1. STRATEGY Process, Content, Context
Chapter 5
Business Level Strategy

2. Agenda The Issue of Competitive Advantage
The Product Offering
The Activity System
The Resource Base
The Paradox of Markets and Resources
The Demand for Market Adaptation
The Demand for Resource Leveraging
Perspectives on Business Level Strategy
The Outside-in Perspective
The Inside-out Perspective
The Debate and Readings

3. I. Competitive Advantage The Business System
The Issue of Competitive Advantage
How can a company be successful?
Business System
The configuration of resources, activities and product/service offering intended to create value for the customers
Product offering
The firm supplies goods or performs services for clients in the market place
Activity System
An integrated set of value creation processes leading to the supply of product and/ or service offerings
Resource Base
All means at the disposal of the organization for the performance of value-adding activities

4. Competitive Advantage Components of a Business System

5. The Product Offering The Risk of an Unfocused Approach
Low economies of scale
The less specialized the company, the lower the opportunity to leverage the resource base
Slow organizational learning
Being involved in a multitude of products slows down the ability to build up specific knowledge and capabilities
Unclear brand image
In general, companies that stand for everything tend to stand out in nothing
Unclear corporate identity
Unfocused companies will have difficulty explaining why its people are together in the same company
High organizational complexity
Highly diverse products and customers also create an exponential increase in organizational complexity
Limits to flexibility
Less specialized firms are often forced into certain choices due to operational necessity

6. The Product Offering Alternative Industry Categorization

7. The Product Offering Alternative Market Segmentation

8. The Product Offering Defining and Selecting Businesses
Companies must focus in two ways:
Firms need to analyze the structural characteristics of interesting businesses to be able to judge whether they are attractive enough (Porters 5-forces analysis)
Selecting a limited number of business
Firms need to determine what they want to be and what they want to leave aside.To be competitive firms should choose distinct market segments and target specific product offerings
Focusing within each selected business

9. The Product Offering Industries, Markets and Businesses

10. The Product Offering Determining Competitive Scope

11. The Product Offering Product Bases for Competitive Advantage
Price
For a firm wanting to compete on price the most important point is that it should have a low cost product offering, activity system and resource base
Features
Firms can distinguish their product offering by having different intrinsic functional characteristics than competing offerings
Bundling
Selling a package of products/ services ‘wrapped together’
Quality
A firm’s product offering doesn’t necessarily have to be different, it can just be better
Distribution
Having the product available at the right place, at the right moment and in the right way is sometimes the most important aspect for customers
Image
Firms can gain advantage in the competition for customers’ preference by having a more appealing image than competitors
Relations
In general, customers prefer to know their suppliers well, as this gives them a more intimate knowledge of the product offering being provided

12. The Activity System Value Chain
An activity system is an integrated set of value creation processes leading to the supply of product and/ or service offerings. This activity system is frequently referred to as the value chain (Porter, 1985).

13. The Activity System Primary and Support Activities
Primary Activities
Inbound Logistics
Activities associated with receiving, storing, and disseminating inputs
Operations
Activities associated with transforming inputs into final products
Outbound Logistics
Collecting, storing, and physically distributing products/ services to buyers
Marketing & Sales
Providing a means by which buyers can purchase the product
Service
Providing service to enhance or maintain the value of products
Support Activities
Procurement
Purchasing of inputs to facilitate all other activities
Technology Development
The improvement of technologies throughout the firm
HRM
Activities associated with the management of personnel
Firm Infrastructure
All general activities that support the entire value chain

14. The Resource Base Types of Firm Resources

15. 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 (Porter, 1980). So sustainability depends on two main factors:
Some competitive advantages are intrinsically easier to defend because they are difficult for rivals to imitate, or because rivals find it almost impossible to find an alternative route to attack
Competitive defendability
All kind of environmental influences can undermine the fit between the firm’s competitive advantage and the environment itself
Environmental consonance

16. II. Markets & Resources Dealing with the Paradox
Market Adaptation
The ability to understand ‘the rules of the game’ in the market where one is operating
Resource
Leveraging
Creating value by controlling, disseminating assets across the business and organizational system

17. III. Business Level Strategy Two Perspectives on shaping the Business System

18. Overview of the Perspectives Outside-in versus Inside-out
OUTSIDE-IN PERSPECTIVE
Markets over resources
Opportunity-driven (external potential)
Market demand & industry structure
Adaptation to environment
Attaining advantageous position
External positioning
Acquiring necessary resources
Bargaining power & mobility barriers
INSIDE-OUT PERSPECTIVE
Resources over markets
Strength-driven (internal potential)
Resource base & activity system
Adaptation of environment
Attaining distinctive resources
Building resource base
External position
Superior resources & imitation barriers