Chapter 3

Business
Strategies
and Their
Marketing
Implications

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Strategic Business Units (SBUs)

Components of a firm engaged in
multiple industries or businesses
Independently decide objectives,
markets, and competitive strategies
to be pursued

Should be consistent with the firms:

Mission
Objectives
The allocation of resources
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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-2

Characteristics of SBUs

Homogeneous set of markets with

limited number of related technologies
Unique set of product-markets
Control over factors necessary for
successful performance
Responsibility for their own profitability

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-3

Dimensions That Define Individual SBUs

Technical compatibility
Similarity in the customer needs
Similarity in the personal
characteristics of customers in the
target markets

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-4

Business-Unit Objectives

Derived from the corporate objective

and vary according to:
Attractiveness of the industries
Strength of the competitive positions

within those industries

Resource allocation decisions by corporate
management

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-5

Allocating Resources within the Business Unit

Firms use:
Similar economic value
Value-based planning
Portfolio analysis tools

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3-6

Generic Business-Level Competitive Strategies

Michael Porter distinguishes three strategies

Overall cost leadership
Differentiation
Focus

Robert Miles and Charles Snow classify

business units into four strategic types
Prospectors
Defenders
Analyzers
Reactors
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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-7

Exhibit 3.1 - Definitions of Miles and Snows Four Business Strategies

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-8

Exhibit 3.1 - Definitions of Miles and Snows Four Business Strategies

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-9

Exhibit 3.2 - Combined Typology of Business-Unit Competitive

Strategies

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-10

Single-Business Firms and Start-ups

Single-business firms
Distinction between business-level

competitive strategy and marketing

strategy tends to blur

Two strategies blend into one

Entrepreneurial start-ups
Do not have an established market

position to defend

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-11

Service Businesses

Service: Any activity or benefit that is

essentially intangible and that does
not result in the ownership of anything
Its production may or may not be tied to a

physical product

Almost all businesses are engaged in

service to some extent

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-12

The Impact of the Internet

Changed the way firms compete

Is primarily a communications channel
Makes it easier for firms to:

Customize their offerings and personalize

their relationships with their

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-13

Exhibit 3.4 - How Business Strategies Differ in

Scope, Objectives, Resource Deployments, and
Synergy

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-14

Exhibit 3.4 - How Business Strategies Differ

in Scope, Objectives, Resource
Deployments, and Synergy

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-15

Exhibit 3.5 - Environmental Factors

Favorable to Different Business
Strategies
External
Factors
Industry
and
Market

Prospector
Industry in
early
growth
stage
Potential
customer
segments
unidentifie
d

Analyzer

Differentiated
Defender

Low-Cost
Defender

Industry in Industry in
Industry in
late
decline stage
decline
growth
Sales
stage
Some
primarily due Sales
potential
to repeat
primary
segments
purchases
due to
may be
repeat
undevelope
purchase
d

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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-16

Exhibit 3.5 - Environmental Factors

Favorable to Different Business
Strategies
External
Factors
Technolo
gy

Prospector

Analyzer

Newly
emerging
technolog
y
Applicatio
ns
undevelop
ed

Basic
technology
well
developed
but still
evolving
Product
modifications
and
improvement
s

Differentiated
Defender

Low-Cost
Defender

Basic
Basic
technology
technology
fully
fully
developed
developed
and stable
and stable
Major
Major
modifications
modificatio
ns

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3-17

Exhibit 3.5 - Environmental Factors

Favorable to Different Business
Strategies
External
Factors

Prospector

Analyzer

Differentiated
Defender

Low-Cost
Defender

Competitio Few
n
established
competitors
Industry
structure
still
emerging
Single
competitor
holds
commandin
g share

Large
Small to
Small to
number of
moderate
moderate
competito
number of
number of
rs
wellwell Industry
established
established
structure
competitors
competitor
Industry
still
s
Industry
evolving
structure
One or
stable
structure
more
Maturity of
stable
competito
markets
Maturity of
rs hold
markets
large
shares in
2014 by McGraw-Hill Education. This is proprietary materialmajor
solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-18

Exhibit 3.5 - Environmental Factors

Favorable to Different Business
Strategies
External
Factors

Prospector

Analyzer

Differentiated
Defender

Low-Cost
Defender

Business SBU has

SBU has good
s relative
strong
R&D, product
strengths
R&D,
engineering,
product
and marketing
engineerin
research
g and
capabilities
marketing Low-cost
research
position or
and
strong sales,
marketing
marketing,
capabilitie
distribution
s

SBU has no
SBU has
outstanding
superior
strengths in
sources of
R&D or
supply
product
and/or
engineering
process
Costs are
engineeri
higher
ng and
SBUs
productio
outstanding
n
strengths are
capabilitie
in process
s
engineering
and quality
control
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authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-19

Exhibit 3.7 - Differences in Marketing Policies

and Program Components across Businesses
Pursuing Different Strategies

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-20

Exhibit 3.7 - Differences in Marketing Policies

and Program Components across Businesses
Pursuing Different Strategies

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-21

Changing Business Strategies for a Changing Market

Effective implementation of different

business strategies requires different:
Functional competencies and resources
Organizational structures
Decision-making and coordination

processes
Reward systems
Personnel
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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

3-22