Business-Level
Strategy:
Creating and
Sustaining
Competitive
Advantages
chapter 5
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education
.
Three Generic Strategies
5-2
Exhibit 5.1 Three Generic Strategies as Part of a Business-Level Strategy
Source: Adapted and reprinted with the permission of The Free Press, a division of Simon & Schuster Inc. from
Competitive Strategy: Techniques for Analyzing Industries and Competitors. Michael E Porter. Copyright © 1980,
1998 by The Free Press. All rights reserved.
Three Generic Strategies
5-3
Overall
cost leadership is based on:
Creating
a low-cost position relative to a
firm’s peers: see the experience curve &
competitive parity
Managing
relationships throughout the
entire value chain to lower costs
Differentiation
Products
implies:
and/or services that are unique &
valued
Emphasis on nonprice attributes for which
customers will gladly pay a premium
Three Generic Strategies
5-4
A
focus strategy requires:
Narrow
product lines, buyer segments, or
targeted geographic markets
Advantages obtained either through
differentiation or cost leadership
Three Generic Strategies
5-5
Exhibit 5.2 Competitive Advantage and Business Performance
Combination Strategies: Integrating
Low-Cost & Differentiation
5-6
The
goal of a combination strategy is to
provide unique value in an efficient
manner
Automated
& flexible manufacturing systems
allow for mass customization
Exploitation of the profit pool concept
creates a competitive advantage
Using information technology, firms can
integrate activities throughout the extended
value chain
Internet-Enabled Low-Cost
Leader Strategies
5-7
The
Internet and digital technologies
lower transaction costs:
No
in-person sales calls
Paperless transactions
Disintermediation
or removing
intermediaries also lowers transaction
costs
Reduced
search costs
No need for a permanent retail location
Internet-Enabled Differentiation
Strategies
5-8
The
Internet and digital technologies have
created new ways of differentiating by
enabling mass customization
Customers can judge the quality &
uniqueness of a product or service by
their ability to be involved in its planning
& design
Lowered transaction costs allow firms to
achieve parity on cost while providing a
unique experience
Internet-Enabled Focus Strategies
5-9
The
Internet and digital technologies have
created new ways of competing in a
narrow market segment
Customers can access markets less
expensively, and small firms can extend
their reach
Social media allows niche firms to solicit
input and respond quickly to customer
feedback
Internet-Enabled Combination
Strategies
5-10
The
Internet and digital technologies have
provided all companies with greater tools
for managing costs
With lower costs for all, the net effect is
fewer rather than more opportunities for
sustainable advantage
The ease of comparison shopping also
erodes differentiation advantages
Industry Life Cycle Stages
5-11
Exhibit 5.7 Stages of the Industry Life Cycle
Strategies in the Introduction
Stage
5-12
The
introduction stage is when:
Products
are unfamiliar to consumers
Market segments are not well-defined
Product features are not clearly specified
Competition tends to be limited
Strategies:
Develop
a product and get users to try it
Generate exposure so the product becomes
“standard”
Strategies in the Growth Stage
5-13
The
growth stage is:
Characterized
by strong increases in sales
Attractive to potential competitors
When firms can build brand recognition
Strategies:
Create
branded differentiated products
Stimulate selective demand
Provide financial resources to support valuechain activities
Strategies in the Maturity Stage
5-14
The
maturity stage is when:
Aggregate
industry demand slows
Market becomes saturated, few new adopters
Direct competition becomes predominant
Marginal competitors begin to exit
Strategies:
Create
efficient manufacturing operations
Lower costs as customers become pricesensitive
Adopt reverse or breakaway positioning
Strategies in the Decline Stage
5-15
The
decline stage is when:
Industry
sales and profits begin to fall
Price competition increases
Industry consolidation occurs
Strategies:
Maintaining
the product position
Harvesting profits & reducing costs
Exiting the market
Consolidating or acquiring surviving firms
Turnaround Strategies
5-16
A
turnaround strategy involves reversing
performance decline & reinvigorating
growth toward profitability through
Asset
& cost surgery
Selected market & product pruning
Piecemeal productivity improvements
Example
= Ford Motor Company
Example = Jamba Juice
0
