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Business-level strategy addresses the question of how a firm will compete in a particular industry (Figure 5.1 "Business-Level Strategies"). Understanding the differences that underlie generic strategies is important because different generic strategies offer different value propositions to customers. Analyzing generic strategies enhances the understanding of how firms compete at the business level. Create a new framework to examine generic strategies using different dimensions than the two offered by Portera€™s framework.
Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Corporate Tinkertoys: Diversification and Integration around the airline industry American Airlines United Airlines National Rent-a-Car Boeing . Airline Industry Example: Diversification and Integration American Airlines United Airlines National Rent-a-Car Boeing .
See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. A generic strategyA general way of positioning a firma€™s business-level strategy within an industry.


A firm focusing on cost leadership will have a different value chain configuration than a firm whose strategy focuses on differentiation.
Firms derive such strategies by executives making decisions about whether their source of competitive advantage is based on price or differentiation and whether their scope of operations targets a broad or narrow market. You may also download a PDF copy of this book (134 MB) or just this chapter (18 MB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).
This dimension involves whether a firm tries to gain an edge on rivals by keeping costs down or by offering something unique in the market.
For example, marketing and sales for a differentiation strategy often requires extensive effort while some firms that follow cost leadership such as Waffle House are successful with limited marketing efforts. For example, one way that cost leaders generally keep costs low is by not spending much on advertising.
But maybe, Tide is not really Tide everywhere – there are changes made to the formula but the brand is the same. Focusing on generic strategies allows executives to concentrate on the core elements of firmsa€™ business-level strategies.
This chapter presents each generic strategy and the a€?recipea€? generally associated with success when using that strategy. Microsoft is in high-technology, Prentice-Hall is in publishing (they publish our textbook). Chances are that you live fairly close to some combination of McDonalda€™s, Subway, Chilia€™s, Applebeea€™s, Panera Bread Company, dozens of other national brands, and a variety of locally based eateries that have just one location. The most popular set of generic strategies is based on the work of Professor Michael Porter of the Harvard Business School and subsequent researchers that have built on Portera€™s initial ideas.Porter, M. This dimension involves whether a firm tries to target customers in general or whether it seeks to attract just a segment of customers. When firms follow these recipes, the result can be a strategy that leads to superior performance.


While cost leaders such as Waffle House spend very little on advertising, Walmart spends considerable money on print and television advertising despite following a cost leadership strategy. If that’s what you see, they are in the same industry and so this is horizontal integration like United Airlines acquiring American. Each of these restaurants competes using a business model that is at least somewhat unique. Four generic business-level strategies emerge from these decisions: (1) cost leadership, (2) differentiation, (3) focused cost leadership, and (4) focused differentiation. But when firms fail to follow logical actions associated with each strategy, the result may be a value proposition configuration that is expensive to implement and that does not satisfy enough customers to be viable.
When an executive in the restaurant industry analyzes her company and her rivals, she needs to avoid getting distracted by all the nuances of different firma€™s business-level strategies and losing sight of the big picture.
In rare cases, firms are able to offer both low prices and unique features that customers find desirable. Indeed, depending on the nature of a firma€™s industry, tweaking the recipe of a generic strategy may be essential to cooking up success. But if combined with Salvo, the company is adjusting its strategy to conform to local preferences, and that means the overall corporate strategy looks multidomestic. From that perspective, this is related diversification where the synergy is likely using Dell’s marketing prowess to leverage Apple’s operating system technology.
This actually happened and represents “strategic” exit (Intel was financially strong) rather than exit under duress. So they are in the same industry (operating systems) which means horizontal integration, and in related industries (PCs, PC applications) which means related diversification.



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