UNIVERSITY OF MAKATI
J. P. Rizal Ext., West Rembo, Makati City
COLLEGE OF BUSINESS AND FINANCIAL SCIENCE
Department of Marketing Management
Course Title Title
Module No. 4
Business-Level Strategy
Strategic Management Module Leader Dr. Adrean O. Manalo
Module Contributor Prof. Ambrosio L. Yalong Jr.
Timeframe One week
1. Complete the reading assignment
2. View online resources
How to Complete this 3. Participate in this week’s discussion
Module? 4. Complete the Module Problem Set
5. Answer review and discussion questions
6. Accomplish Experiential exercises and case studies
Teaching Strategies
Firms that perform well, even in very competitive industries, will follow some pattern of
INTRODUCTION
decision-making and execution that is internally consistent. That is, the firm will line up its
resource commitments in a way that reinforces the direction of the enterprise. If these
decisions are inconsistent, the outcome will be resource commitments that work against one
another and hinder the progress of the business. This module lays out the basic strategy
patterns that can lead to competitive advantage. Knowing these will help students understand
how to make the most of the firm’s potential.
LEARNING OBJECTIVES
1. Define business-level strategy.
2. Discuss the relationship between customers and business-level strategies in terms of who,
what, and how.
3. Explain the differences among business-level strategies.
4. Use the five forces of competition model to explain how above-average returns can be
earned through each business-level strategy.
5. Describe the risks of using each of the business-level strategies.
MODULE
Business-Level Strategy
1. Business Level Strategy
Each business should have its own business strategy. A business strategy is basically a
competitive strategy and is concerned more with how a business competes successfully
in the chosen market. The strategic decisions at business-level revolve around choice of
products and markets, meeting the needs of customers, protecting market share, gaining
advantage over competitors, and exploiting or creating new opportunities and earning
profit at the business unit level. In short, a business strategy outlines the competitive
posture of its operations in the industry.
A business-level strategy - is an integrated and coordinated set of commitments and
actions the firm uses to gain a competitive advantage by exploiting core competencies in
specific product markets.
2. Customers: Their Relationship with Business-Level Strategies
Strategic competitiveness results only when the firm able to satisfy a group of customers
by using its competitive advantages as the basis for competing in individual product
markets. A key reason firms must satisfy customers with their business-level strategy is
that returns earned from relationships with customers are the lifeblood of all organizations.
2.1 Effectively Managing Relationships with Customers - the firm’s relationships with
its customers are strengthened when it delivers superior value to them. Strong interactive
relationships with customers often provide the foundation for the firm’s efforts to profitably
serve customers’ unique needs.
2.2 Reach, Richness, and Affiliation:
CONTENT
2.2.1 Reach dimension - relationships with customers is concerned with the firm’s access
and connection to customers.
2.2.1 Richness dimension - is concerned with the depth and detail of the two-way flow
of information between the firm and the customer.
2.2.2 Affiliation dimension - is concerned with facilitating useful interactions with
customers.
2.3 Who: Determining the Customers to Serve - deciding who the target customer is
that the firm intends to serve with its business-level strategy is an important decision.
Dividing customers into groups based on their needs is called market segmentation,
which is a process that clusters people with similar needs into individual and identifiable
groups.
2.4 What: Determining Which Customer Needs to Satisfy - successful firms learn how
to deliver to customers what they want and when they want it. In a general sense, needs
(what) are related to a product’s benefits and features.
2.5 How: Determining Core Competencies Necessary to Satisfy Customer Needs -
firms use core competencies (how) to implement value-creating strategies and thereby
satisfy customers’ needs. Only those firms with the capacity to continuously improve,
innovate, and upgrade their competencies can expect to meet and hopefully exceed
customers’ expectations across time.
Source: Strategic Management by: Hitt, Ireland and Hoskisson
(For class discussion purposes only)
3. The Purpose of a Business-Level Strategy
The purpose of a business-level strategy is to create differences between the firm’s
position and those of its competitors. To position itself differently from competitors, a firm
must decide whether it intends to perform activities differently or to perform different
activities. In fact, “choosing to perform activities differently or to perform different activities
than rivals” is the essence of business-level strategy.
4. Types of Business-Level Strategies
Business-Level Strategies
CONTENT
Source: Strategic Management by: Hitt, Ireland and Hoskisson
(For class discussion purposes only)
4.1 Cost Leadership Strategy – a firm strategy based on appeal to the industrywide market
using a competitive advantage based on low cost. Firms using the cost leadership strategy
commonly sell standardized goods or services (but with competitive levels of quality) to
the industry’s most typical customers.
4.2 Differentiation Strategy – a firm’s strategy based on creating differences in the firm’s
product or service offering by creating something that is perceived industrywide as unique
and valued by customers.
4.3 Focus Strategies – a firm’s strategy based on appeal to a narrow market segment
within an industry. A firm following this strategy selects a segment or group of segments
and tailors its strategy to serve them.
4.3.1 Focus Cost Leadership Strategy
4.3.2 Focused Differentiation Strategy
4.4 Integrated Cost Leadership/Differentiation Strategy – firms that successfully both
differentiation and cost advantages create an enviable position. This dominant competitive
position, serves to erect high entry barriers to potential competitors that have neither the
financial nor physical resources to compete head-to-head.
4.4.1 Flexible Manufacturing Systems - flexible manufacturing system (FMS) increases
the “flexibilities of human, physical, and information resources, that the firm integrates to
create relatively differentiated products at relatively low costs. A significant technological
advance, FMS a computer-controlled process used to produce a variety of products in
moderate, flexible quantities with a minimum of manual intervention.
4.4.2 Information Networks - by linking companies with their suppliers, distributors, and
customers, information networks provide another source of flexibility. These networks,
CONTENT
when used effectively, help the firm to satisfy customer expectations in terms of product
quality and delivery speed.
4.4.3 Total Quality Management Systems - total quality management (TQM) is a
“managerial innovation that emphasizes an organization’s total commitment to the
customer and to continuous improvement of every process through use of data-driven,
problem-solving approaches based on empowerment of employee groups and teams.
Source: Strategic Management by: Hitt, Ireland and Hoskisson
(For class discussion purposes only)
Experiential Exercises:
By asking students to identify business-level strategy of various companies, this exercise
ASSESSMENT
provides the opportunity for students to identify how market segmentation is used by firms
to craft advertising campaigns that target a specific customer base. The instructor should
encourage students to clearly identify the strategy employed by the brand, and how the
poster is a visual representation of that strategy at work.
The instructor may also challenge the students to discuss how to build brand loyalty using
different business-level strategies.
Review Questions:
1. What is a business-level strategy?
2. What is the relationship between a firm’s customers and its business-level strategy in
terms of who, what, and how? Why is this relationship important?
ASSIGNMENT
3. What are the differences among the cost leadership, differentiation, focused cost
leadership, focused differentiation, and integrated cost leadership/differentiation business-
level strategies?
4. How can each one of the business-level strategies be used to position the firm relative to
the five forces of competition in a way that helps the firm earn above-average returns?
5. What are the specific risks associated with using each business-level strategy?
Criterion
Written
Expert Accomplished Capable Poor
Examination
RUBRIC
Case Analysis Excellent Acceptable Poor
Experiential
Excellent Acceptable Poor
Exercises
Hitt,Ireland, & Hoskisson, Strategic Management, Competitiveness & Globalization, Concepts and
Cases, Cengage, 12 Edition, 2017
REFERENCES
Rothaermel, Frank, Strategic Management 4th Edition, Mc Graw Hill, 2019
David, Fred and David Forest, Strategic Management, concepts and cases, A Competitive Advantage
Approach, 16th Edition, Pearson Education, inc. 2017
Ritson, Niel, Strategic Management, Ventus Publishing, 2011
Dess, Lumpkin, Eisner, Strategic Management, Creating Competitive Advantages 5th Edition, Mc.
Graw Hill, 2010