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Chapter 5. Business-Level Strategy: Creating and Sustaining Competitive Advantages

Overview:

Understanding the components of external and internal analysis, companies now have the building blocks and framework to develop strong business-levels strategies to create and sustain competitive advantages. There are three generic strategies: overall cost leadership, differentiation, and focus. This chapter explains how the successful attainment of generic strategies can improve the firm’s relative power and discusses the five forces that determine an industry’s average profitability. As managers evaluate these generic strategies, it is critical that they do not fall into specific pitfalls. Long term, the factors that determine the sustainability of a firm’s competitive advantage are discussed. Each company must evaluate where they are in the industry life cycle to determine their business-level strategy and have turnaround strategies to reposition themselves to be in a competitive position.  

Chapter 5. Business-Level Strategy: Creating and Sustaining Competitive Advantages

Learning Objectives

1. The central role of competitive advantage in the study of strategic management and the three generic strategies: overall cost leadership, differentiation, and focus.
2. How the successful attainment of generic strategies can improve the firm’s relative power vis-à-vis the five forces that determine an industry’s average profitability.
3. The pitfalls managers must avoid in striving to attain generic strategies.
4. How firms can effectively combine the generic strategies of overall cost leadership and differentiation.
5. What factors determine the sustainability of a firm’s competitive advantage?
6. The importance of considering the industry life cycle to determine a firm’s business-level strategy and its relative emphasis on functional area strategies and value-creating activities.
7. The need for turnaround strategies that enable a firm to reposition its competitive position in an industry.

   Question

   Initial Postings: Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding.Also, provide a graduate-level response to each of the following questions:

   1. Research Amazon. How has this firm been able to combine overall cost leadership and differentiation strategies?