Chapter 5 (STRAT)

Business-level strategy (Ch. 5)

The overall competitive theme of a business in a given market: who it serves, what needs, and how it satisfies them.

Differentiation strategy

Create higher value than competitors through unique features and service; charge higher prices while keeping costs as low as possible.

Low-cost (cost leadership) strategy

Create similar value to competitors at lower cost; charge lower prices.

Market segmentation

Clearly identifiable groups of customers with similar needs and desires.

Standardization strategy

Producing one standardized product for the average customer (broad market).

Segmentation strategy

Producing different offerings for different segments, serving many segments or the whole market (broad).

Focus strategy

Serving a limited number of segments or just one (narrow market).

Generic strategy examples

Broad low cost: Walmart.

Broad differentiation: Toyota, Coca-Cola.

Focus low cost: Costco, Southwest.

Focus differentiation: Nordstrom.

Blue ocean strategy

Successfully combining differentiation and cost leadership to open untapped market space and create new demand.

Value innovation

Simultaneously pursuing differentiation (V up) and low cost (C down).

Eliminate / Reduce / Raise / Create

Value innovation questions. Eliminate and Reduce lower costs; Raise and Create increase perceived customer benefits.