Business-Level Strategies

Objectives

• Identify and analyze what are the different

business-level strategies
• Discuss the importance of business-level
strategies
• Discuss each strategy and provide real scenarios
to be identified in class.
Customers

• who will be served

• what needs those target customers have that it will
satisfy
• how those needs will be satisfied.
Customers

• Reach
• Richness
• Affiliation
Customers

Reach
It pertains to the business firm’s ability to connect
and to access customers by identifying their wants
and needs. A business firm seeks to expand their
reach to customers. The ability of a business firm to
reach would cause more customers to be added in
the long run.
Customers

• Richness
It pertains to the business firm’s level of how deep
and how detailed the two-way flow of information a
firm and customer has.
Customers

• Affiliation
It is concerned with facilitating useful interactions
with customers. Seeing the world through
customer’s eyes and constantly seeking ways to
create more value for the customer have positive
effects in terms of affiliation.
Customers

• Who: Determining the Customers to

Serve
• What: Determining Which Customer
Needs to Satisfy
• How: Determining Core Competencies
Necessary to Satisfy Customer Needs
Business-level strategy
• it is an integrated and coordinated set of
commitments and actions the firm uses
to gain a competitive advantage by
exploiting core competencies in specific
product markets.
Business-level strategies
1.Cost leadership
2.Differentiation
3.Focused cost leadership
4.Focused differentiation
5.Integrated Cost
Leadership/differentiation
Cost Leadership Strategy
• It is a business-level strategy that involves
combination of actions to provide services or produce
goods which has acceptable features to costumers at
a lower cost compared to rivals. Companies choosing
this type of business-level strategy usually sell
standardized goods or services. These goods and
services have also levels of differentiation compared
to the industry’s typical customers.
Differentiation Strategy
• This type of business-level strategy involves combination of
actions to provide services or produce goods at acceptable
costs that customers think it to be different in ways that are
significant to them. Companies using this strategy target
customers for whom value is created by the act of differing
products and services compared to rivals. Companies must
be able to produce differentiated goods or provide
differentiated services at competitive costs to diminish the
possibility of making prices higher than customers are willing
to pay.
Cost Leadership vs Differentiation

Forces Cost Leadership Differentiation

Rivalry with Existing It is valuable to be a cost Customers has the
Competitors leader and it may lead to possibility to be loyal in
competitive advantage terms of the brand they
over competitors. perceive as different
Competitors may be from other.
hesitant to compete in
term of price if the
company achieves the
results of being a cost
leader.
Cost Leadership vs Differentiation

Forces Cost Leadership Differentiation

Bargaining Power of Customers with bargaining Price increases may not be
Buyers power might force a an issue for customers due
company which uses cost to the distinctiveness of the
leadership to diminish its differentiated goods and
prices but not to the extent services.
that it will be lower to the
level of the next rival which
can also reduce costs in
terms of earning average
returns.
Cost Leadership vs Differentiation

Forces Cost Leadership Differentiation

Bargaining Power of Firms employing cost Suppliers must contribute
Suppliers leadership usually has high-quality aspects of the
contribution margins higher goods if they want to
than its rivals and usually increase the prices
has the same level by because differentiators add
increasing contribution premium price for its goods
margins by lowering costs. and services.
Higher contribution margins
compared to rivals can lead
to possible absorbing an
increase in supplier’s costs
as well.
Cost Leadership vs Differentiation

Forces Cost Leadership Differentiation

Potential Entrants Usually it is hard for new Customer’s loyalty to the
comers to earn above- company brought about by
average returns or even the uniqueness of the
average returns until they goods and services
have ability to do the hindrances potential
strategies done by a cost entrants.
leader.
Cost Leadership vs Differentiation

Forces Cost Leadership Differentiation

Product Substitutes A firm usually has the Effective branding strategy
ability to reduce prices to to loyal buyers create a
retain the current barrier for purchasing
customers it has. The substitutes.
combination of lower prices
and competitive levels of
differentiated goods and
services, business firm
increases the chance that
the customers choose its
products and services
rather than a substitute.
Cost Leadership vs Differentiation

Forces Cost Leadership Differentiation

Competitive Risks 1. Obsolescence 1. Customers’ perception
2. Rivals’ Innovation that difference is too large
3. Too much focus on cost for the differentiator’s price
reduction compared to cost leader’s
price.
2. Business firm’s ways to
differentiate may stop to
provide value to customers
willing to pay.
3. Experience
4. Counterfeiting
Focus Strategy

• It is a type of business-level strategy that combines set of actions to

provide services or produce goods to customers in a particular
segment which is deemed competitive in nature. Companies use
this strategy when they use their core competencies to provide
goods or services to a particular segment of the industry or to play a
vital role in a specific industry. A focus strategy can be focused cost
leadership strategy or focused differentiation strategy.
Risks – Focus Strategy

1. Out-focus by the rival

2. Additional competitors
3. Customer reduction
Integrated Cost Leadership/Differentiation
Strategy

• It is a business-level strategy that combines value-chain activities

and support functions that enable a company to both achieve low
costs and differentiated goods and services.
Flexible Manufacturing Systems

• Using this type of system will lead the company to integrate

resources such as information, human, and physical to create
differentiated products or services at a low cost. The FMS is a
computer-controlled process. It is used to produce numerous and
varied products with minimal manual process.
Information Networks

• Combining firms with their customers information networks,

suppliers, and distributors is a source of flexibility. Customer
information networks help a company satisfy and achieve the
expectations of its customers in terms of delivery speed and product
quality when used effectively.
Total Quality Management

• It is a process that focuses on firm’s commitment to continuous

improvement of all processes and to customers. TQM is used by a
company to be efficient, reduce costs, and increase customer
satisfaction.
Risk – Integrated

1. Costs are present if firms want to perform value-chain activities and

support functions with levels of differentiated goods or services.
2. Stuck in the middle
3. Added costs for alliance strategies