Podcast
Questions and Answers
What is primarily addressed by business-level strategy?
What is primarily addressed by business-level strategy?
Which of the following options is NOT a component of functional-level strategy?
Which of the following options is NOT a component of functional-level strategy?
How should functional strategies be aligned according to the levels of strategy?
How should functional strategies be aligned according to the levels of strategy?
Which type of demand refers to the actual number of units sold?
Which type of demand refers to the actual number of units sold?
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What aspect does financial strategy NOT typically include?
What aspect does financial strategy NOT typically include?
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What is the primary purpose of a business-level strategy?
What is the primary purpose of a business-level strategy?
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Which of the following describes a broad competitive scope?
Which of the following describes a broad competitive scope?
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What are potential types of competitive advantage as mentioned by Michael Porter?
What are potential types of competitive advantage as mentioned by Michael Porter?
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Which of the following best describes the role of IT strategy within a firm?
Which of the following best describes the role of IT strategy within a firm?
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What is a characteristic of a differentiation strategy?
What is a characteristic of a differentiation strategy?
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What is a key characteristic of companies employing a cost leadership strategy?
What is a key characteristic of companies employing a cost leadership strategy?
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In a differentiation strategy, what is the primary goal of a company?
In a differentiation strategy, what is the primary goal of a company?
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How do focused strategies differ from broad market strategies?
How do focused strategies differ from broad market strategies?
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Which factor is crucial for a successful cost focus strategy?
Which factor is crucial for a successful cost focus strategy?
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What does the concept of economies of scale imply for companies following a cost leadership strategy?
What does the concept of economies of scale imply for companies following a cost leadership strategy?
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What characterizes a Strategic Business Unit (SBU)?
What characterizes a Strategic Business Unit (SBU)?
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Which statement accurately reflects the purpose of business-level strategy?
Which statement accurately reflects the purpose of business-level strategy?
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How do the five forces of competition influence business-level strategies?
How do the five forces of competition influence business-level strategies?
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What is a critical risk associated with pursuing a business-level strategy?
What is a critical risk associated with pursuing a business-level strategy?
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What best describes the relationship between customers and business-level strategies?
What best describes the relationship between customers and business-level strategies?
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Study Notes
Business-Level Strategy
- Business-level strategy is an integrated set of commitments and actions to gain a competitive advantage by exploiting core competencies in specific product markets.
- It is a means of developing a generic strategy.
- Key Issues in Business-level Strategy: Who will be served? What needs will be satisfied? How will those needs be satisfied?
Types of Potential Competitive Advantage
- Low Cost: Achieving lower overall costs than rivals.
- Differentiation: Possessing the capability to differentiate a firm's product or service and command a premium price.
Competitive Scope
- Scope: The number of segments a firm chooses to target.
- Broad Scope: The firm competes in many customer segments.
- Narrow Scope or Niche Market: The firm selects a segment or a group of segments in the industry and tailors its strategy to serve them.
Types of Business-Level Strategies
- Based on the combinations of competitive scope (broad or narrow market) and basis for customer value (lowest cost or distinctiveness).
- Cost leadership: Lower overall costs than rivals.
- Differentiation: Providing unique products or services that are valued by customers.
- Integrated cost leadership/differentiation: Combining features of both strategies.
- Focused cost leadership: Low cost in a narrow market.
- Focused differentiation: Differentiation in a narrow market.
Cost Leadership Strategy
- An integrated set of actions to produce goods or services at a low cost.
- Typically earns low margins but achieves high sales volumes.
- Economies of scale exist when firm's costs fall as a function of its production volume.
- Examples: Walmart, KIA, Lenovo, Southwest.
Differentiation Strategy
- An integrated set of actions to produce goods or services that customers perceive as different.
- Firms seek to be unique in attributes that are valued by customers.
- Examples: Apple, Mercedes-Benz, Saveco.
Functional-Level Strategy
- Financial, HR, marketing, operations, and IT strategies that support the corporate and business-level strategies.
- Important aspects of each:
- Financial Strategy: Selecting funding source, developing own funds.
- HR Strategy: Recruiting, organizing staff, compensation, training, and organizational structure.
- Marketing Strategy: Pricing, promotion, distribution, brand image and public relations.
- Operations Strategy: Production techniques, use of technology, processes, quality control.
- IT Strategy: Using information technology to achieve firm goals, including current and future projects with timelines.
Strategic Business Unit (SBU)
- A homogeneous group of activities sharing the same technology, resources, skills, and facilities.
- It's an independent division with its own vision, mission, and objectives.
- An SBU focuses on a specific market(s) for its products or services.
Levels of Strategy
- Corporate-level strategy: Concerns strategic decisions affecting the entire organization; includes decisions about the markets to serve, resource allocation, mergers, and acquisitions.
- Business-level strategy: How a firm intends to compete in a particular product market.
- Functional-level strategy: Strategies adopted by each functional area (marketing, finance, HR, etc.) to support the business-level strategy.
Focused Strategies
- An integrated set of actions to serve the needs of a particular competitive market segment.
- Focus can be on a narrow product line, buyer segments, or geographic market.
- Cost focus: A firm seeks a cost advantage in its target segment.
- Differentiation focus: A firm seeks differentiation in its target segment.
Responding to Low-Cost Rivals
- Strategies to avoid losing customers to low-cost competitors.
Value-Chain Activities (Differentiation)
- Detailed examples of activities related to a differentiation strategy are shown and explained..
Strategy Clock
- The competitive strategies are positioned on a two-axis chart based on Price and Perceived value.
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