Ch4-1 Chapter 4 Business-Level Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©2000 South-Western College Publishing Ch4-2 Chapter 3 Internal Environment Chapter 2 External Environment The Strategic The Strategic Management Management Process Process The Strategic The Strategic Management Management Process Process Strategic Intent Strategic Mission Strategic Competitiveness Above Average Returns Feedback Strategy Formulation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Strategy Implementation Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Strategic Inputs Strategic Actions Strategic Outcomes Ch4-3 Chapter 4 Chapter 4 Business Level Business Level Strategy Strategy Sustainable Sustainable Competitive Competitive Advantage Advantage Chapter 2 External Environment Chapter 3 Internal Environment Ch4-4 Core Core Competenc Competenc y y The The resources resources and and capabilities capabilities that have been determined to that have been determined to be a source of competitive be a source of competitive advantage for a firm over its advantage for a firm over its rivals. rivals. Ch4-5 Strateg Strateg y y An integrated and coordinated An integrated and coordinated set of actions taken to exploit set of actions taken to exploit core competencies and gain a core competencies and gain a competitive advantage. competitive advantage. Core Competency The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals. Ch4-6 Strategy An integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage. Business Business Level Level Strategy Strategy Actions taken to provide value to Actions taken to provide value to customers and gain a competitive customers and gain a competitive advantage by exploiting core advantage by exploiting core competencies in specific, competencies in specific, individual product markets. individual product markets. Core Competency The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals. Ch4-7 Basis for Customer Segmentation Basis for Customer Segmentation Consumer Markets 1. Demographic factors (age, income, sex, etc.) 2. Socioeconomic factors (social class, stage in the family life cycle) 3. Geographic factors (culture, region or country differences) 4. Psychological factors (lifestyle, personality traits) 5. Consumption patterns (heavy, moderate, and light users) 6. Perceptual factors (benefit segmentation, perceptual mapping) 7. Brand loyalty patterns Ch4-8 Basis for Customer Segmentation Basis for Customer Segmentation Industrial Markets 1. End use segments (identified by SIC code) 2. Product segments (based on technological differences or production economics) 3. Geographic segments (defined by boundaries between countries or by regional differences within them) 4. Common buying factor segments (cut across product/market and geographic segments) 5. Customer size segments Ch4-9 Generic Business Level Strategies Generic Business Level Strategies Cost Cost Uniqueness Uniqueness Source of Competitive Advantage Source of Competitive Advantage Breadth of Breadth of Competitive Competitive Scope Scope Broad Broad Target Target Market Market Narrow Narrow Target Target Market Market Focused Differen- tiation Cost Leadership Differen- tiation Focused Low Cost Cost Cost Leadership Leadership Ch4-10 Key Criteria: Cost Leadership Business Level Strategy Relatively standardized products Features acceptable to many customers Lowest competitive price [...]... Business Level Strategy Requirements: Constant effort to reduce costs through: Building efficient scale facilities Tight control of production costs and overhead Minimizing costs of sales, R&D and service State of the art manufacturing facilities Monitoring costs of activities provided by outsiders Simplification of processes Ch4- Value Creating Activities Common to a Cost Leadership Business Level Strategy. .. A R G IN Marketing & Sales Outbound Logistics Operations Procurement Inbound Logistics Support Activities Firm Infrastructure Ch4- Value Creating Activities Common to a Cost Leadership Business Level Strategy Simplified Planning Practices to Reduce Planning Costs Relatively Few Management Layers to Reduce Overhead Firm Infrastructure Consistent Policies to Reduce Turnover Costs Effective Training Programs... Inbound Logistics Support Activities Cost Effective MIS Systems Interrelationships with Sister Units Primary Activities Ch4- Value Creating Activities Common to a Inbound Cost Leadership Business Level Strategy Logistics Simplified Planning Practices to Reduce Planning Costs Relatively Few Management Layers to Reduce Overhead Firm Infrastructure Highly Efficient Systems to LinkPrograms Effective Training... Logistics Logistics Support Activities Cost Effective MIS Systems Interrelationships with Sister Units Primary Activities Ch4- Value Creating Activities Common to a Operations Cost Leadership Business Level Strategy Firm Relatively Few Management Layers to Reduce Overhead Human Resource ManagementAsset MA Timing of Consistent Policies to Reduce Turnover Costs Effective Training Programs to Improve Worker... Practices to Reduce Planning Costs National Scale Advertising Interrelationships with Sister Units Primary Activities Ch4- Value Creating Activities Common to a Outbound Cost Leadership Business Level Strategy Logistics Simplified Planning Practices to Reduce Planning Costs Relatively Few Management Layers to Reduce Overhead Firm Infrastructure Delivery Schedule that Reduces Costs M Human Resource ManagementSelection... Inbound Logistics Support Activities Cost Effective MIS Systems Interrelationships with Sister Units Primary Activities Ch4- Value Creating Activities Common to a Marketing Cost Leadership Business Level Strategy & Sales Relatively Few Management Layers to Reduce Overhead Firm Infrastructure Effective Training Programs to Improve Worker Efficiency and Effectiveness Easy-to-Use Manufacturing Technologies... Costs Inbound Logistics Support Activities Cost Effective MIS Systems Interrelationships with Sister Units Primary Activities Ch4- Value Creating Activities Common to a Cost Leadership Business Level Strategy Simplified Planning Practices to Reduce Planning Costs Relatively Few Management Layers to Reduce Overhead Firm Infrastructure Service Effective Product Effective Training Programs Installations... Processes Inbound Logistics Support Activities Cost Effective MIS Systems Interrelationships with Sister Units Primary Activities Ch4- Value Creating Activities Common to a Cost Leadership Business Level Strategy Simplified Planning Practices to Reduce Planning Costs Relatively Few Management Layers to Reduce Overhead Firm Infrastructure Consistent Policies to Reduce Turnover Costs Effective Training Programs... Activities Cost Effective MIS Systems Frequent Evaluation Processes to Monitor Suppliers’ Performances National Scale Advertising Ch4- Value Creating Activities Common to a Cost Leadership Business Level Strategy Simplified Planning Practices to Reduce Planning Costs Relatively Few Management Layers to Reduce Overhead Firm Infrastructure Consistent Policies to Reduce Turnover Costs Effective Training Programs... Link Suppliers’ Products with the Firm’s Production Processes Inbound Logistics Support Activities Cost Effective MIS Systems Ch4- Value Creating Activities Common to a Cost Leadership Business Level Strategy Simplified Planning Practices to Reduce Planning Costs Relatively Few Management Layers to Reduce Overhead Firm Infrastructure Consistent Policies to Reduce Turnover Costs Effective Training Programs . Average Returns Feedback Strategy Formulation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter. rivals. Ch4-6 Strategy An integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage. Business Business Level Level Strategy Strategy Actions. Business Level Strategy Business Level Strategy Ch4-14 Value Creating Activities Value Creating Activities Common to a Common to a Cost Leadership Cost Leadership Business Level Strategy Business