Lesson 9 Business Level Strategy

Lesson 9
Business Level
Strategy
External Environment
Sustainable
Competitive
Advantage
Internal Environment
Business Level
Strategy
The resources and capabilities
Core that have been determined to
Competency be a source of competitive
advantage for a firm over its
rivals.
Core The resources and capabilities that have been
Competency determined to be a source of competitive
advantage for a firm over its rivals.
An integrated and coordinated

set of actions taken to exploit
Strategy
core competencies and gain a
competitive advantage.
Core The resources and capabilities that have been
Competency determined to be a source of competitive
advantage for a firm over its rivals.
An integrated and coordinated set of

Strategy actions taken to exploit core competencies
and gain a competitive advantage.
Actions taken to provide value to

Business customers and gain a competitive
Level advantage by exploiting core
Strategy competencies in specific, individual
product markets.
Basis for Customer Segmentation
Consumer Markets
1. Demographic factors (age, income, sex, etc.)
2. Socioeconomic factors
(social class, stage in the family life cycle)
3. Geographic factors
(culture, region or country differences)
4. Psychological factors (lifestyle, personality traits)
5. Consumption patterns
(heavy, moderate, and light users)
6. Perceptual factors
(benefit segmentation, perceptual mapping)
7. Brand loyalty patterns
Basis for Customer Segmentation
Industrial Markets
1. End use segments (identified by SIC code)
2. Product segments (based on technological differences
or production economics)
3. Geographic segments (defined by boundaries
between countries or by regional differences within
them)
4. Common buying factor segments (cut across
product/market and geographic segments)
5. Customer size segments
Cost Leadership Business Level Strategy
Key Criteria:
Relatively standardized products
Features acceptable to many customers
Lowest competitive price

Requirements:
Constant effort to reduce costs through:
Building efficient scale facilities

Tight control of production costs and overhead
Minimizing costs of sales, R&D and service
State of the art manufacturing facilities
Monitoring costs of activities provided by outsiders
Simplification of processes
Value Creating Activities Common to a
Firm Infrastructure
Activities
M
Support
Human Resource Management A

R
Technological Development G
IN
Procurement
M Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
IN
G
AR
Primary Activities
Value Creating Activities Common to a
Simplified Planning Relatively Few
Cost Effective
MIS Systems Firm Infrastructure
Practices to Reduce
Planning Costs
Management Layers to
Reduce Overhead
Activities
M
Support
Effective Training Programs

Human Resource Management
Consistent Policies to
Reduce Turnover Costs
to Improve Worker
Efficiency and Effectiveness A
R
Easy-to-Use Manufacturing
Technological Development
Investments in Technology in order G
Technologies to Reduce Costs Associated with
Manufacturing Processes
IN
Systems and Procedures to find the
Procurement
Frequent Evaluation Processes to
Lowest Cost Products to Purchase
Raw Materials
Monitor Suppliers’ Performances
Highly Efficient Efficient Plant Delivery Schedule Small, Highly Effective Product
M Service
Systems to Link Scale to Minimize that Reduces Trained Sales Installations to
Operations
Suppliers’ Manufacturing
Outbound
Costs Force Reduce Frequency
Marketing
Logistics
Inbound
Products with the Costs and Severity
& Sales
Logistics
IN
Firm’s Production Selection of Low Products Priced to of Recalls
Processes Timing of Asset Cost Transport Generate Sales
G
Purchases Carriers Volume
AR
Located in Close Policy Choice of Efficient Order National Scale
Proximity with Plant Technology Sizes Advertising
Suppliers
Organizational Interrelationships
Learning with Sister Units
Primary Activities
How to Obtain a Cost Advantage
1. Determine and Control Cost Drivers

2. Reconfigure the Value Chain as needed
Alter production process New raw material

Change in automation Forward integration
New distribution channel Backward integration
New advertising media Change location relative
Direct sales in place of to suppliers or buyers
indirect sales
Choices That Drive Costs
Economies of scale Product features
Asset utilization Performance
Capacity utilization pattern Mix & variety of products
- Seasonal, cyclical Service levels
Interrelationships Small vs. large buyers
- Order processing
and distribution Process technology
Value chain linkages Wage levels

- Advertising & Sales Product features
- Logistics & Operations
Hiring, training, motivation

Lesson 9 Business Level Strategy

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Lesson 9

An integrated and coordinated

An integrated and coordinated set of

Actions taken to provide value to

Relatively standardized products

Features acceptable to many customers

Lowest competitive price

Building efficient scale facilities

Human Resource Management A

Effective Training Programs

Products with the Costs and Severity

1. Determine and Control Cost Drivers

Alter production process New raw material

Value chain linkages Wage levels

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