Hitt PPT 12e ch04
Hitt PPT 12e ch04
Hitt PPT 12e ch04
Business-Level Strategy
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Learning Objectives
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Core Competencies and Strategy
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Customers: Their Relationship
with Business-Level Strategies
Who will be
served?
Key Issues
in What needs will
Business-level be satisfied?
Strategy
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Effectively Managing Relationships
with Customers
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Who: Determining the Customers
to Serve
• Market segmentation
– A process used to cluster people with similar needs
into individual and identifiable groups.
All Customers
Consumer Industrial
Markets Markets
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Market Segmentation
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Market Segmentation (cont’d)
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What: Determining Which
Customer Needs to Satisfy
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How: Determining Core Competencies
Necessary to Satisfy Customer Needs
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The Purpose of a
Business-Level Strategy
• Business-Level Strategies:
– are intended to create differences between the firm’s
competitive position and those of its competitors.
• To position itself, the firm must decide whether it
intends to:
– perform activities differently or
– perform different activities as compared to its rivals.
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Types of Potential
Competitive Advantage
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Competitive Scope
• Broad Scope
– The firm competes in many customer segments.
• Narrow Scope
– The firm selects a segment or group of segments in
the industry and tailors its strategy to serving them at
the exclusion of others.
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4–14
Business Level Strategies
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Cost Leadership Strategy
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Cost Leadership Strategy
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How to Obtain a Cost Advantage
Determine Reconfigure
and control Value Chain if
Cost Drivers needed
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Value-Creating Activities for Cost Leadership
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Value-Creating Activities for Cost Leadership
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Cost Leadership Strategy: Buyers
Bargaining Power
• Can mitigate buyers’
of Buyers
power by:
– driving prices far Threat of
new
below competitors, entrants
causing them to exit, Rivalry
Bargaining
among
thus shifting power competing power of
firms suppliers
with buyers
(customers) back to Threat of Bargaining
the firm. substitute
products
power of
buyers
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4–22
Cost Leadership Strategy: Suppliers
Bargaining Power
• Can mitigate
of Suppliers
suppliers’ power by:
– being able to absorb Threat of
new
cost increases due to entrants
low cost position. Rivalry
Bargaining
among
– being able to make competing power of
suppliers
firms
very large purchases,
reducing chance of Threat of Bargaining
substitute power of
supplier using power. products buyers
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Cost Leadership Strategy: New Entrants
The Threat of
• Can frighten off new
Potential Entrants
entrants due to:
Threat of – their need to enter on a
new
entrants
large scale in order to
Rivalry
Bargaining
be cost competitive.
among
competing power of
suppliers
– the time it takes to
firms
move down the
Threat of Bargaining industry learning curve.
substitute power of
products buyers
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Cost Leadership Strategy: Substitutes
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Cost Leadership Strategy (cont’d)
• Competitive Risks
– Processes used to produce and distribute good or
service may become obsolete due to competitors’
innovations.
– Too much focus on cost reductions may occur at
expense of customers’ perceptions of differentiation.
– Competitors, using their own core competencies, may
successfully imitate the cost leader’s strategy.
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4–26
Differentiation Strategy
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How to Obtain a
Differentiation Advantage
Control Reconfigure
Cost Drivers if Value Chain to
needed maximize
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Value-Creating Activities and Differentiation
Rivalry with
• Defends against
Existing Competitors
competitors because
Threat of customer’s brand
new
entrants loyalty to differentiated
Rivalry
among Bargaining product offsets price
power of
competing
firms suppliers competition.
Threat of Bargaining
substitute power of
products buyers
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Differentiation Strategy: Buyers
Bargaining Power
• Can mitigate buyers’
of Buyers
power because well
Threat of differentiated
new
entrants products reduce
Rivalry
among Bargaining customer sensitivity to
power of
competing
firms suppliers price increases.
Threat of Bargaining
substitute power of
products buyers
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4–32
Differentiation Strategy: Suppliers
Bargaining Power
• Can mitigate suppliers’
of Suppliers
power by:
Threat of – absorbing price
new
entrants
increases due to higher
Rivalry
Bargaining
margins.
among
competing power of
suppliers
– passing along higher
firms
supplier prices because
Threat of Bargaining buyers are loyal to a
substitute power of
products buyers differentiated brand.
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Differentiation Strategy: New Entrants
The Threat of
• Can defend against new
Potential Entrants
entrants because:
Threat of – new products must
new
entrants
surpass proven products.
Rivalry
among Bargaining – new products must be at
power of
competing
suppliers least equal to performance
firms
of proven products, but
Threat of Bargaining offered at lower prices.
substitute power of
products buyers
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Differentiation Strategy: Substitutes
Product
• Well-positioned relative
Substitutes
to substitutes because:
Threat of – brand loyalty to a
new
entrants
differentiated product
Rivalry
Bargaining
tends to reduce
among
competing power of customers’ testing of new
firms suppliers
products or switching
Threat of Bargaining brands.
substitute power of
products buyers
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Competitive Risks of Differentiation
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Focus Strategies
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Focus Strategies (cont’d)
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Factors That Drive Focused Strategies
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Competitive Risks of Focus Strategies
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Integrated Cost Leadership/
Differentiation Strategy
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Integrated Cost Leadership/
Differentiation Strategy (cont’d)
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Flexible Manufacturing Systems
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Information Networks
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Total Quality Management
(TQM) Systems
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Risks of an Integrated Cost Leadership/
Differentiation Strategy
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