Professional Documents
Culture Documents
Business-Level Strategy
Michael A. Hitt Michael A. Hitt R. Duane Ireland R. Duane Ireland Robert E. Hoskisson Robert E. Hoskisson
2000 South-Western College Publishing
Ch4
Chapter 2
External Environment
Chapter 3
Internal Environment
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Core Competenc y
The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals.
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Core Competency
The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals.
Strateg y
An integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage.
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Core Competency
The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals.
Strategy
An integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage.
Actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product markets. Ch4
Cost Leadership
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M A RG
IN
Operations
Outbound Logistics
Primary Activities
Inbound Logistics
M Service A R G IN
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Firm Infrastructure
Support Activities
M A RG
IN
Systems and Procedures to find the Lowest Cost Products to Purchase Raw Materials
Operations
Outbound Logistics
Primary Activities
Inbound Logistics
M Service A R G IN
Highly Efficient Systems to Link Suppliers Products with the Firms Production Processes
Effective Product Installations to Reduce Frequency and Severity Products Priced to of Recalls Generate Sales Volume
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Save on shipping and cattle weight loss Utilize cheaper non-union rural labor
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Effective Cost Leaders can remain profitable even when the Five Forces appear unattractive
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Effective Cost Leaders can remain profitable even when the Five Forces appear unattractive
Threat of New Entrants
Can frighten off New Entrants due to the need to: * Enter at large scale to be Cost Competitive * Take time to move down the Learning Curve
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Effective Cost Leaders can remain profitable even when the Five Forces appear unattractive
Threat of New Entrants
Can frighten off New Entrants due to the need to: * Enter at Large Scale to be Cost Competitive * Take time to move down the Learning Curve
Can mitigate Buyer Power by: * Driving prices far below competitors may cause exit and shift power back to firm
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Effective Cost Leaders can remain profitable even when the Five Forces appear unattractive Well positioned relative toThreat of New Substitutes in order to: Entrants * Make investments to create
substitutes first * Buy patents developed by potential substitutes
Can frighten off New Entrants due to the need to: * Enter at Large Scale to be Cost Competitive * Take time to move down the Learning Curve
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Effective Cost Leaders can remain profitable even when the Five Forces appear unattractive
Threat of New Entrants
Can frighten off New Entrants due to the need to: * Enter at Large Scale to be Cost Competitive * Take time to move down the Learning Curve
* Low cost position makes them better able to absorb cost increases Well positioned relative to Can mitigate Buyer Power by:
Substitutes in order to: Driving prices far * More likely to make very large purchases whichbelow Threat of competitors may Can buy patents developed by * which reduces chance Substitute of supplier power and shift power cause exit potential substitutes * Make investments to create substitutes * Lower prices to maintain value position
Products
back to firm
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Effective Cost Leaders can remain profitable even when Competitors the Five Forces appear unattractive avoid price wars with Cost Leaders, which due Can mitigate Supplier Power by: Can frighten off New Entrants Threat of to the need higher profits createsto: Scale to be * Low cost position makes them New * Enter at Large better able to absorb cost increases Cost Competitive for entire industry Entrants * More likely to make very large
purchases which reduces chance of supplier power * Take time to move down the Learning Curve
* Make investments to create substitutes * Can buy patents developed by potential substitutes * Lower prices to maintain value position
Driving prices far below competitors which may cause exit and shift power back to firm
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Cost Leadership
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Cost Leadership
Differentiation
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M A RG
IN
Operations
Outbound Logistics
Primary Activities
Inbound Logistics
M Service A R G IN
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Firm Infrastructure
Extensive use of subjective rather than objective performance measures
Support Activities
Compensation programs intended to encourage worker creativity and productivity Coordination among R&D, product development and marketing
M A RG Strong
capability in basic research
IN
Systems and procedures used to find the highest quality raw materials Superior handling of incoming raw materials to minimize damage and improve the quality of the final product
Operations
Outbound Logistics
Extensive Rapid and timely personal product deliveries relationships to customers with buyers Premium Pricing
Primary Activities
Inbound Logistics
M Service A R G IN
Strong Coordin- Complete field ation among stocking of functions in R&D, replacement parts Marketing and Product Development
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Heineken beer Steinway pianos Mercedes Benz autos Intel microprocessors Caterpillar tractors
Raw materials Raw materials & Workmanship Technology and Workmanship Technological superiority
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Drivers of Differentiation
Examples:
Unique product features Unique product performance Exceptional services New technologies Quality of inputs Exceptional skill or experience Detailed information
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Effective Differentiators can remain profitable even when the Five Forces appear unattractive
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Effective Differentiators can remain profitable even when the Five Forces appear unattractive
Threat of New Entrants
Can fend off New Entrants because: * New products must surpass proven products * Or be equal to performance at lower prices
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Effective Differentiators can remain profitable even when the Five Forces appear unattractive
Threat of New Entrants
Can fend off New Entrants because: * * New products must surpass proven products Or be equal to performance at lower prices
Can mitigate Buyer Power because: Well differentiated products reduce customer sensitivity to price increases
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Effective Differentiators can remain profitable even when the Five Forces appear unattractive
Threat of New Entrants
Can fend off New Entrants because: * * New products must surpass proven products Or be equal to performance at lower prices
Well positioned relative to Substitutes because: * Brand loyalty tends to reduce new product trial and brand switching
Threat of Substitute Products
Can mitigate Buyer Power because well differentiated products reduce customer sensitivity to price increases
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Effective Differentiators can remain profitable even when the Five Forces appear unattractive
Threat of New Entrants
Can fend off New Entrants because: * * New products must surpass proven products Or be equal to performance at lower prices
Bargaining * Absorbing price increases due to Power of higher margins Suppliers Well positioned relative to Substitutes because: * Passing on higher supplier prices * Brand loyalty tends to because buyers are brand loyal reduce new product trial and
brand switching
Can mitigate Buyer Power because well differentiated products reduce customer sensitivity to price increases
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Effective Differentiators can remain profitable even when the Five Forces appear unattractive
Can mitigate Supplier Power by: * * Absorbing price increases due to higher margins Passing on higher supplier prices because buyers are brand loyal
Brand loyalty New products must surpass proven much overcomes products * Or be equal to performance price competition at lower prices
*
Can mitigate Buyer Power because well differentiated products reduce customer sensitivity to price increases
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Cost Leadership
Differentiation
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Cost Leadership
Differentiation
Focused Differentiation
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Firm may be outfocused by competitors Large competitor may set its sights on your niche market Preferences of niche market may change to match those of broad market
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Cost DifferenLeadership tiation Integrated Low Cost/ Differentiation Focused Focused DifferenLow Cost tiation
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Recognize that the Integrated Low Cost/ Differentiation business level strategy involves a Compromise The risk is that the firm may become Stuck in the Middle lacking a strong commitment to or expertise with either type of generic strategy
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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)
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