Chapter 5: Selecting Business-Level Strategy
This chapter explained generic business-level strategies that executives must choose between to keep their firms competitive. Executives must identify their firm’s source of competitive advantage by choosing to compete based on low-cost versus (often) more expensive features that differentiate their firm from competitors. In addition, targeting either a narrow or broad market helps firms further understand their customer base. Based on these choices, firms will follow cost leadership, differentiation, focused cost leadership, or focused differentiation strategies. Another potentially viable business strategy, best cost, exists when firms offer relatively low prices while still managing to differentiate their goods or services on some important value-added aspects.
One predictor of long(er)-term business success is the firm’s ability to stick to strategy. Low cost firms that venture into additional features or services often find that they have to increase prices to pay for these additional features, decreasing their ability for cost leadership. Similarly, firms that differentiate need to invest sufficiently in R&D to ensure the element of differentiation remains both current and desirable. Whatever their strategy, all firms can fall victim to being “stuck in the middle” by not offering sufficiently unique features or competitive prices.
- Divide your class into four or eight groups, depending on the size of the class. Each group should select a different industry. Find examples of each generic business-level strategy for your industry. Discuss which strategy seems to be the most successful in your selected industry.
- This chapter discussed Target and other retailers. If you were assigned to turn around a struggling retailer such as Kmart, what actions would you take to revive the company?
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