4

BUSINESS LEVEL STRATEGY

ANALYSIS
The Positioning Approach.
- Porters 5 Forces.
- Value Chain Analysis.
- The Generic Strategies.
The Positioning
Approach
The oldest approach to military
strategy.
The newest of the three prescriptive
approaches to strategy .
-Design and Planning Approaches were
explained in Chapter 3.
Focuses on how firms in a given context
differ in product market positions
compared to the competition.
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Premises of The
Positioning Approach
Strategy follows structure.
Looks at the groups of competitors in an
industry.
Relies more heavily on calculation than
the design or planning schools.
Places even more emphasis on the role
of strategic planners.
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Porters Five Forces
Analysis
Breaking Apart Industry-Level Competition
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Porters Five Forces
Analysis
Threat of
Entry
The 6 Barriers of
Entry
Economies of Scale.
Product Differentiation.
Capital Requirements.
Cost Disadvantages Independent of Size.
+Access to Distribution Channels.
Government Policy.
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Porters Five Forces
Analysis
Power of
Buyers
Buyer Power
Determinants
Bargaining Leverage.
UBuyer Concentration
UBuyer Volume.
UBuyer Switching Costs.
UBuyer Information.
UAbility to Integrate Backward.
USubstitute Products.
UPull-Through.
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Buyer Power
Determinants
Price Sensitivity.
UPrice/Total Purchases
UProduct Differences.
UBrand Identity.
UImpact on Quality/Performance.
UBuyer Profits.
UDecision-Makers Incentives.
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Porters Five Forces
Analysis
Power
of
Suppliers
Supplier Power
Determinants
Differentiation of Inputs.
Switching Costs of Suppliers.
Presence of Substitute Products.
Supplier Concentration.
Importance of Volume to Supplier.
Cost Relative to Total Purchases in
the Industry.
Impact of Inputs on Cost or
Differentiation.
90
Porters Five Forces
Analysis
Power
of
Substitutes
Power of Substitutes
Relative Price Performance of
Substitute.
Switching Costs.
Buyer Propensity to Substitute.
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Porters Five Forces
Analysis
Competitive
Rivalry
Determinants of
Rivalry
Industry Growth.
Fixed Costs/Value Added.
Intermittent Overcapacity.
Product Differences.
Brand Identity.
Switching Costs.
Concentration and Balance.
Informational Complexity.
Diversity of Competitors.
Corporate Stakes.
Exit Barriers.
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Determinants of
Rivalry
Competition is
Everything!!!
Industry Growth.
Fixed Costs/Value Added.
Intermittent Overcapacity.
Product Differences.
Brand Identity.
Switching Costs.
Concentration and Balance.
Informational Complexity.
Diversity of Competitors.
Corporate Stakes.
Exit Barriers.
Value Chain Analysis
Figure 3
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Value Chain Analysis
Primary Activities
Figure 3
Value Chain Analysis
Procurement
Human Resource Management
Technology Development
Procurement
S
U
P
P
O
R
T

A
C
T
I
V
I
T
I
E
S
Primary Activities
Figure 3
Value Chain Analysis
Importance of value-chain analysis is
that
it provides a framework for identifying or
developing a distinctive competence.
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Devising a Plan of Action
O Position the Company.
O Influence the Balance of the Forces.
O Anticipate Shifts in the Forces.
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Creating Families of Strategies
1 . Locating the core business.
2 . Distinguishing the core business.
3 . Elaborating the core business.
4 . Extending the core business.
5 . Reconceiving the core business.
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Creating Families of Strategies
1 . Locating the core business.
2 . Distinguishing the core business.
3 . Elaborating the core business.
4 . Extending the core business.
5 . Reconceiving the core business.
The Core Business is reflected in the
Choice of Generic Strategies
Porters Generic
Strategies
Cost Advantage
Competitive
Scope
Broad
Target
Narrow
Target
Lower Cost Differentiation
1. Cost Leadership
Figure 4
99
Porters Generic
Strategies
Cost Advantage
Competitive
Scope
Broad
Target
Narrow
Target
Lower Cost Differentiation
1. Cost Leadership
2. Differentiation
Figure 4
Porters Generic
Strategies
Cost Advantage
Competitive
Scope
Broad
Target
Narrow
Target
Lower Cost Differentiation
1. Cost Leadership
2. Differentiation
3A. Cost Focus
Figure 4
Porters Generic
Strategies
Cost Advantage
Competitive
Scope
Broad
Target
Narrow
Target
Lower Cost Differentiation
1. Cost Leadership
2. Differentiation
3A. Cost Focus
Figure 4
3B. Differentiation
Focus
Strategies of Differentiation
v Price Differentiation.
v Image Differentiation.
v Support Differentiation.
v Quality Differentiation.
v Design Differentiation.
v Undifferentiation.
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Strategies of Scope
vUnsegmentation.
vSegmentation.
vNiche.
vCustomizing.
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Elaborating the Core Business
vPenetration Strategies.
vMarket Development Strategies.
vGeographic Expansion Strategies.
vProduct Development Strategies.
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Elaborating the Core Business
vPenetration Strategies.
vMarket Development Strategies.
vGeographic Expansion Strategies.
vProduct Development Strategies.
Existing Product New Product
Existing
Market
New
Market
Penetration
Strategies
Market
Development
Strategies
Product
Development
Strategies
Diversification
Strategies
Ways to Elaborate a Given
Business
Figure 5 101
Questions ?
End of Presentation