Business-Level

Business-Level Strategy
Strategy

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External Environment
Sustainable
Competitive
Advantage
Internal Environment

Business Level
Strategy
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 The resources and
Core capabilities that have been
Competenc determined to be a source of
y competitive advantage for a
firm over its rivals.

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Core The resources and capabilities that have been
Competency determined to be a source of competitive
advantage for a firm over its rivals.

An integrated and coordinated

set of actions taken to exploit
Strateg
core competencies and gain a
y
competitive advantage.

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Core The resources and capabilities that have been
Competency determined to be a source of competitive
advantage for a firm over its rivals.

An integrated and coordinated set of

Strategy actions taken to exploit core competencies
and gain a competitive advantage.

Actions taken to provide value to

Business customers and gain a competitive
Level advantage by exploiting core
Strategy competencies in specific,
individual product markets. 5
 Generic Business Level Strategies
Source of Competitive Advantage

Cost Uniqueness

Broad Cost Differen-

Target
Market Leadership tiation
Breadth of
Competitive
Scope
Focused
Narrow Focused
Target Differen-
Market Low Cost
tiation
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Cost Leadership Business Level Strategy

Key Criteria:

Relatively standardized products

Features acceptable to many customers

Lowest competitive price

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Cost Leadership Business Level Strategy
Requirements:
Constant effort to reduce costs through:

Building efficient scale facilities

Tight control of production costs and overhead
Minimizing costs of sales, R&D and service
State of the art manufacturing facilities
Monitoring costs of activities provided by outsiders
Simplification of processes
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 Value Creating Activities Common to a
Cost Leadership Business Level Strategy
Firm Infrastructure
Activities

M
Support

Human Resource Management A

RG
Technological Development IN
Procurement

M Service
Operations

Outbound

Marketing
Logistics
Inbound

& Sales
Logistics

IN
G
R
A
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Primary Activities
 Value Creating Activities Common to a
Cost Leadership Business Level Strategy
Relatively Few
MIS Systems
Firm Infrastructure Management Layers to
Reduce Overhead
Activities

M
Support

Training & Development

Human Resource Management
Consistent Policies to
Reduce Turnover Costs
A
Easy-to-Use Manufacturing Reduce Costs Associated with
RG
Technological Development
Technologies
[SOPHISTICATION]
Manufacturing Processes IN
Lowest Cost Products to Purchase
Raw Materials Procurement
Frequent Evaluation Processes to
Monitor Suppliers’ Performances

Highly Efficient Efficient Plant Delivery Schedule Small, Highly Effective Product

M Service
Systems to Link Scale to Minimize that Reduces Trained Sales Installations to
Operations

Suppliers’ Manufacturing
Outbound
Costs Force Reduce Frequency

Marketing
Logistics
Inbound

Products with the Costs and Severity

& Sales
Logistics

IN
Firm’s Production Selection of Low of Recalls
Processes Timing of Asset Cost Transport

G
Purchases Carriers

R
A
Located in Close Policy Choice of National Scale
Proximity with Plant Technology Advertising
Suppliers
Organizational
Learning
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Primary Activities
 How to Obtain a Cost Advantage

1. Determine and Control Cost Drivers

2. Reconfigure the Value Chain as needed

Alter production process New raw material

Change in automation Forward integration
New distribution channel Backward integration
New advertising media Change location relative
Direct sales in place of to suppliers or buyers
indirect sales
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Choices That Drive Costs
Economies of scale
Asset utilization
Capacity utilization pattern
- Seasonal, cyclical
Interrelationships
- Order processing
and distribution
Value chain linkages
- Advertising & Sales
- Logistics & Operations
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Major Risks of Cost Leadership
Business Level 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
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Examples…..
Retail Sector : Big Bazar

Telecom Sector : Nokia 1100, Hair,

Water Filter : SWACH [TATA]

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Ref. Book

Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson

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