Syndicate 9 Summary Ireland Chapter 4

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. Five business
level strategies (cost leadership, differentiation, focused cost leadership, focused differentiation, and
integrated cost leadership/differentiation) are examined in the chapter. Customers are the foundation of
successful business-level strategies. When considering customers, a firm simultaneously examines three
issues: who, what, and how. These issues, respectively, refer to the customer groups to be served, the
needs those customers have that the firm seeks to satisfy, and the core competencies the firm will use to
satisfy customers needs. Increasing segmentation of markets throughout the global economy creates
opportunities for firms to identify more unique customer needs they can serve with one of the business-
level strategies. Firms seeking competitive advantage through the cost leadership strategy produce no-
frills, standardized products for an industrys typical customer. However, these low-cost products must be
offered with competitive levels of differentiation. Above-average returns are earned when firms
continuously emphasize efficiency such that their costs are lower than those of their competitors, while
providing customers with products that have acceptable levels of differentiated features. Competitive
risks associated with the cost leadership strategy include (1) a loss of competitive advantage to newer
technologies, (2) a failure to detect changes in customers needs, and (3) the ability of competitors to
imitate the cost leaders competitive advantage through their own unique strategic actions. Firms choose
from among five business-level strategies to establish and
defend their desired strategic position against competitors
cost leadership, differentiation, focused cost leadership,
focused differentiation and integrated cost
leadership/differentiation (see Figure 4.2). Each business-
level strategy helps the firm to establish and exploit a
particular competitive advantage within a particular
competitive scope. How firms integrate the
activities they perform within each different business-level
strategy demonstrates how they differ from one another.

Question
1. How do we implement business-level strategies in the real world?
2. What is the relationship between a firms customers and its business-level strategy in terms of
who, what, and how? Why is this relationship important?