1. Chapter 4 Business Level Strategy
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

2. © 2014, Cengage Learning EMEA, ISBN 97814082683
Contents
Introduction
The issue of competitive advantage
The paradox of markets and resources
Perspectives on business level strategy
Managing the paradox of markets and resources
Business level strategy in international perspective
Readings and Case 4
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

3. The issue of competitive advantage
A business model is the configuration of resources, activities and product/service offerings intended to create value for customers – the way a firm conducts its business
Competitive advantage can be achieved if a business model creates superior value for buyers
A firm must be able to:
supply a product or service more closely fitted to client needs than rival firms
develop and supply the superior product
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

4. The issue of competitive advantage
Components of a business model
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

5. The issue of competitive advantage
Value chain – R&D, production, logistics, marketing and sales
Resource base – stock of assets to create the product know-how, patents, facilities, money, brands and relationships
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

6. The issue of competitive advantage
Product offering
The key question is which products should be developed and which markets should be served
Companies that do not focus on a limited set of product-marked combinations risk:
low economies of scale
slow organizational learning
unclear brand image
unclear corporate image
high organizational complexity
limits to flexibility
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

7. The issue of competitive advantage
Delineating industries
The simplest way to draw an industry boundary is to use product similarity e.g. British Airways is in the airline industry
Industry can also be defined on value chain similarity, e.g. Swatch is in the watch industry but also in the fashion industry
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

8. The issue of competitive advantage
Alternative industry categorizations
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

9. The issue of competitive advantage
Segmenting markets
A market is a group of customers with similar needs
Market for transportation between London and Paris, customers can travel by air or substitute rail travel for air travel, air transportation is a market segment
Market can be divided by
buyer attributes
buyer criteria needs, or
buyer behavior/actions
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

10. The issue of competitive advantage
Alternative market categorizations
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

11. The issue of competitive advantage
Industries, markets and businesses
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

12. The issue of competitive advantage
Positioning within a business
Where to compete?
How to compete?
Bases of competitive advantage: price, features, bundling, quality, availability, image and relations
Three generic competitive advantages: operational excellence, product leadership, customer intimacy
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

13. The issue of competitive advantage
Determining competitive scope
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

14. The issue of competitive advantage
Value chain
A value chain is an integrated set of value creation processes leading to the supply of product or service offerings
Value chains differ significantly but primary activities are: inbound logistics, operations, outbound logistics, marketing and sales, and service
For service industries each firm also needs: procurement, technology development, human resource management, and firm infrastructure
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

15. The issue of competitive advantage
The generic value chain (Porter, 1985)
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

16. The issue of competitive advantage
Resource base
All means at the disposal of the organization for the performance of value-adding activities
Also called assets
The following major distinctions are made:
tangible vs. intangible resources
relational resources vs. competences
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

17. The issue of competitive advantage
Types of firm resources
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

18. The issue of competitive advantage
Sustaining competitive advantage
A competitive advantage is said to be sustainable if it cannot be copied, substituted or eroded by the actions of rivals, and is not made redundant by developments in the environment
Sustainability depends on two main factors:
competitive defendability
environmental consonance
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

19. The paradox of markets and resources
The tension arising from the partially conflicting demands of market adaptation and resource leveraging is referred to as the paradox of markets and resources
Read carefully Exhibit 4.1 Yakult: Message in a tiny bottle
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

20. Perspectives on business level strategy
The outside-in perspective
Firms should take their environment as the starting point when determining their strategy – externally oriented and market-driven
Strategy begins with an analysis of the environment to identify market opportunities
Insights into markets and industries is essential
Firms that are market-driven are often the first to realize that new resources and/or activities need to be developed ‘first mover advantage’
Read carefully Exhibit 4.2 Sony-Microsoft battle
goes to E3 as tables dent consoles
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

21. Perspectives on business level strategy
The inside-out perspective
Strategy should be built around a company’s strengths
Successful companies build up a strong resource base which offers them access to unfolding market opportunities in the medium and short term
The starting point is which resource base it wants to have
Importance of a firm’s competences over its physical assets
But – companies with competence specialization may be locked in by past choices and cannot adapt to a changing market
Read carefully Exhibit 4.3 Dyson: Blown by the
wind
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

22. The issue of competitive advantage
Two perspectives on shaping the business model
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

23. Managing the paradox of markets and resources
Parallel processing
Company separates demands over different organizational units, e.g. sales managers focus on market demands, R&D managers focus on resource leveraging
Juxtaposing
Juxtaposing is the continuous process of creating and maintaining a dynamic equilibrium between markets and resources
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

24. Managing the paradox of markets and resources
Outside-in versus inside-out perspective
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

25. Business level strategy in international perspective
Mobility Barriers
Industry and market positions of more value if there are high mobility barriers within the environment
Some mobility barriers are national in origin e.g. government regulation, union’s resistance to change, high customer loyalty, or powerful groups or families
Strategists think primarily in terms of market position
Resource mobility
Different types of resources across countries
In nations where the dominant industries are populated by firms using simple and abundant resources, market positions are more important as the acquisition of resources is less of an issue
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN