Business Level Strategy
Business Level Strategy
Business Level Strategy
Business-Level Strategy:
Creating and Sustaining
Competitive Advantages
2 5-2
Types of Competitive Advantage and Sustainability
Three generic strategies to overcome the five
forces and achieve competitive advantage
Overall cost leadership
Low-cost-position relative to a firm’s peers
Manage relationships throughout the entire value
chain
Differentiation
Create products and/or services that are unique
and valued
Non-price attributes for which customers will pay a
premium
Focus strategy
Narrow product lines, buyer segments, or targeted
geographic markets
Attain advantages either through differentiation or
cost leadership
3 5-3
Differentiation
Differentiation
Firms may differentiate along several
dimensions at once
Firms achieve and sustain differentiation
and above-average profits when price
premiums exceed extra costs of being
unique
Successful differentiation requires
integration with all parts of a firm’s value
chain
An important aspect of differentiation is
speed or quick response
McGraw-Hill/Irwin
Strategic Management, 3/e
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
145-14
Differentiation: Improving Competitive
Position vis-à-vis the Five Forces
Differentiation
Creates higher entry barriers due to
customer loyalty
Provides higher margins that enable the
firm to deal with supplier power
Reduces buyer power because buyers
lack suitable alternative
Reduces supplier power due to prestige
associated with supplying to highly
differentiated products
Establishes customer loyalty and hence
less threat from substitutes
155-15
Focus
Focus
Creates barriers of either cost
leadership or differentiation, or
both
Used to select niches that are
least vulnerable to substitutes or
where competitors are weakest
185-18