Summary
Summary Business Level Strategy
- Course
- Institution
Summary of the Business Level Strategy course containing summaries of the slides and articles.
[Show more]
Seller
Follow
AmberOosterling
Reviews received
Content preview
Business Level Strategy – Summary of the lecturesThe general objective of strategy is: ‘achieving sustainable competitive advantage leading to above-
average economic performance’. Where average is the industry average.
“The fundamental basis of above-average performance in the long run is sustainable competitive
advantage.” (Porter, 1985)
Competitive Advantage: the firm is able to create more economic value than rival firms.
Economic Value: perceived benefits gained by a customer that purchases a firm’s products or services
minus the full economic cost of these products and services.
Nature of Competitive Advantage:
CA that is hard to copy, examples:
- Brand name
- Path dependency (history)
- Absorptive capacity (firm’s ability to learn)
- Tacit knowledge
A sustainable competitive advantage: has value creating processes and positions that cannot be
duplicated or imitated and lead to consistent production of above average returns.
Porter’s Five Forces Model (FFM): the intensity of competition within an industry is determined by:
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of new entries into the industry
- Threat of substitute products from a different industry
- Competition from industry incumbents
For strategic analysis it is important though to reduce the scope with strategic groups:
- Strategic dimensions: product range, geographical breadth, distribution channels, product
quality, vertical integration, etc.
- Yet, most empirical findings: not big difference between profitability between and within
strategic groups
- Strategic group analysis can be used to identify different strategic niches within an industry
Generic strategies for Competitive Advantage:
- Differentiation strategy: increases the willingness to pay but also increases the costs
- Low-cost strategy: has lower WTP but also lower costs
- Dual advantage strategy
1
, If performance is determined by industry, all firms in the same industry should perform similarly? Do
differences between firms matter?
M. Porter (1979): Attractive industry + favorable competitive positioning → superior profitability
- Locate within attractive industries
- Adopt strategies that modify industry conditions and competitor behavior to moderate
competition
But: J. Barney (1991): Resources and capabilities of a firm may be more reliable sources of
competitive advantage than market focus.
The potential of resources and capabilities to earn profit, three factors:
- Ability to establish a Competitive Advantage
- Ability to sustain that Competitive Advantage
- Ability to appropriate the returns from that Competitive Advantage
Establishing a competitive advantage:
- Scarcity
Resource which is essential to compete, but widely available in the industry – not a
sufficient basis for CA.
- Relevance
Resource or capability must assist in creating value for customers, or surviving
competition.
Sustaining a competitive advantage, depends on:
- Durability of resources and capabilities
Short durability: capital equipment and proprietary technologies
Long durability: reputation
- Whether rivals can imitate the CA that these resources and capabilities offer: transfer or
replicate
Easily transferable: finance, raw materials, components, skilled employees
Immobile: geographical immobility of natural resources, large items of capital
equipment; complementarity between resources; organizational capabilities are less
mobile than resources
Easily replicable: financial innovations, CA in retailing (store layout, extended
opening hours, design)
Difficult to replicate: capabilities based on complex organizational routines, e.g.
FedEx national, next-day delivery service; just-in-time scheduling and quality
services by Japanese companies
2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller AmberOosterling. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $6.91. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
52510 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now