BUSINESS LEVEL STRATEGY ANALYSIS


The Positioning Approach.
 Porter’s 5 Forces.
 Value Chain Analysis.
 The Generic Strategies.
 The Positioning Approach

 The oldest approach to military

strategy.
 The newest of the three prescriptive
approaches to strategy .
Design and Planning Approaches were explained
in Chapter 3.
 Focuses on how firms in a given context differ
in product market positions compared to the
competition.

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 Premises of The Positioning
Approach

 Strategy follows structure.

 Looks at the groups of competitors in an
industry.
 Relies more heavily on calculation than
the design or planning schools.
 Places even more emphasis on the role
of strategic planners.

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 Porter’s Five Forces Analysis

Breaking Apart Industry-Level

Competition

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Porter’s Five Forces Analysis

Threat of
Entry
 The 6 Barriers of Entry

Economies of Scale.
Product Differentiation.
Capital Requirements.
Cost Disadvantages Independent of Size.
Access to Distribution Channels.
Government Policy.

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Porter’s Five Forces Analysis

Power of
Buyers
 Buyer Power Determinants

 Bargaining Leverage.
 Buyer Concentration
 Buyer Volume.
 Buyer Switching Costs.
 Buyer Information.
 Ability to Integrate Backward.
 Substitute Products.
 Pull-Through.

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 Buyer Power Determinants

 Price Sensitivity.
 Price/Total Purchases
 Product Differences.
 Brand Identity.
 Impact on Quality/Performance.
 Buyer Profits.
 Decision-Maker’s Incentives.

90
Porter’s Five Forces Analysis

Power
of
Suppliers
 Supplier Power Determinants
 Differentiation of Inputs.
 Switching Costs of Suppliers.
 Presence of Substitute Products.
 Supplier Concentration.
 Importance of Volume to Supplier.
 Cost Relative to Total Purchases in
the
Industry.
 Impact of Inputs on Cost or
Differentiation.

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Porter’s Five Forces Analysis

Power
of
Substitutes
 Power of Substitutes

 Relative Price Performance of

Substitute.
 Switching Costs.
 Buyer Propensity to Substitute.

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Porter’s Five Forces Analysis

Competitive
Rivalry
 Determinants of Rivalry

 Industry Growth.
 Fixed Costs/Value Added.
 Intermittent Overcapacity.
 Product Differences.
 Brand Identity.
 Switching Costs.
 Concentration and Balance.
 Informational Complexity.
 Diversity of Competitors.
 Corporate Stakes.
 Exit Barriers. 92
 Determinants of Rivalry
Competition is
 Industry Growth.
Everything!!!
 Fixed Costs/Value Added.
 Intermittent Overcapacity.
 Product Differences.
 Brand Identity.
 Switching Costs.
 Concentration and Balance.
 Informational Complexity.
 Diversity of Competitors.
 Corporate Stakes.
 Exit Barriers.
 Value Chain Analysis

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 Value Chain Analysis
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Figure 3 Primary Activities

Value Chain Analysis

 Importance of value-chain analysis is that

it provides a framework for identifying or

developing a distinctive competence.

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Devising a Plan of Action

 Position the Company.

 Influence the Balance of the Forces.
 Anticipate Shifts in the Forces.

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Creating Families of Strategies

1 . Locating the core business.

2 . Distinguishing the core business.
3 . Elaborating the core business.
4 . Extending the core business.
5 . Reconceiving the core business.

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Creating Families of Strategies

1 . Locating the core business.

2 . Distinguishing the core business.
3 . Elaborating the core business.
4 . Extending the core business.
5 . Reconceiving the core business.

The Core Business is reflected in the

Choice of Generic Strategies
 Porter’s Generic Strategies

Cost Advantage
Lower Cost Differentiation

Broad
1. Cost Leadership
Target
Competitive
Scope
Narrow
Target

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Figure 4
 Porter’s Generic Strategies

Cost Advantage
Lower Cost Differentiation

Broad
1. Cost Leadership 2. Differentiation
Target
Competitive
Scope
Narrow
Target

Figure 4
 Porter’s Generic Strategies

Cost Advantage
Lower Cost Differentiation

Broad
1. Cost Leadership 2. Differentiation
Target
Competitive
Scope
Narrow 3A. Cost Focus
Target

Figure 4
 Porter’s Generic Strategies

Cost Advantage
Lower Cost Differentiation

Broad
1. Cost Leadership 2. Differentiation
Target
Competitive
Scope
3B. Differentiation
Narrow 3A. Cost Focus
Focus
Target

Figure 4
Strategies of Differentiation

 Price Differentiation.
 Image Differentiation.
 Support Differentiation.
 Quality Differentiation.
 Design Differentiation.
 Undifferentiation.
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Strategies of Scope

 Unsegmentation.
 Segmentation.
 Niche.
 Customizing.

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Elaborating the Core Business

 Penetration Strategies.
 Market Development Strategies.
 Geographic Expansion Strategies.
 Product Development Strategies.

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Elaborating the Core Business

 Penetration Strategies.
 Market Development Strategies.
 Geographic Expansion Strategies.
 Product Development Strategies.
 Ways to Elaborate a Given
Business

Existing Product New Product

Product
Existing Penetration
Development
Market Strategies
Strategies
Market
New
Diversification
Development
Market Strategies
Strategies

Figure 5 101