BUSINESS LEVEL STRATEGY Five Generic Strategies
(One Page Summary Assignment)
SYNDICATE 5
YP56B
Yunia Apriliani Kartika (29116364)
Fithri Hidayani Megantari (29116377)
I Nyoman Sujana Giri (29116418)
Bayu Rifqi Aulia Rachman (29116483)
Business-level strategy is an integrated and coordinated set of
commitments and actions the firm uses to gain a competitive
advantage by exploiting core competencies in specific product
markets.
Core Competencies is the resources and capabilities that have
been determined to be a source of competitive advantage for a
firm over its rivals.
Strategy is an integrated and coordinated set of actions taken
to exploit core competencies and gain a competitive
advantage.
Business-Level Strategy is actions taken to provide value to
customers and gain a competitive advantage by exploiting
core competencies in specific, individual product markets.
The Central Role of Costumers
In selecting a business-level strategy, the firm determines who
it will serve, what needs those target customers have that it
will satisfy and how those needs will be satisfied
Managing Relationships With Customers
Customer relationships are strengthened by offering them
superior value
help customers to develop a new competitive
advantage
enhance the value of existing competitive advantages
Establish a competitive advantage along these
dimensions:
Reach; the firms access and connection to customers
Richness; the depth and detail of the two-way flow
of information between the firm and customers
Affiliation; facilitating useful interactions with
customers
Market Segmentation
Consumer Markets (Demographic factors,
Socioeconomic factors, Psychological factors,
Consumption patterns, Perceptual factor).
Industrial Markets (End-use segments, Product
segments, Geographic segments, Common buying factor
segments, Customer size segments).
Types of Business-Level Strategies
Business-level strategies are intended to create differences
between the firms position relative to those of its rivals.
To position itself, the firm must decide whether it intends
to perform activities differently or to perform different
activities as compared to its rivals.
Cost Leadership Strategy
An integrated set of actions designed to produce or deliver
goods or services at the lowest cost, relative to competitors
with features that are acceptable to customers; relatively
standardized products, features acceptable to many customers,
lowest competitive price
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, and simplifying production
processes.
Factors that Drive Costs (Economies of scale, Asset
utilization, Capacity utilization pattern, Interrelationships,
Order processing and distribution, Value chain linkages,
Product features, Performance, Mix & variety of products,
Service levels, Small vs. large buyers, Process technology,
Wage levels, Product features, Hiring, training, motivation
Cost Leadership Strategy and the Five Forces of
Competition
Rivalry Among Competing Firms
Can use cost leadership strategy to advantage since
competitors avoid price wars with cost leaders, creating
higher profits for the entire industry.
Bargaining Power of Buyers
Can mitigate buyers power by driving prices far below
competitors, causing them to exit and shifting power with
buyers back to the firm
Bargaining Power of Suppliers
Can mitigate suppliers power by being able to absorb
cost increases due to low cost position and being able to
make very large purchases, reducing chance of supplier
using power
Threat of New Entrants
Can frighten off new entrants due to their need to enter on
a large scale in order to be cost competitive and the time it
takes to move down the learning curve
Threat of Substitute Products
Cost leader is well positioned to make investments to be
first to create substitutes buy patents developed by
potential substitutes and lower prices in order to maintain
value position.
Major Risks of Cost Leadership Strategy
Dramatic technological change could take away your cost
advantage
Competitors may learn how to imitate value chain
Focus on efficiency could cause cost leader to overlook
changes in customer preferences
Differentiation Strategy
An integrated set of actions designed by a firm to produce or
deliver goods or services (at an acceptable cost) that customers
perceive as being different in ways that are important to them
 price for product can exceed what the firms target Major Risks of Focused Strategies
customers are willing to pay Firm may be outfocused by competitors
non-standardized products Large competitor may set its sights on your niche market
customers value differentiated features more than Preferences of niche market may change to match those
they value low cost of broad market
Differentiation actions required by this strategy: developing Advantages of Integrated Strategy
new systems and processes, shaping perceptions through A firm that successfully uses an integrated cost
advertising, quality focus, capability in R&D, maximize leadership/differentiation strategy should be in a better
human resource contributions through low turnover and high position to:
motivation. adapt quickly to environmental changes
Factors That Drive Differentiation (Unique product learn new skills and technologies more quickly
features, Unique product performance, Exceptional services, effectively leverage its core competencies while
New technologies, Quality of inputs, Exceptional skill or competing against its rivals
experience, Detailed information). Benefits of Integrated Strategy
Differentiation Strategy and the Five Forces of Successful firms using this strategy have above-average
Competition returns
Rivalry Among Competing Firms
Firm offers two types of values to customers some
Can defend against competition because brand loyalty to
differentiated features (but less than a true differentiated
differentiated product offsets price competition.
firm) and relatively low cost (but now as low as the cost
Bargaining Power of Buyers leaders price)
Can mitigate buyer power because well differentiated Major Risks of Integrated Strategy
products reduce customer sensitivity to price increases.
An integrated cost/differentiation business level strategy
Bargaining Power of Suppliers often involves compromises (neither the lowest cost nor
Can mitigate suppliers power by absorbing price the most differentiated firm)
increases due to higher margins and passing along higher
The firm may become stuck in the middle lacking the
supplier prices because buyers are loyal to differentiated strong commitment and expertise that accompanies firms
brand.
following either a cost leadership or a differentiated
Threat of New Entrants strategy
Can defend against new entrants because new products
must surpass proven products or new products must be at
least equal to performance of proven products, but offered Question:
at lower prices.
Threat of Substitute Products a company that famous with cost leadership strategy or low-
Well positioned relative to substitutes because brand
cost brand image tries to broaden their market segment by
loyalty to a differentiated product tends to reduce
customers testing of new products or switching brands. upscale their customer segment. How do we accomplish it
Major Risks of Differentiation Strategy while keeping the low-costbrand image and didnt lose our
Customers may decide that the price differential between long time customer? What factor do we have to consider?
the differentiated product and the cost leaders product is
too large
Means of differentiation may cease to provide value for
which customers are willing to pay
Experience may narrow customers perceptions of the
value of differentiated features of the firms products
Makers of counterfeit goods may attempt to replicate
differentiated features of the firms products
Focused Business-Level Strategies
A focus strategy must exploit a narrow targets differences
from the balance of the industry by:
isolating a particular buyer group
isolating a unique segment of a product line
concentrating on a particular geographic market
finding their niche
Factors That May Drive Focused Strategies
Large firms may overlook small niches
Firm may lack resources to compete in the broader market
May be able to serve a narrow market segment more
effectively than can larger industry-wide competitors
Focus may allow the firm to direct resources to certain
value chain activities to build competitive advantage