Business-Level Strategy

Business-Level Strategy

Business-level strategy: an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets. Or Business-level strategy details the actions managers take in their quest for competitive advantage when competing in a single product market.² It may involve a single product or a group of very similar products that use the same channel. It concerns the broad question, “How should we compete?” To formulate an appropriate business-level strategy, managers must answer the “who-what-why-and-how” questions of competition:

• Who—which customer segments—will we serve?
• What customer needs, wishes, and desires will we satisfy?
• Why do we want to satisfy them?
• How will we satisfy our customers’ needs?³

To formulate an effective business strategy, managers need to keep in mind that a firm’s competitive advantage is determined jointly by industry characteristics and firm characteristics. The more attractive an industry is, the more profitable it is.

Purpose of business level strategy to create differences between position of a firm and its competitors.  Firm must make a deliberate choice to

- perform activities differently

- perform different activities.

satisfying customers is the foundation of successful business strategies.

Two types of competitive advantage firms must choose between

. cost (are we lower than others)

. uniqueness ( are we different? How?)

The two types of Competitive scope firms must choose between

. broad target

. narrow target

These comdine to yield 5 different generic business level strategies.

   This generic business level strategies can be used by any organisation competing in any industry.

Cost leadership strategies

- firms must offer relatively standardised products with features or characteristics that are acceptable to customers at the lowest competitive price

- firms must consider their value chain of primary and secondary activities and link those activities to implemtn a cost leadership strategy

Differentiation strategy

- goal is to provide value to customers through unique features and characteristics of a firm's products

- differentiators focus or concentrate on product innovation and developing product features that customers value

- cant completely ignore costs

Focus strategies

-focus on a particular buyer group, segment of the market

- to serve a narrow target or market segment more effectively than broad based competitors can due to core competencies

-select target segments which are the least vulnerable to substitutes or where competitors are the weakest.

Intergrated cost leadership/differentiation

- efficiently produce products with differentiated attributes

- can adapt to new technology and rapid changes in external environment

- simultaneously concentrate on two sources of competitive advantage: cost and differentiation consequently