Professional Documents
Culture Documents
Business-Level Strategy
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
Chapter 4
Business Level
Strategy
Ch4
The resources and capabilities
Core that have been determined to
Competenc be a source of competitive
y advantage for a firm over its
rivals.
Ch4
Core The resources and capabilities that have been
Competency determined to be a source of competitive
advantage for a firm over its rivals.
Ch4
Core The resources and capabilities that have been
Competency determined to be a source of competitive
advantage for a firm over its rivals.
Cost Uniqueness
Key Criteria:
Ch4
Cost Leadership Business Level Strategy
Requirements:
Constant effort to reduce costs through:
Ch4
Value Creating Activities Common to a
Cost Leadership Business Level Strategy
Firm Infrastructure
Activities
M
Support
M Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
IN
G
AR
Primary Activities Ch4
Value Creating Activities Common to a
Cost Leadership Business Level Strategy
Simplified Planning Relatively Few
Cost Effective
MIS Systems Firm Infrastructure
Practices to Reduce
Planning Costs
Management Layers to
Reduce Overhead
Activities
M
Support
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
& 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
R
A
Located in Close Policy Choice of Efficient Order National Scale
Proximity with Plant Technology Sizes Advertising
Suppliers
Organizational Interrelationships
Learning with Sister Units
Ch4-
Reconfiguring the Value Chain
of Iowa Beef Packers (IBP)
Old Ship “on the Slaughter
Ranch “Boxed
Way: Cattle Hoof” to Rail into sides Cuts” at
Center of beef Markets
(Chicago)
New
New Locate large Ship cuts
Process into
Way: automated already
Way plants near
“Boxed Cuts” at
“Boxed” to
plants
ranches Markets
Ch4-
Effective Cost Leaders can remain profitable even when
the Five Forces appear unattractive
Threat of
New
Entrants
Ch4-
Effective Cost Leaders can remain profitable even when
the Five Forces appear unattractive
Cost Uniqueness
Broad Cost
Target
Market Leadership
Breadth of
Competitive
Scope
Narrow
Target
Market
Ch4-
Generic Business Level Strategies
Source of Competitive Advantage
Cost Uniqueness
Ch4-
Differentiation Business Level Strategy
Key Criteria:
Prestige or exclusivity
Rapid innovation
Ch4-
Differentiation Business Level Strategy
Requirements:
Constant effort to differentiate products through:
Developing new systems and processes
Quality focus
Capability in R&D
M
Support
M Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
IN
G
AR
Primary Activities Ch4-
Value Creating Activities Common to a
Differentiation Business Level Strategy
Highly Developed Information A companywide
Firm Infrastructure
Systems to better understand
customers’ purchasing preferences
emphasis on producing
high quality products
Activities
M Service
handling of manufacturing of responsive order ation among stocking of
Operations
Marketing
incoming raw attractive processing
Logistics
Inbound
Marketing and
Logistics
& Sales
materials to products procedures
IN
minimize Product
damage and Development
G
improve the
AR
Rapid responses Extensive
quality of the to customers Rapid and timely personal
final product unique product deliveries relationships
manufacturing to customers with buyers
specifications
Premium
Pricing
Ch4-
Drivers of Differentiation
Examples:
Ch4-
Effective Differentiators can remain profitable
even when the Five Forces appear unattractive
Threat of
New
Entrants
Ch4-
Effective Differentiators can remain profitable
even when the Five Forces appear unattractive
Can fend off New Entrants because:
Threat of New products must
*
New surpass proven products
Entrants * Or be equal to performance
at lower prices
Well positioned relative to
Substitutes because:
Bargaining
* Brand loyalty tends to Power of
reduce new product trial Suppliers
and brand switching
Can mitigate Buyer Power
because well differentiated
Threat of products reduce customer
Substitute sensitivity to price increases
Products
Ch4-
Effective Differentiators can remain profitable
even when the Five Forces appear unattractive
Can fend off New Entrants because:
Threat of New products must
*
New surpass proven products
Entrants * Or be equal to performance
at lower prices
because
* Brand buyers
loyalty tends to
reduce new product trial and
are brand loyal
Can mitigate Buyer Power
brand switching
Threat of because well differentiated
products reduce customer
Substitute sensitivity to price increases
Products
Ch4-
Effective Differentiators can remain profitable
even when the Five Forces appear unattractive
Cost Uniqueness
Ch4-
Generic Business Level Strategies
Source of Competitive Advantage
Cost Uniqueness
Cost Uniqueness
Ch4-
Integrated Low Cost/Differentiation Strategy
Southwest Airlines
Low Cost Differentiation
Use a single aircraft model
Focus on customer
(Boeing 737)
satisfaction
Use secondary airports
High level of employee
Fly short routes dedication
No meals
New flight services for
15 minute turnaround time
business travelers
No reserved seats (phones and faxes)
No travel agent reservations
Ch4-