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Business Strategy and Competitive Advantage: Understanding Customers and Market Segments, Study notes of Business Management and Analysis

Oakland University (OU)Business Management and Analysis

An in-depth analysis of business-level strategies, focusing on the importance of core competencies, competitive advantage, and customer relationships. It covers various aspects of customer segments, including demographic, socioeconomic, geographic, and psychological factors, as well as consumption patterns and perceptual factors for both industrial and consumer markets. Additionally, it discusses the impact of various external factors, such as the bargaining power of buyers and suppliers, threat of new entrants, and rivalry among competing firms, on business strategies.

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Presentation design

by Charlie Cook

Chapter 4

Business-Level Strategy

Part 2 Strategic Actions: Strategy Formulation

Partial preview of the text

Download Business Strategy and Competitive Advantage: Understanding Customers and Market Segments and more Study notes Business Management and Analysis in PDF only on Docsity!

© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Presentation design by Charlie Cook

Chapter 4 Business-Level Strategy

Part 2 Strategic Actions: Strategy Formulation

Studying this chapter should provide you with the strategic management knowledge needed to:

Learning Objectives

Define business-level strategy.
Discuss the relationship between customers and business-level strategies in terms of who , what , and how.
Explain the differences among business-level strategies.
Use the five forces of competition model to explain how above-average returns can be earned through each business-level strategy.
Describe the risks of using each of the business-level strategies. © 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

Core Competencies and Strategy

Resources and superior capabilities that are

sources of competitive advantage over a

firm’s rivals

Providing value to customers and gaining

competitive advantage by exploiting core

competencies in individual product markets

Core

Competencies

Strategy

Business-level

Strategy

An integrated and coordinated set of

actions taken to exploit core competencies

and gain competitive advantage

Customers: Their Relationship

with Business-Level Strategies

Key Issues

in

Business-level

Strategy

Who will be

served?

What needs will

be satisfied?

How will those

needs be satisfied?

Who: Determining the Customers

to Serve

• Market segmentation

– A process used to cluster people with similar needs

into individual and identifiable groups.

All Customers

Industrial

Markets

Consumer

Markets

• Consumer Markets

– Demographic factors

– Socioeconomic factors

– Geographic factors

– Psychological factors

– Consumption patterns

– Perceptual factors

• Industrial Markets

– End-use segments

– Product segments

– Geographic segments

– Common buying factor

segments

– Customer size

segments

Market Segmentation

How: Determining Core Competencies

Necessary to Satisfy Customer Needs

• Firms must decide:

– Who to serve, what customer needs to meet, and how

to use core competencies to implement value creating

strategies that satisfy target customers’ needs.

• Only firms with capacity to continuously improve,

innovate and upgrade their competencies can

expect to meet and/or exceed customer

expectations across time.

The Purpose of a

Business-Level Strategy

• Business-Level Strategies

– Are intended to create differences between the firm’s

competitive position and those of its competitors.

• To position itself, the firm must decide whether it

intends to:

– Perform activities differently or

– Perform different activities as compared to its rivals.

Competitive Scope

• Broad Scope

– The firm competes in many

customer segments.

• Narrow Scope

– The firm selects a segment or

group of segments in the

industry and tailors its strategy

to serving them at the

exclusion of others.

Types of Business-Level Strategies

Lowest Cost Distinctiveness

Cost Leadership Differentiation

Focused

Differentiation

Focused Cost

Leadership

Integrated Cost

Leadership/

Differentiation

Broad

Target

Narrow

Target

Basis for Customer Value

Target

Market

Cost Leader

Cost Leadership Strategy

• Cost saving actions required by this strategy:

– Building efficient scale facilities

– Tightly controlling production costs and overhead

– Minimizing costs of sales, R&D and service

– Building efficient manufacturing facilities

– Monitoring costs of activities provided by outsiders

– Simplifying production processes

How to Obtain a Cost Advantage

Determine

and control

Cost Drivers

Reconfigure

Value Chain

if needed

 Alter production process

 Change in automation

 New distribution channel

 New advertising media

 Direct sales in place of

indirect sales

 New raw material

 Forward integration

 Backward integration

 Change location relative

to suppliers or buyers

© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as Figure 4.2 Examples of Value-Creating Activities Associated with the Cost Leadership Strategy

Business Strategy and Competitive Advantage: Understanding Customers and Market Segments, Study notes of Business Management and Analysis

Related documents

Partial preview of the text

Download Business Strategy and Competitive Advantage: Understanding Customers and Market Segments and more Study notes Business Management and Analysis in PDF only on Docsity!

Chapter 4

Business-Level Strategy

Part 2 Strategic Actions: Strategy Formulation

Learning Objectives

Core Competencies and Strategy

Resources and superior capabilities that are

sources of competitive advantage over a

firm’s rivals

Providing value to customers and gaining

competitive advantage by exploiting core

competencies in individual product markets

Core

Competencies

Strategy

Business-level

Strategy

An integrated and coordinated set of

actions taken to exploit core competencies

and gain competitive advantage

Customers: Their Relationship

with Business-Level Strategies

Key Issues

in

Business-level

Strategy

Who will be

served?

What needs will

be satisfied?

How will those

needs be satisfied?

Who: Determining the Customers

to Serve

• Market segmentation

– A process used to cluster people with similar needs

into individual and identifiable groups.

All Customers

Industrial

Markets

Consumer

Markets

• Consumer Markets

– Demographic factors

– Socioeconomic factors

– Geographic factors

– Psychological factors

– Consumption patterns

– Perceptual factors

• Industrial Markets

– End-use segments

– Product segments

– Geographic segments

– Common buying factor

segments

– Customer size

segments

Market Segmentation

How: Determining Core Competencies

Necessary to Satisfy Customer Needs

• Firms must decide:

– Who to serve, what customer needs to meet, and how

to use core competencies to implement value creating

strategies that satisfy target customers’ needs.

• Only firms with capacity to continuously improve,

innovate and upgrade their competencies can

expect to meet and/or exceed customer

expectations across time.

The Purpose of a

Business-Level Strategy

• Business-Level Strategies

– Are intended to create differences between the firm’s

competitive position and those of its competitors.

• To position itself, the firm must decide whether it

intends to:

– Perform activities differently or

– Perform different activities as compared to its rivals.