customers is to buy products that create value for them Two main forms of value that products provide are:

swing generation 1933–1945 baby boom generation 1946–1964 generation X 1965–1976 generation Y 1977–1984.
What: Determining Which Customer Needs to Satisfy

Business-level strategy

an integrated and coordinated set of commitments and actions designed to gain a competitive advantage by exploiting core competencies in specific, individual product markets.

To be successful in a chosen strategy, the firm must integrate its primary and support activities to provide the unique value it intends to deliver. Integration of primary and support activities creates an activity system.
Demographic factors
Perceptual Demographic
Socio-economic factors
Consumption Socio-economic
Geographic factors Psychological factors
Psychological
Geographic

lowest competitive price

in selecting a business-level strategy, the firm determines:
who will be served what needs those target customers have that it will satisfy how those needs will be satisfied. an example

The Purpose of a Business-Level Strategy

Business-level strategies are intended to create differences in the firm’s position relative to that of its rivals. To position itself, the firm must decide whether it intends to:
Common buying factor
Industrial Markets Product
Geographic
Increasing Segmentation of Markets (cont.)

Companies are segmenting markets into increasingly specialised niches of customers with unique needs and interests:


perform activities differently to achieve lower cost
or

perform different (and valuable) activities.
The Purpose of a Business-Level Strategy (cont.)

Core competencies are resources and capabilities that serve as a source of competitive advantage for the firm over its rivals. How will customer needs be satisfied?


Dell’s strategy to satisfy customer needs and manage its relationships with customers.
How to Effectively Manage Relationships with Customers

When the firm is committed to providing superior value to those it serves. Selecting customers and deciding which needs to be satisfied. Superior value is often created when a firm’s product satisfied a customer.


Who: Determining the Customers to Serve

Companies divide customers into groups based on differences in the customers’ needs.
Consumer markets Customers Industrial markets
Consumption patterns Perceptual factors
Basis for Customer Segmentation: Industrial Markets
End-use segments
Customer size
End use
Product segments
Geographic segments Common buying factor segments Customer size segments
Business-level Strategy (cont.)


Indicates choices the firms make to compete in individual product/service market Which good or service to offer Key issues
customers?
Business-level strategy
How to manufacture or create it?
How to distribute it?
Business-level Strategy (cont.)

Customers: business-level strategic issues


Business-level Strategy

Strategy

an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
Five Business-Level Strategies
Cost Leadership Strategy

A cost leadership strategy is an integrated set of actions designed to produce or deliver goods or services at the lowest cost relative to competitors, with features that are acceptable to customers:

Market segmentation

market segmentation is used to cluster people with similar needs into individual and identifiable groups.
Basis for Customer Segmentation: Consumer Markets