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Business-Level Strategy: Michael A. Hitt R. Duane Ireland Robert E. Hoskisson
Business-Level Strategy: Michael A. Hitt R. Duane Ireland Robert E. Hoskisson
Business-Level Strategy
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
2000 South-Western College Publishing
Ch4-1
Strategic
Inputs
Chapter 2
External
Environment
Strategic Intent
Strategic Mission
Chapter 3
Internal
Environment
Strategy Implementation
Chapter 4
Business-Level
Strategy
Chapter 5
Competitive
Dynamics
Chapter 6
Corporate-Level
Strategy
Chapter 10
Corporate
Governance
Chapter 11
Structure
& Control
Chapter 7
Acquisitions &
Restructuring
Chapter 8
International
Strategy
Chapter 9
Cooperative
Strategies
Chapter 12
Strategic
Leadership
Chapter 13
Outcomes
Strategic
Strategic
Actions
Strategy Formulation
The Strategic
Management
Process
Feedback
Entrepreneurship
& Innovation
Strategic
Competitiveness
Above Average
Returns
Ch4-2
Chapter 2
External Environment
Chapter 3
Sustainable
Competitive
Advantage
Internal Environment
Chapter 4
Business Level
Strategy
Ch4-3
Core
Competenc
y
Ch4-4
Core
Competency
Strateg
y
Ch4-5
Core
Competency
Strategy
Business
Level
Strategy
Ch4-6
Breadth of
Competitive
Scope
Broad
Target
Market
Narrow
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
Focused
Low Cost
Focused
Differentiation
Ch4-9
M
A
R
G
IN
Primary Activities
M Service
A
R
G
IN
Marketing
& Sales
Outbound
Logistics
Operations
Procurement
Inbound
Logistics
Support
Activities
Firm Infrastructure
Ch4-12
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
National Scale
Advertising
M Service
A
R
G
IN
Located in Close
Proximity with
Suppliers
Organizational
Learning
Effective Product
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Marketing
& Sales
Small, Highly
Trained Sales
Force
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Interrelationships
with Sister Units
Primary Activities
Ch4-13
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Highly Efficient
Systems
to Link
Effective Training Programs
toManagement
Improve Worker
Human Resource
Suppliers
Efficiency and Effectiveness
Products with the
Easy-to-Use Manufacturing
Investments in Technology in order
Firms
Production
Technologies
to Reduce
Costs Associated with
Technological Development
Manufacturing Processes
Processes
Consistent Policies to
Reduce Turnover Costs
M
A
R
G
IN
Proximity with
Small, Highly
Sales
Suppliers Trained
Force
National Scale
Advertising
Organizational
Learning
M Service
A
R
G
IN
Located in Close
Proximity with
Suppliers
Marketing
& Sales
Effective Product
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Inbound
Inbound
Logistics
Logistics
Support
Activities
Cost Effective
MIS Systems
Interrelationships
with Sister Units
Primary Activities
Ch4-14
Relatively Few
Management Layers to
Reduce Overhead
M
Human Resource Management
Timing of Asset A
R
Easy-to-Use Manufacturing
Investments inPurchases
Technology in order
G
Technologies
to Reduce Costs Associated with
Technological Development
IN
Manufacturing Processes
Effective Training Programs
to Improve Worker
Efficiency and Effectiveness
Consistent Policies to
Reduce Turnover Costs
Policy Choice of
Systems and Procedures to find the
Frequent Evaluation
to
PlantProcesses
Technology
Lowest Cost Products toProcurement
Purchase
Monitor Suppliers Performances
Organizational
Small, Highly
Effective Product
Trained Sales
Installations to
Learning
Force
M Service
A
R
G
IN
Located in Close
Proximity with
Suppliers
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Marketing
& Sales
Raw Materials
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Efficient Plant
Scale to Minimize
Infrastructure
Mfg. Costs
Simplified Planning
Practices to Reduce
Planning Costs
National Scale
Advertising
Interrelationships
with Sister Units
Primary Activities
Ch4-15
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Delivery Schedule
that Reduces Costs
M
Human Resource ManagementSelection
A of Low
R
Easy-to-Use Manufacturing
Investments in Technology in order
Cost Transport
G
Technologies
to Reduce Costs Associated with
Technological Development
IN
Carriers
Manufacturing Processes
Systems and Procedures to find the
Efficient Order
Frequent Evaluation Processes to
Lowest Cost Products toProcurement
Purchase
Monitor Suppliers Performances
Sizes
Raw Materials
Located in Close
Proximity with
Suppliers
National Scale
Advertising
Organizational
Learning
Marketing
& Sales
Small, Highly
Trained Sales
Force
Outbound
Outbound
Logistics
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Effective Product
Interrelationships
Installations to
Reduce
Frequency
with
Sister
Units
M Service
A
R
G
IN
Consistent Policies to
Reduce Turnover Costs
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Interrelationships
with Sister Units
Primary Activities
Ch4-16
Firm Infrastructure
Easy-to-Use Manufacturing
Technologies
Located in Close
Proximity with
Suppliers
National Scale
Advertising
Organizational
Learning
Products
Priced
A
R
to Generate
Sales
G
Volume I
National Scale
Advertising
Effective Product
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Marketing
&
& Sales
Sales
Small, Highly
Trained Sales
Force
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Small, Highly
Trained Sales Force
M Service
A
R
G
IN
Simplified Planning
Practices to Reduce
Planning Costs
Consistent Policies to
Reduce Turnover Costs
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Interrelationships
with Sister Units
Primary Activities
Ch4-17
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Service
Effective Product
Effective Training ProgramsInstallations to
Consistent Policies to
M
Improve Worker
Human
ResourcetoEfficiency
Management
Reduce
Turnover Costs
Reduce
and Effectiveness
A
R
Recalls
Easy-to-Use Manufacturing
Investments in Technology in
order
G
to Reduce Costs Associated with
Technological Development
Manufacturing Processes
IN
Technologies
National Scale
Advertising
Service
M Service
A
R
G
IN
Located in Close
Proximity with
Suppliers
Organizational
Learning
Effective Product
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Marketing
& Sales
Small, Highly
Trained Sales
Force
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Interrelationships
with Sister Units
Primary Activities
Ch4-18
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
Procurement
Interrelationships
with Sister Units
Primary Activities
M Service
A
R
G
IN
Small, Highly
Trained Sales
Force
Marketing
& Sales
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Frequent Evaluation
Processes to Monitor
Suppliers Performances
National Scale
Advertising
Ch4-19
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Small, Highly
Trained Sales
Force
Effective Product
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Located in Close
Proximity with
Suppliers
National Scale
Advertising
Organizational
Learning
Marketing
& Sales
Outbound
Logistics
Easy-to-Use
Manufacturing
Technologies
Operations
Technological Development
M Service
A
R
G
IN
Highly Efficient
Systems to Link
Suppliers
Products with the
Firms Production
Processes
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Investments in Technology in
order to Reduce Costs Associated
with Manufacturing Processes
Interrelationships
with Sister Units
Primary Activities
Ch4-20
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
Human Procurement
Resource Management
Located in Close
Proximity with
Suppliers
Cost Transport
Carriers
Generate Sales
Volume
National Scale
Advertising
Organizational
Learning
M Service
A
R
G
IN
Effective Product
Effective Training Programs
Installations to
to Improve Worker Reduce Frequency
and Severity
Efficiency and Effectiveness
Selection of Low Products Priced to of Recalls
Delivery Schedule Small, Highly
that Reduces
Trained Sales
Costs
Force
Marketing
& Sales
Operations
Highly Efficient
Efficientto
Plant
Consistent
Policies
Systems to Link
Scale to Minimize
Reduce
Costs
SuppliersTurnover
Manufacturing
Outbound
Logistics
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Interrelationships
with Sister Units
Primary Activities
Ch4-21
Relatively Few
Management Layers to
Reduce Overhead
Firm Infrastructure
Consistent Policies to
Reduce Turnover Costs
Easy-to-Use Manufacturing
Technologies
M
A
R
G
IN
Located in Close
Proximity with
Suppliers
National Scale
Advertising
Organizational
Learning
Installations to
Reduce Frequency
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Marketing
& Sales
Trained Sales
Force
Outbound
Logistics
Operations
Systems to Link
Suppliers
Products with the
Firms Production
Processes
M Service
A
R
G
IN
CostSystems
Effective
Simplified
Planning
Relatively Few
and Procedures to find
the
Frequent Evaluation Processes to
Cost Products toProcurement
Purchase
Suppliers Performances
MIS Lowest
Systems
Practices Monitor
to Reduce
Management Layers
Raw Materials
Planning
Costs
Overhead
Highly Efficient
Efficient Plant
Delivery
Schedule Small, Highly to Reduce
Effective Product
Inbound
Logistics
Support
Activities
Cost Effective
MIS Systems
Interrelationships
with Sister Units
Primary Activities
Ch4-22
Ch4-23
New
New
Way:
Way
Ranch
Cattle
Ship on the
Hoof to Rail
Center
(Chicago)
Locate large
automated
plants near
ranches
Slaughter
into sides
of beef
Process into
Boxed Cuts at
plants
Boxed
Cuts at
Markets
Ship cuts
already
Boxed to
Markets
Product features
Asset utilization
Performance
Interrelationships
- Order processing
and distribution
Wage levels
Service levels
Process technology
Product features
Hiring, training, motivation
Ch4-25
Ch4-27
Bargaining
Power of
Buyers
Ch4-29
substitutes first
* Buy patents developed by
potential substitutes
Bargaining
Power of
Buyers
Can mitigate Buyer Power by:
Threat of
Substitute
Products
Bargaining
Power of
Suppliers
Threat of
New
Entrants
Bargaining
Power of
Buyers
Products
back to firm
Ch4-31
Bargaining
Power of
Suppliers
Rivalry Among
Competing Firms
in Industry
Bargaining
Power of
Buyers
Can mitigate Buyer Power by:
Threat of
Substitute
Products
Breadth of
Competitive
Scope
Broad
Target
Market
Uniqueness
Cost
Leadership
Narrow
Target
Market
Ch4-34
Breadth of
Competitive
Scope
Broad
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
Narrow
Target
Market
Ch4-35
M
A
R
G
IN
Primary Activities
M Service
A
R
G
IN
Marketing
& Sales
Outbound
Logistics
Operations
Procurement
Inbound
Logistics
Support
Activities
Firm Infrastructure
Ch4-38
A companywide
emphasis on producing
high quality products
Compensation programs
intended to encourage worker
creativity and productivity
Superior
personnel
training
M
A
R
Strong
capability in
basic research
G
IN
Procurement
replacement parts
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Primary Activities
Marketing
& Sales
Rapid responses
to customers
unique
manufacturing
specifications
Outbound
Logistics
Accurate and
responsive order
processing
procedures
M Service
A
R
G
IN
Consistent
manufacturing of
attractive
products
Operations
Superior
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
Inbound
Logistics
Support
Activities
Firm Infrastructure
Premium
Pricing
Ch4-39
A companywide
emphasis on producing
high quality products
of incoming raw
Superior
personnel
M
materials
to
Human Resource
Management
training
A
minimize
damage
R
Coordination among R&D,
Investments in technologies that will
Strong
andthe
improve
the produce capability in GI
product
development and
allow
firm to consistently
Technological
Development
marketing
highly differentiated products
basic research
N
quality of the
Systems and procedures used to find
Purchase of highest quality
final product
the highest quality rawProcurement
materials
replacement parts
Strong Coordin- Complete field
ation among
stocking of
functions in R&D, replacement parts
Marketing and
Product
Development
Rapid responses
to customers
unique
manufacturing
specifications
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Primary Activities
Marketing
& Sales
Accurate and
responsive order
processing
procedures
Outbound
Logistics
Consistent
manufacturing of
attractive
products
Operations
Superior
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
M Service
A
R
G
IN
Compensation programs
intended to encourage worker
creativity and productivity
Inbound
Inbound
Logistics
Logistics
Support
Activities
Firm Infrastructure
Superior handling
Premium
Pricing
Ch4-40
specifications
Procurement
replacement parts
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Primary Activities
Marketing
& Sales
Rapid responses
to customers
unique
manufacturing
specifications
Outbound
Logistics
Accurate and
responsive order
processing
procedures
M Service
A
R
G
IN
Consistent
manufacturing of
attractive
products
Operations
Superior
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
Inbound
Logistics
Support
Activities
Firm
A companywide
emphasis on producing
high quality products
Premium
Pricing
Ch4-41
A companywide
emphasis on producing
high quality products
Accurate and
responsive order
Compensation programs
Extensive use of subjective
Superior
intended to encourage worker rather than objective
personnel
M
processing
Human
Resource
Management
creativity and productivity
performance measures
training
A
procedures
R
Coordination among R&D,
Investments in technologies that will
Strong
allow the
firm to consistently produce
Technological
Development
highly differentiated products
Procurement
replacement parts
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Marketing
& Sales
Rapid responses
to customers
unique
manufacturing
specifications
Outbound
Outbound
Logistics
Logistics
Accurate and
responsive order
processing
procedures
Primary Activities
G
IN
Consistent
manufacturing of
attractive
products
Operations
Superior
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
capability in
basic research
M Service
A
R
G
IN
Inbound
Logistics
Support
Activities
Firm Infrastructure
Premium
Pricing
Ch4-42
A companywide
emphasis on producing
high quality products
Strong Coordination
among functions in
Compensation programs
Extensive use of subjective
Superior
Marketing
intended to encourage worker rather than objective
personnel R&D,
M
Human
Resource
Management
creativity and productivity
performance measures
training
andAProduct
R
Coordination among R&D,
Investments in technologies that will
Strong
Development
G
product development and
allow the firm to consistently produce
capability in
Technological
Development
highly differentiated products
marketing
Procurement
replacement parts
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Marketing
&
& Sales
Sales
Rapid responses
to customers
unique
manufacturing
specifications
Outbound
Logistics
Accurate and
responsive order
processing
procedures
Primary Activities
IN
Extensive personal
relationships with
buyers
Consistent
manufacturing of
attractive
products
Operations
Superior
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
basic research
M Service
A
R
G
IN
Inbound
Logistics
Support
Activities
Firm Infrastructure
Premium
Pricing
Premium
Pricing
Ch4-43
A companywide
emphasis on producing
high quality products
Service
Complete field
Compensation programs
Extensive use of subjective
Superior
stocking of
intended to encourage worker rather than objective
personnel
M
Human Resource
Management
replacement
creativity and productivity
performance measures
training
A
R
Coordination among R&D,
Investments in technologies that willparts
Strong
allow the
firm to consistently produce
Technological
Development
highly differentiated products
capability in
basic research
G
IN
Procurement
replacement parts
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Primary Activities
Marketing
& Sales
Rapid responses
to customers
unique
manufacturing
specifications
Outbound
Logistics
Accurate and
responsive order
processing
procedures
Service
M Service
A
R
G
IN
Consistent
manufacturing of
attractive
products
Operations
Superior
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
Inbound
Logistics
Support
Activities
Firm Infrastructure
Premium
Pricing
Ch4-44
A companywide
emphasis on producing
high quality products
Support
Activities
Firm Infrastructure
Compensation programs
intended to encourage worker
creativity and productivity
Superior
personnel
training
M
A
R
Strong
capability in
basic research
G
IN
Procurement
replacement parts
Procurement
Procurement
Rapid responses
to customers
unique
manufacturing
specifications
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Purchase of highest
quality replacement
parts
Premium
M Service
A
R
G
IN
Marketing
& Sales
Accurate and
responsive order
processing
procedures
Outbound
Logistics
Consistent
manufacturing of
attractive
products
Operations
Inbound
Logistics
Superior
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
Located in
Close Proximity
with Suppliers
Pricing
Primary Activities
Ch4-45
A companywide
emphasis on producing
high quality products
Compensation programs
intended to encourage worker
creativity and productivity
Superior
personnel
training
M
A
R
Strong
capability in
basic research
G
IN
Procurement
replacement parts
Consistent
manufacturing of
attractive
products
Accurate and
responsive order
processing
procedures
unique
manufacturing
specifications
Marketing
& Sales
Outbound
Logistics
Operations
Technological Development
Coordination among
Investments in technolR&D, marketing and
ogies to produce highly
Rapid responses
Extensive
product development
differentiated
products
Rapid
and
timely
personal
to customers
Primary Activities
M Service
A
R
G
IN
Superior
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
Inbound
Logistics
Support
Activities
Firm Infrastructure
Strong
capability in
basic research
Premium
Pricing
Ch4-46
A companywide
emphasis on producing
high quality products
Support
Activities
Firm Infrastructure
Compensation programs
intended to encourage worker
creativity and productivity
Superior
personnel
training
M
A
R
Strong
capability in
basic research
G
IN
Human Procurement
Resource Management
Product
Development
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Primary Activities
M Service
A
R
G
IN
Rapid responses
to customers
unique
manufacturing
specifications
ExtensiveStrong
useCoordinof
Superior
Complete field
among
stocking ofpersonnel
subjectiveation
performance
functions in R&D, replacement parts
measuresMarketing and
training
Accurate and
responsive order
processing
procedures
Marketing
& Sales
minimize
damage and
improve the
quality of the
final product
Operations
Inbound
Logistics
Compensation
programs
Superior
Consistent
handling
of
manufacturing
of
which
encourage
worker
incoming raw
attractive
products
materials and
to
creativity
productivity
Outbound
Logistics
Premium
Pricing
Ch4-47
A companywide
emphasis on producing
high quality products
Compensation programs
intended to encourage worker
creativity and productivity
Superior
personnel
training
M
A
R
Strong
capability in
basic research
G
IN
ation among
stocking of
functions in R&D, replacement parts
Marketing and
Product
Development
Marketing
& Sales
Rapid responses
to customers
unique
manufacturing
specifications
Outbound
Logistics
Operations
handling of
incoming raw
materials to
minimize
damage and
improve the
quality of the
final product
Extensive
Rapid and timely personal
product deliveries relationships
to customers
with buyers
Primary Activities
M Service
A
R
G
IN
Highly
developed InformationPurchase of highest
A companywide
emphasis
Systems and procedures used to find
quality
the highest
rawProcurement
materials
replacement parts
Systems
toquality
better
understand
on producing high quality
customers
purchasing
preferences
products
Strong
Coordin- Complete field
Consistent
Accurate and
Superior
Inbound
Logistics
Support
Activities
Firm Infrastructure
Premium
Pricing
Ch4-48
Heineken beer
Raw materials
Steinway pianos
Intel microprocessors
Technological superiority
Caterpillar tractors
Ch4-50
Drivers of Differentiation
Examples:
Ch4-52
Or be equal to performance
at lower prices
Bargaining
Power of
Buyers
Ch4-54
Or be equal to performance
at lower prices
Bargaining
Power of
Suppliers
Bargaining
Power of
Suppliers
Or be equal to performance
at lower prices
to
* Absorbing price increases dueBargaining
Power of
higher margins
Suppliers
Threat of
Substitute
Products
Bargaining
Power of
Buyers
Well positioned relative to
Substitutes because:
*
Threat of
New
Entrants
Brand
loyalty
New products must
surpass proven products
overcomes
much
* Or be equal to performance
price
competition
at lower
prices
*
Rivalry Among
Competing Firms
in Industry
Threat of
Substitute
Products
Bargaining
Power of
Suppliers
Breadth of
Competitive
Scope
Broad
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
Narrow
Target
Market
Ch4-59
Breadth of
Competitive
Scope
Cost
Uniqueness
Broad
Target
Market
Cost
Leadership
Differentiation
Narrow
Target
Market
Focused
Low Cost
Focused
Differentiation
Ch4-60
Ch4-62
Breadth of
Competitive
Scope
Broad
Target
Market
Narrow
Target
Market
Uniqueness
Cost
DifferenLeadership
tiation
Integrated
Low Cost/
Differentiation
Focused
Focused
DifferenLow Cost
tiation
Ch4-65
Ch4-66
Ch4-67
Southwest Airlines
Low Cost
Use a single aircraft model
(Boeing 737)
Use secondary airports
Fly short routes
No meals
15 minute turnaround time
No reserved seats
No travel agent reservations
Differentiation
Focus on customer
satisfaction
High level of employee
dedication
New flight services for
business travelers
(phones and faxes)
Ch4-68