McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.5 Strategic Management Business Level Strategy: Creating and Sustaining Competitive Advantages

5-2 Chapter 5 Objectives The central role of competitive advantage in the study of strategic management The three generic strategies: overall cost leadership, differentiation, and focus

5-3 Chapter 5 Objectives How the successful attainment of generic strategies can improve a firm’s relative power vis-à-vis the Five Forces that determine an industry’s average profitability The pitfalls managers must avoid in striving to attain generic strategies

5-4 Chapter 5 Objectives How firms can effectively combine the generic strategies of overall cost leadership and differentiation The importance of considering the industry life cycle to determine a firm’s business-level strategy and its relative emphasis on functional area strategies and value-creating activities

5-5 Chapter 5 Objectives The need for turnaround strategies which enable a firm to reposition their competitive position in an industry

5-6 Types of Competitive Advantage and Sustainability Overall low cost leadership Overall cost leadership: improving competitive position vis-à-vis the Five Forces Potential pitfalls of overall low-cost strategies

5-7 Types of Competitive Advantage and Sustainability Differentiation Differentiation: improving competitive position vis-à-vis the Five Forces Potential pitfalls of differentiation strategies Focus Focus: improving competitive position vis-à-vis the Five Forces Potential pitfalls of focus strategies

5-8 Types of Competitive Advantage and Sustainability Combination strategies: integrating overall low cost and differentiation Automated and flexible manufacturing systems Exploiting the profit pool concept for competitive advantage Coordinating the “extended” value chain by way of information technology

5-9 Types of Competitive Advantage and Sustainability Combination strategies: integrating overall low cost and differentiation (cont’d.) Integrated overall low-cost and differentiation strategies: improving competitive position vis-à- vis the Five Forces Pitfalls of integrated overall cost leadership and differentiation strategies

5-10 Industry Life Cycle Stages: Strategic Implications Strategies in the introduction stage Strategies in the growth stage Strategies in the maturity stage Strategies in the decline stage Relating generic strategies to stages of the industry life cycle: the personal computer industry