Chapter 3 © 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Components of a firm engaged in multiple industries or businesses Independently decide objectives, markets, and competitive strategies to be pursued Should be consistent with the firm’s: Mission Objectives The allocation of resources

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Homogeneous set of markets with limited number of related technologies Unique set of product-markets Control over factors necessary for successful performance Responsibility for their own profitability

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Technical compatibility Similarity in the customer needs Similarity in the personal characteristics of customers in the target markets

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Derived from the corporate objective and vary according to: Attractiveness of the industries Strength of the competitive positions within those industries Resource allocation decisions by corporate management

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Firms use: Similar economic value Value-based planning Portfolio analysis tools

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Michael Porter distinguishes three strategies Overall cost leadership Differentiation Focus Robert Miles and Charles Snow classify business units into four strategic types Prospectors Defenders Analyzers Reactors

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Single-business firms Distinction between business-level competitive strategy and marketing strategy tends to blur Two strategies blend into one Entrepreneurial start-ups Do not have an established market position to defend

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Service: Any activity or benefit that is essentially intangible and that does not result in the ownership of anything Its production may or may not be tied to a physical product Almost all businesses are engaged in service to some extent

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Changed the way firms compete Is primarily a communications channel Makes it easier for firms to: Customize their offerings and personalize their relationships with their

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

External Factors ProspectorAnalyzerDifferentiated Defender Low-Cost Defender Industry and Market Industry in early growth stage Potential customer segments unidentified Industry in late growth Some potential segments may be undeveloped Industry in decline stage Sales primarily due to repeat purchases Industry in decline stage Sales primary due to repeat purchase

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. External Factors ProspectorAnalyzerDifferentiated Defender Low-Cost Defender Technology Newly emerging technology Applications undeveloped Basic technology well developed but still evolving Product modifications and improvements Basic technology fully developed and stable Major modifications Basic technology fully developed and stable Major modifications

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. External Factors ProspectorAnalyzerDifferentiated Defender Low-Cost Defender Competition Few established competitors Industry structure still emerging Single competitor holds commanding share Large number of competitors Industry structure still evolving One or more competitors hold large shares in major segments Small to moderate number of well- established competitors Industry structure stable Maturity of markets Small to moderate number of well- established competitors Industry structure stable Maturity of markets

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. External Factors ProspectorAnalyzerDifferentiated Defender Low-Cost Defender Business’s relative strengths SBU has strong R&D, product engineering and marketing research and marketing capabilities SBU has good R&D, product engineering, and marketing research capabilities Low-cost position or strong sales, marketing, distribution SBU has no outstanding strengths in R&D or product engineering Costs are higher SBU’s outstanding strengths are in process engineering and quality control SBU has superior sources of supply and/or process engineering and production capabilities

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Effective implementation of different business strategies requires different: Functional competencies and resources Organizational structures Decision-making and coordination processes Reward systems Personnel