Business Level Strategy

Question 1

Business-Level Strategy - Definition and key questions

Answer 1

BLS is about the positioning in the market

1. Who - market segmentation to identify who is going to be served
2. What needs - anticipate the need of those costumers
3. How - identify core competencies to use

Question 2

2 key decisions lead to 5 business level strategies

Answer 2

1. Perform Activities DIFFERENTLY (Cost) vs. Perform different ACTIVITIES (differentiation)
2. Determine scope: broad vs. narrow

Question 3

Business-Level Strategies

Answer 3

1. Cost Leadership
2. Focused Cost Leadership
3. Differentiation
4. Focused Differentiation
5. Integrated Cost Leadership/ Differentiation

Question 4

Cost Leadership - Definition, Feasibility, Risks

Answer 4

Produce goods or services with features that are acceptable at the lowest costs.

One has to constantly reduce the cost of the value chain to keep the advantage. This advantage comes from greater margins than the one from competitors

Factors affecting feasibility:
> Input factor
> Economies of scale
> Learning and experience curve

Risk
> lack of innovation
> source of competitive advantage becomes obsolete
> overlook customer preferences
> Imitation
> perception - lower cost - lower quality

Question 5

Differentiation - Definition, Feasibility, Risks

Answer 5

Products at an acceptable cost that customer perceive as different in ways that are important to them. Competitive advantage as long as economic value is greater than competitors

Ways to increase differentiation
> Product features
> Costumer service
> Bundles

Risks
> High costs
> Costs of differentiation is too great
> means cease to provide value
> Over-differentiation
> Counterfeiting

Question 6

Focus Strategies - Why focus on a particular niche and associated risks

Answer 6

> satisfy needs that others are not exploring
lack resources for the broader market
ability to serve the narrow market more effectively
large firms overlook niches

Market segmentation is even more important. (Buyer groups, Product line, Geographic)

Risk
> competitors focus on narrower niche and “outfocus” the focuser
> large firm enters your niche
> large firm sees your firm as attractive and worth of competitive pursuit
> customer needs within the narrow competitive segment may become more similar to those of industry-wide costumers as a whole

Question 7

Integrated Cost-Leadership/ Differentiation Strategy

Answer 7

Low cost and product of unique value.

Risk
> Being stuck in the middle (costs not low enough and product not differentiated enough)
> loss of coherence confuses costumer

You have to evolve and adapt - do not stick

Question 8

Cost Leadership & 5 Forces

Answer 8

1. Rivalry - hesitate to compete on basis of prices
2. Bargaining power of buyers - can demand low prices which may result in a monopoly
3. Bargaining power of suppliers - absorb price increase, due to volume they have to keep down prices
4. Entry - improving effiency as a barrier
5. Substitution - flexibility to lower prices to retain consumer

Question 9

Differentiation & 5 Forces

Answer 9

1. Rivalry - customer are loyal
2. Bargaining power of buyers - as loyalty increases, price sensitivity decreases
3. Bargaining power of suppliers - the cost of high-quality components can be passed to costumers
4. Entry - entry barrier due to loyalty and need for significant resource investment
5. Substitution - customer loyalty

Question 10

For 5 Five Forces and BLS see also Framework on Slides

Answer 10

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