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BUT, first
Function-level strategies can build resources and capabilities to enhance a companys distinctive competencies.
Business-Level Strategy
A successful business model results from business-level strategies that create a competitive advantage over its rivals.
3. Distinctive competencies
Customer needs
The desires, wants, or cravings that can be satisfied through product attributes Customers choose a product based on:
1. The way the product is differentiated from other products of its type 2. The price of the product
Product differentiation
Designing products to satisfy customers needs in ways that competing products cannot.
A profitable business model depends on providing the customer with the most value while keeping cost structures viable.
Source: Copyright C. W. L. Hill & G. R. Jones, The Dynamics of Business-Level Strategy, (unpublished manuscript, 2002).
Cost Leadership
Cost leaders establish a cost structure that allows them to provide goods and services at lower unit costs than competitors.
Strategic Choices
The cost leader does not try to be the industry innovator. The cost leader positions its products to appeal to the average or typical customer. The overriding goal of the cost leader is to increase efficiency and lower its costs relative to industry rivals.
Cost leaders are able to charge a lower price or are able to achieve superior profitability than their competitors at the same price.
Competitors may
Differentiation
Companies with a differentiation strategy create a product that is different or distinct from its competitors in an important way. Strategic Choices
A differentiator:
Stives to differentiate itself on as many dimensions as possible. Focuses on quality, innovation, and responsiveness to customer needs. May segment the market in many niches. Concentrates on the organizational functions that provide a source of distinct advantages.
Differentiators can create demand for their distinct products and charge a premium price, resulting in greater revenue and higher profitability.
The focuser strives to serve the need of a targeted niche market segment where it has either a low-cost or differentiated competitive advantage.
Focus
Strategic Choices
The focuser selects a specific market niche that may be based on:
Geography Type of customer Segment of product line
Strategic Groups
They have lost their source of competitive advantage Their rivals have found ways to push out the value creation frontier and leave them behind
There is no more important task than ensuring that the company is optimally positioned against its rivals to compete for customers.