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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.
81
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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Porter’s Five Porter’s Five Forces AnalysisForces AnalysisPorter’s Five Porter’s Five Forces AnalysisForces Analysis
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.
90
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.
90
Porter’s Five Porter’s Five Forces AnalysisForces AnalysisPorter’s Five Porter’s Five Forces AnalysisForces Analysis
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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Porter’s Five Porter’s Five Forces AnalysisForces AnalysisPorter’s Five Porter’s Five Forces AnalysisForces Analysis
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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Porter’s Five Porter’s Five Forces AnalysisForces AnalysisPorter’s Five Porter’s Five Forces AnalysisForces Analysis
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
Value Chain Value Chain AnalysisAnalysisValue Chain Value Chain AnalysisAnalysis
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
Value Chain Value Chain AnalysisAnalysisValue Chain Value Chain AnalysisAnalysis
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
Value Chain Value Chain AnalysisAnalysisValue Chain Value Chain AnalysisAnalysis
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.
93
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.
94
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
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 2. Differentiation2. Differentiation
Figure 4Figure 4
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 2. Differentiation2. Differentiation
3A. Cost Focus3A. Cost Focus
Figure 4Figure 4
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 2. Differentiation2. Differentiation
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.
99
Strategies of ScopeStrategies of Scope
Unsegmentation.Unsegmentation.Segmentation.Segmentation.Niche.Niche.Customizing.Customizing.
100
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.
101
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 ?
End of PresentationEnd of PresentationEnd of PresentationEnd of Presentation