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Chapter4,Business-LevelStrategy,MichaelA.HittR.DuaneIrelandRobertE.Hoskisson,2000South-WesternCollegePublishing,CoreCompetency,Theresourcesandcapabilitiesthathavebeendeterminedtobeasourceofcompetitiveadvantageforafirmoveritsrivals.,Strategy,Anintegratedandcoordinatedsetofactionstakentoexploitcorecompetenciesandgainacompetitiveadvantage.,CoreCompetency,Theresourcesandcapabilitiesthathavebeendeterminedtobeasourceofcompetitiveadvantageforafirmoveritsrivals.,Strategy,Anintegratedandcoordinatedsetofactionstakentoexploitcorecompetenciesandgainacompetitiveadvantage.,BusinessLevelStrategy,Actionstakentoprovidevaluetocustomersandgainacompetitiveadvantagebyexploitingcorecompetenciesinspecific,individualproductmarkets.,CoreCompetency,Theresourcesandcapabilitiesthathavebeendeterminedtobeasourceofcompetitiveadvantageforafirmoveritsrivals.,GenericBusinessLevelStrategies,KeyCriteria:,CostLeadershipBusinessLevelStrategy,Requirements:,Constantefforttoreducecoststhrough:,CostLeadershipBusinessLevelStrategy,PrimaryActivities,SupportActivities,TechnologicalDevelopment,HumanResourceManagement,FirmInfrastructure,Procurement,InboundLogistics,Operations,OutboundLogistics,Marketing&Sales,Service,MARGIN,MARGIN,ValueCreatingActivitiesCommontoaCostLeadershipBusinessLevelStrategy,PrimaryActivities,SupportActivities,ValueCreatingActivitiesCommontoaCostLeadershipBusinessLevelStrategy,HowtoObtainaCostAdvantage,1.DetermineandControlCostDrivers,2.ReconfiguretheValueChainasneeded,ReconfiguringtheValueChainofIowaBeefPackers(IBP),Saveonshippingandcattleweightloss,Utilizecheapernon-unionrurallabor,ChoicesThatDriveCosts,ThreeKeyQuestions,2.,Howcanagroupoflinkedvalueactivitiesberegroupedorreordered?,3.,Howmightcoalitionswithotherfirmsloweroreliminatecosts?,Gallosoldwinethroughgrocerystoresratherthanliquorstoresbecausetheyweremoreefficientdistributors,1.,Howcananactivitybeperformeddifferentlyoreveneliminated?,EffectiveCostLeaderscanremainprofitableevenwhentheFiveForcesappearunattractive,EffectiveCostLeaderscanremainprofitableevenwhentheFiveForcesappearunattractive,BargainingPowerofBuyers,ThreatofNewEntrants,EffectiveCostLeaderscanremainprofitableevenwhentheFiveForcesappearunattractive,CanmitigateBuyerPowerby:,ThreatofNewEntrants,BargainingPowerofBuyers,Drivingpricesfarbelowcompetitorswhichmaycauseexitandshiftpowerbacktofirm,EffectiveCostLeaderscanremainprofitableevenwhentheFiveForcesappearunattractive,BargainingPowerofSuppliers,ThreatofNewEntrants,ThreatofSubstituteProducts,CanmitigateBuyerPowerby:,BargainingPowerofBuyers,Drivingpricesfarbelowcompetitorswhichmaycauseexitandshiftpowerbacktofirm,CanmitigateSupplierPowerby:,Lowcostpositionmakesthembetterabletoabsorbcostincreases,*,Morelikelytomakeverylargepurchaseswhichreduceschanceofsupplierpower,*,EffectiveCostLeaderscanremainprofitableevenwhentheFiveForcesappearunattractive,EffectiveCostLeaderscanremainprofitableevenwhentheFiveForcesappearunattractive,ThreatofNewEntrants,BargainingPowerofSuppliers,ThreatofSubstituteProducts,RivalryAmongCompetingFirmsinIndustry,CanmitigateBuyerPowerby:,BargainingPowerofBuyers,Drivingpricesfarbelowcompetitorswhichmaycauseexitandshiftpowerbacktofirm,MajorRisksofCostLeadershipBusinessLevelStrategy,BreadthofCompetitiveScope,SourceofCompetitiveAdvantage,BroadTargetMarket,NarrowTargetMarket,Cost,CostLeadership,Uniqueness,GenericBusinessLevelStrategies,BreadthofCompetitiveScope,SourceofCompetitiveAdvantage,BroadTargetMarket,NarrowTargetMarket,Cost,CostLeadership,Differen-tiation,GenericBusinessLevelStrategies,Uniqueness,KeyCriteria:,DifferentiationBusinessLevelStrategy,DifferentiationBusinessLevelStrategy,Requirements:,PrimaryActivities,SupportActivities,TechnologicalDevelopment,HumanResourceManagement,FirmInfrastructure,Procurement,InboundLogistics,Operations,OutboundLogistics,Marketing&Sales,Service,MARGIN,MARGIN,ValueCreatingActivitiesCommontoaDifferentiationBusinessLevelStrategy,TechnologicalDevelopment,HumanResourceManagement,FirmInfrastructure,Procurement,InboundLogistics,Operations,OutboundLogistics,Marketing&Sales,Service,MARGIN,MARGIN,PrimaryActivities,SupportActivities,ValueCreatingActivitiesCommontoaDifferentiationBusinessLevelStrategy,EffectivenesswithDifferentiationgrowsoutofValueChainactivities,Examples:,DifferentiationBusinessLevelStrategy,Creatingbarriersbyperceptionsofuniqueness,Creatingswitchingcoststhroughdifferentiation,RaisingBuyersPerformance,LoweringBuyersCosts,CreatingSustainabilitythrough:,CreateValuewithDifferentiationby:,DriversofDifferentiation,EffectiveDifferentiatorscanremainprofitableevenwhentheFiveForcesappearunattractive,EffectiveDifferentiatorscanremainprofitableevenwhentheFiveForcesappearunattractive,ThreatofNewEntrants,EffectiveDifferentiatorscanremainprofitableevenwhentheFiveForcesappearunattractive,ThreatofNewEntrants,BargainingPowerofSuppliers,CanmitigateBuyerPowerbecausewelldifferentiatedproductsreducecustomersensitivitytopriceincreases,EffectiveDifferentiatorscanremainprofitableevenwhentheFiveForcesappearunattractive,ThreatofNewEntrants,BargainingPowerofSuppliers,CanmitigateBuyerPowerbecausewelldifferentiatedproductsreducecustomersensitivitytopriceincreases,EffectiveDifferentiatorscanremainprofitableevenwhentheFiveForcesappearunattractive,ThreatofSubstituteProducts,ThreatofNewEntrants,BargainingPowerofSuppliers,BargainingPowerofBuyers,ThreatofSubstituteProducts,CanmitigateBuyerPowerbecausewelldifferentiatedproductsreducecustomersensitivitytopriceincreases,EffectiveDifferentiatorscanremainprofitableevenwhentheFiveForcesappearunattractive,MajorRisksofaDifferentiationBusinessLevelStrategy,BreadthofCompetitiveScope,SourceofCompetitiveAdvantage,BroadTargetMarket,NarrowTargetMarket,Cost,CostLeadership,Differen-tiation,Uniqueness,GenericBusinessLevelStrategies,BreadthofCompetitiveScope,SourceofCompetitiveAdvantage,BroadTargetMarket,NarrowTargetMarket,Cost,CostLeadership,Differen-tiation,FocusedDifferen-tiation,FocusedLowCost,Uniqueness,GenericBusinessLevelStrategies,FocusedBusinessLevelStrategiesinvolvethesamebasicapproachasBroadMarketStrategies.,However,opportunitiesmayexistbecause:,FocusedBusinessLevelStrategies,FocusedBusinessLevelStrategies,FocusedBusinessLevelStrategiesinvolvethesamebasicapproachasBroadMarketStrategies.,However,opportunit
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