How to formulate Business –

Unit Level Strategies in your

Organisation? – Answered!
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After formulating corporate-level strategies, managers attend to

business level strategies for a multi-business corporation. Guided by
the direction set by corporate level strategy, business level strategy is
concerned with managing the interests and operations of a particular
line of business, especially with its competitive position in the market.
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In formulating strategies, various business activities that produce a

particular type of product or service are grouped together and treated
as a single unit and this unit is known as a “Strategic Business Unit” or
SBU. Within the guidelines of the corporate level strategies, SBUs
develop their own strategies at the business unit level.
There are three models that can be used as frameworks for developing
a business level strategy. These are: Porter’s generic model, Miles and
Snow’s adaptation model” and Product Life Cycle model.

Porter’s Model:
According to Michael E. Porter, a Harvard Business School professor
who studied the interplay of forces within the competitive market
place, there are three strategies that can be adopted at the business
level.

They are called “generic” strategies because they can be used in a

variety of situations, across diverse industries at various stages of
development. These strategies are cost leadership, differentiation and
focus.

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(1) Cost leadership strategy:

This strategy seeks to attain lower costs than the competitors by
improving upon the efficiency of production, distribution and other
organizational systems. By cutting costs without sacrificing quality,
the managers can beat the competition and thus acquire gains in the
market share with higher profits.

(2) Differentiation:
The second generic strategy is to differentiate a firm’s products or
services from those of its competitors. When customers perceive a
product or a service being unique and superior, they are willing to pay
more for it. Managers can differentiate their products on the basis of
technology (Intel micro-chips), customer service (American Express),
product design (Sony’s Walkman) and so on. Such a strategy results in
brand loyalty and a larger customer base.

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(3) Focus:
Focus strategy involves special attention to a product or a narrow line
of products or to the segment of the market that gives the company a
competitive edge. The objective is to better serve the targeted market
through concentration of organizational resources on such a market.

The target market can further be segmented into such dimensions as

demographics (age, gender, education, religion, income, life-cycle
stage), lifestyles (similarities in attitudes, interests) or other
dimensions.

This would assist in developing a focus strategy which addresses the

needs of these common groups. For example, Rolls Royce has targeted
economic elitists to sell their cars which are most expensive and a
matter of pride to own.

Miles and Snow’s Adaptation Model:

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The major premise of this model is that organizations should relate

their business-level strategies to their environment and should meet
the challenges of uncertainty and change in the external environments
though adaptation.
There are four such business-level strategies: defender, prospector,
analyzer and reactor.

1. The defender strategy:

An organization emphasizes existing products and current market
share and then develops a strategy to defend its domain through
pursuing internal efficiencies rather than worrying about external
environment.

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Defenders, like many small local retailers in our community, try to

maintain their level of business through personal relations with
customers or otherwise. However, a defender may be unable to
respond to major shifts in the environment, such as the opening of a
major national chain store in the community which could drive the
local retailers out of business.

2. The prospector strategy:

A prospector seeks and exploits new product and market
opportunities. The strategy involves pursuing innovation in a dynamic
environment in the face of risk but with products for growth. This
gives the prospector a competitive edge. There is always a risk of over
extension, high cost of innovation and low profitability.

3. The analyzer strategy:

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It is a combination of defender and prospector strategies so that an
organization maintains a firm base of traditional products and
customers while selectively responding to opportunities for innovation
and change. Thus the organization remains flexible to respond to
environmental changes but also maintains stability to profit from a
stable environment.

4. The reactor strategy:

This strategy is not proactive in nature and organizations pursuing
this strategy are primarily responding to competitive pressures in
order to survive. They lack a set of consistent mechanism for
adaptation and only respond to environmental changes in ad hoc
fashion.