Business-Level Strategy

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
It is the core strategy
Every firm must form and use a business-level
strategy for each one of its businesses
Business-level strategy choices matter because
long-term performance is linked to a firms
strategies

 One business-level strategy: A singleproduct market/single geographic location

firm one business-level strategy and
one corporate-level strategy.
Several business-level strategies : A
diversified firm separate business-level
strategy for each product market area
and one or more corporate-level
strategies

To strengthen its market position, PT.HM Sampoerna

presented several kinds of innovations, among others:
Launched A Flava Click Mint, the first mild cigarette
product in Indonesia with innovative click mint, that
offers 2 different experiences to adult smokers,
cigarettes with a mild flavor and mint.
Launched the A Mild cigarette, the first low nicotine
cigarette in Indonesia (Low Tar Low Nicotine / LTLN),
with the composition of the tar / nicotine 14 mg / 1.0
mg.

Key Issues in Business-Level

Strategy
- Who will be served?
- What needs will be satisfied?
- How those needs will be saatisfied?

Effectively Manage Relationship

with Customers
REACH
Access and Connection
to Customers

RICHNESS

Depth and Detail of Two-Way Flo

of Information Between
the Firm and Customer

AFFILIATION

Facilitating Useful Interactions

With Customers

WHO: Determining the Customers to

Serve
MARKET SEGMENTATION
A process used to cluster people with similar
needs into individual and identifiable groups
CONSUMER MARKETS

INDUSTRIAL MARKETS

1. DEMOGRAPHIC FACTORS
(age, income, sex, etc.)
2. SOCIOECONOMIC FACTORS
(social class, stage in the family life
cycle)
3. GEOGRAPHIC FACTORS
(cultural, regional, and national
differences)
4. PSYCHOLOGICAL FACTORS
(lifestyle, personality traits)
5. CONSUMPTION PATTERNS
(heavy, moderate, and light users)
6. PERCEPTUAL FACTORS

1. END-USE SEGMENTS
(identified by SIC code)
2. PRODUCT SEGMENTS
(based on technological differences or
production economics)
3. GEOGRAPHIC SEGMENTS
(defined by boundaries between
countries or by regional differences
within them)
4. COMMON BUYING FACTOR
SEGMENTS
(cut across product market and
geographic segments)

WHAT: Determining which Customer

Needs to Satisfy
Customer needs are related to a
products benefits and features
Customer needs are neither right nor
wrong, good nor bad
Customer needs represent desires in
terms of features and performance
capabilities
Successful firms learn how to deliver
to customers what they want, when
they want it

HOW: Determining Core Competencies

Necessary to Satisfy Needs
Firms use core competencies to implement value
creating strategies that satisfy customers needs
Value means goods or services that provide either low
cost with acceptable features or highly differentiated
features with acceptable costs
Only firms with capacity to continuously improve,
innovate, and upgrade their competencies can expect to
meet and/or exceed customer expectations across time
Perform activities differently or Perform
different activities as compared to its rivals

Five Business-Level
Strategies

A. Strength
1. Good quality of raw materials
2. Mastering the market share
3. Credibility of the company
4. Sampoernas corporate culture
5. The large capital value
B. Weakness
1. The price is quite expensive
2. Less enthuses mild cigarette products in the International
3. Defeat filtered SKM market share from competitors
4. Capital big enough to hold a periodic event
5. The slow growth of non Avolution

C. Opportunity
1. The entry of Philip Morris as a business partner
2. The positive market trend for cigarettes Low Tar Low Nicotine
(LTLN) Indonesia
3. Big number of available events to promote new product
4. Possible birth of a new product
5. Shift of competitors customers to Sampoernas LTLN cigarettes
D. Threat
1. Regulations regarding anti-smoking
2. Competitors of mild cigarettes
3. Increased competitors of mild cigarettes
4. Higher cigarette taxes
5. Reduced number of event sponsored by the cigarette industry

Cost Leadership Strategy

An integrated set of actions taken to
produce goods or services with features
that are acceptable to customers at the
lowest cost, relative to that of competitors
with features that are acceptable to
customers
Relatively standardized products
Features acceptable to many customers
Lowest competitive price

Value Chain Activities

Value chain analysis identifies the parts of a
firms operations that create value and those
that do not
A competitive advantage in logistics creates
more value for a cost leadership strategy than
for a differentiation strategy
Inbound logistics [materials handling,
warehousing, and inventory control]
Outbound logistics [collecting, storing, and
distribution]

Cost Saving Actions

Employing process innovations that facilitate
efficient production and distribution methods
Building efficient scale facilities
Tightly controlling production costs and overhead
Minimizing costs of sales, R&D, and service
Building efficient manufacturing facilities
Monitoring costs of activities provided by
outsiders
Simplifying production processes

Rivalry with Existing

Competitors
Due to cost leaders advantageous position:
Rivals hesitate to compete on basis of price
Lack of price competition leads to greater
profits
Rivalry may be based on factors such as size,
resources, location, market dependence, and
prior competitive interactions