business level strategy analysis

BUSINESS LEVEL STRATEGY BUSINESS LEVEL STRATEGY ANALYSISANALYSIS

The Positioning The Positioning Approach.Approach.

Porter’s 5 Forces.Porter’s 5 Forces. Value Chain Analysis.Value Chain Analysis. The Generic The Generic

Strategies.Strategies.

The Positioning The Positioning Approach.Approach.

Porter’s 5 Forces.Porter’s 5 Forces. Value Chain Analysis.Value Chain Analysis. The Generic The Generic

Strategies.Strategies.

The Positioning The Positioning ApproachApproachThe Positioning The Positioning ApproachApproach

The oldest approach to military The oldest approach to military strategy. strategy.

The newest of the three prescriptive The newest of the three prescriptive approaches to strategy .approaches to strategy .Design and Planning Approaches were Design and Planning Approaches were

explained in Chapter 3.explained in Chapter 3. Focuses on how firms in a given context Focuses on how firms in a given context

differ in product market positions compared differ in product market positions compared to the competition.to the competition.

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Premises of The Premises of The Positioning Positioning ApproachApproach

Premises of The Premises of The Positioning Positioning ApproachApproach

Strategy follows structure.Strategy follows structure. Looks at the groups of competitors in an Looks at the groups of competitors in an

industry.industry. Relies more heavily on calculation than Relies more heavily on calculation than

the design or planning schools.the design or planning schools. Places even more emphasis on the role Places even more emphasis on the role

of strategic planners.of strategic planners.

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Porter’s Five Porter’s Five Forces AnalysisForces AnalysisPorter’s Five Porter’s Five Forces AnalysisForces AnalysisBreaking Apart Industry-Level Breaking Apart Industry-Level

CompetitionCompetition

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Porter’s Five Porter’s Five Forces AnalysisForces AnalysisPorter’s Five Porter’s Five Forces AnalysisForces Analysis

Threat ofThreat ofEntryEntry

The 6 Barriers of The 6 Barriers of EntryEntryThe 6 Barriers of The 6 Barriers of EntryEntry

Economies of Scale.Economies of Scale. Product Differentiation.Product Differentiation. Capital Requirements.Capital Requirements. Cost Disadvantages Independent of Size.Cost Disadvantages Independent of Size. Access to Distribution Channels.Access to Distribution Channels. Government Policy.Government Policy.

Economies of Scale.Economies of Scale. Product Differentiation.Product Differentiation. Capital Requirements.Capital Requirements. Cost Disadvantages Independent of Size.Cost Disadvantages Independent of Size. Access to Distribution Channels.Access to Distribution Channels. Government Policy.Government Policy.

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Power of Power of BuyersBuyers

Buyer Power Buyer Power DeterminantsDeterminantsBuyer Power Buyer Power DeterminantsDeterminants

Bargaining Leverage.Bargaining Leverage. Buyer ConcentrationBuyer Concentration Buyer Volume.Buyer Volume. Buyer Switching CostsBuyer Switching Costs.. Buyer Information.Buyer Information. Ability to Integrate BackwardAbility to Integrate Backward.. Substitute Products. Substitute Products. Pull-Through. Pull-Through.

Bargaining Leverage.Bargaining Leverage. Buyer ConcentrationBuyer Concentration Buyer Volume.Buyer Volume. Buyer Switching CostsBuyer Switching Costs.. Buyer Information.Buyer Information. Ability to Integrate BackwardAbility to Integrate Backward.. Substitute Products. Substitute Products. Pull-Through. Pull-Through.

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Buyer Power Buyer Power DeterminantsDeterminantsBuyer Power Buyer Power DeterminantsDeterminants

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

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

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PowerPowerof of SuppliersSuppliers

Supplier Power Supplier Power DeterminantsDeterminantsSupplier Power Supplier Power DeterminantsDeterminants

Differentiation of Inputs.Differentiation of Inputs. Switching Costs of Suppliers. Switching Costs of Suppliers. Presence of Substitute Products. Presence of Substitute Products. Supplier Concentration. Supplier Concentration. Importance of Volume to Supplier.Importance of Volume to Supplier. Cost Relative to Total Purchases in Cost Relative to Total Purchases in

the the Industry.Industry.

Impact of Inputs on Cost or Impact of Inputs on Cost or Differentiation. Differentiation.

Differentiation of Inputs.Differentiation of Inputs. Switching Costs of Suppliers. Switching Costs of Suppliers. Presence of Substitute Products. Presence of Substitute Products. Supplier Concentration. Supplier Concentration. Importance of Volume to Supplier.Importance of Volume to Supplier. Cost Relative to Total Purchases in Cost Relative to Total Purchases in

the the Industry.Industry.

Impact of Inputs on Cost or Impact of Inputs on Cost or Differentiation. Differentiation.

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PowerPower of of

SubstitutesSubstitutes

Power of Power of SubstitutesSubstitutesPower of Power of SubstitutesSubstitutes

Relative Price Performance of Relative Price Performance of Substitute. Substitute.

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

Relative Price Performance of Relative Price Performance of Substitute. Substitute.

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

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CompetitiveCompetitiveRivalryRivalry

Determinants of Determinants of RivalryRivalryDeterminants of Determinants of RivalryRivalry Industry Growth.Industry Growth. Fixed Costs/Value Added.Fixed Costs/Value Added. Intermittent Overcapacity.Intermittent Overcapacity. Product Differences.Product Differences. Brand Identity.Brand Identity. Switching Costs.Switching Costs. Concentration and Balance.Concentration and Balance. Informational Complexity.Informational Complexity. Diversity of Competitors.Diversity of Competitors. Corporate Stakes.Corporate Stakes. Exit Barriers. Exit Barriers.

Industry Growth.Industry Growth. Fixed Costs/Value Added.Fixed Costs/Value Added. Intermittent Overcapacity.Intermittent Overcapacity. Product Differences.Product Differences. Brand Identity.Brand Identity. Switching Costs.Switching Costs. Concentration and Balance.Concentration and Balance. Informational Complexity.Informational Complexity. Diversity of Competitors.Diversity of Competitors. Corporate Stakes.Corporate Stakes. Exit Barriers. Exit Barriers. 92

Determinants of Determinants of RivalryRivalryDeterminants of Determinants of RivalryRivalry

Competition Competition is is Everything!!!Everything!!!

Industry Growth.Industry Growth. Fixed Costs/Value Added.Fixed Costs/Value Added. Intermittent Overcapacity.Intermittent Overcapacity. Product Differences.Product Differences. Brand Identity.Brand Identity. Switching Costs.Switching Costs. Concentration and Balance.Concentration and Balance. Informational Complexity.Informational Complexity. Diversity of Competitors.Diversity of Competitors. Corporate Stakes.Corporate Stakes. Exit Barriers. Exit Barriers.

Industry Growth.Industry Growth. Fixed Costs/Value Added.Fixed Costs/Value Added. Intermittent Overcapacity.Intermittent Overcapacity. Product Differences.Product Differences. Brand Identity.Brand Identity. Switching Costs.Switching Costs. Concentration and Balance.Concentration and Balance. Informational Complexity.Informational Complexity. Diversity of Competitors.Diversity of Competitors. Corporate Stakes.Corporate Stakes. Exit Barriers. Exit Barriers.

Value Chain Value Chain AnalysisAnalysisValue Chain Value Chain AnalysisAnalysis

Figure 3Figure 3 98


Inbound

Inbound

Logistics

Logistics

Operations

Operations

Outbound

Outbound

Logistics

Logistics

Marketing

Marketing

& S

ales

& S

ales

Service

Service

Margin

Margin

Margin

Margin

Primary ActivitiesPrimary ActivitiesPrimary ActivitiesPrimary ActivitiesFigure 3Figure 3


Inbound

Inbound

Logistics

Logistics

Operations

Operations

Outbound

Outbound

Logistics

Logistics

Marketing

Marketing

& S

ales

& S

ales

Service

Service

ProcurementProcurement

Human Resource ManagementHuman Resource Management

Technology DevelopmentTechnology Development

ProcurementProcurement

SSUUPPPPOORRTT

SSUUPPPPOORRTT

AACCTTIIVVIITTIIEESS

AACCTTIIVVIITTIIEESS

Primary ActivitiesPrimary ActivitiesPrimary ActivitiesPrimary ActivitiesFigure 3Figure 3

Margin

Margin

Margin

Margin


Importance of value-chain analysis is that Importance of value-chain analysis is that it it provides a framework for identifying or provides a framework for identifying or

developing a developing a distinctive competencedistinctive competence..

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Devising a Plan of ActionDevising a Plan of Action

Position the Company.Position the Company. Influence the Balance of the Forces.Influence the Balance of the Forces. Anticipate Shifts in the Forces.Anticipate Shifts in the Forces.

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Creating Families of StrategiesCreating Families of Strategies

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

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

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Creating Families of StrategiesCreating Families of Strategies

1 .. Locating the core business. Locating the core business.

2 . Distinguishing the core business.. Distinguishing the core business.

3 . Elaborating the core business.. Elaborating the core business.

4 . Extending the core business.. Extending the core business.

5 . Reconceiving the core business.. Reconceiving the core business.

1 .. Locating the core business. Locating the core business.

2 . Distinguishing the core business.. Distinguishing the core business.

3 . Elaborating the core business.. Elaborating the core business.

4 . Extending the core business.. Extending the core business.

5 . Reconceiving the core business.. Reconceiving the core business.

The Core Business is reflected in the The Core Business is reflected in the Choice of Generic StrategiesChoice of Generic Strategies

Porter’s Generic Porter’s Generic StrategiesStrategiesPorter’s Generic Porter’s Generic StrategiesStrategies

Cost AdvantageCost Advantage

CompetitiveCompetitiveScopeScope

Broad Broad TargetTarget

NarrowNarrowTargetTarget

Lower CostLower Cost DifferentiationDifferentiation

1. Cost Leadership1. Cost Leadership

Figure 4Figure 499







1. Cost Leadership1. Cost Leadership 2. Differentiation2. Differentiation

Figure 4Figure 4








3A. Cost Focus3A. Cost Focus

Figure 4Figure 4








3A. Cost Focus3A. Cost Focus

Figure 4Figure 4

3B. Differentiation 3B. Differentiation

FocusFocus

Strategies of DifferentiationStrategies of Differentiation

Price Differentiation.Price Differentiation. Image Differentiation.Image Differentiation. Support Differentiation.Support Differentiation. Quality Differentiation.Quality Differentiation. Design Differentiation.Design Differentiation. Undifferentiation.Undifferentiation.

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Strategies of ScopeStrategies of Scope

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

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Elaborating the Core BusinessElaborating the Core Business

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

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Elaborating the Core BusinessElaborating the Core Business

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

Existing ProductExisting Product New ProductNew Product

Existing Existing MarketMarket

New New MarketMarket

PenetrationPenetrationStrategiesStrategies

Market Market DevelopmentDevelopment StrategiesStrategies

ProductProductDevelopmentDevelopment

StrategiesStrategies

DiversificationDiversificationStrategiesStrategies

Ways to Elaborate a Given Ways to Elaborate a Given BusinessBusiness

Figure 5Figure 5 101

Questions ?Questions ?

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