Chapter 3
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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 firm’s:
• Mission
• Objectives
• The allocation of resources
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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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Technical compatibility
Similarity in the customer needs
Similarity in the personal characteristics of customers in the target markets
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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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Firms use:
Similar economic value
Value-based planning
Portfolio analysis tools
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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.

© 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.

© 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.

© 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.

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Single-business firms
Distinction between business-level competitive strategy and marketing strategy tends to blur
• Two strategies blend into one
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Entrepreneurial start-ups
Do not have an established market position to defend
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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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• Changed the way firms compete
Is primarily a communications channel
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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.

© 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.

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

External
Factors
Prospector Analyzer
Industry and
Market
• Industry in early growth stage
• Potential customer segments unidentified
• Industry in late growth
• Some potential segments may be undeveloped
Differentiated
Defender
• Industry in decline stage
• Sales primarily due to repeat purchases
Low-Cost
Defender
• Industry in decline stage
• Sales primary due to repeat purchase
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External
Factors
Prospector
Technology • Newly emerging technology
• Applications undeveloped
Analyzer Differentiated
Defender
Low-Cost
Defender
• Basic technology well developed but still evolving
• Product modifications and improvements
• Basic technology fully developed and stable
• Major modifications
• Basic technology fully developed and stable
• Major modifications
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External
Factors
Prospector
Competition • Few established competitors
• Industry structure still emerging
• Single competitor holds commanding share
Analyzer Differentiated
Defender
• Large number of competitors
• Industry structure still evolving
• One or more competitors hold large shares in major segments
• Small to moderate number of wellestablished competitors
• Industry structure stable
• Maturity of markets
Low-Cost
Defender
• Small to moderate number of wellestablished competitors
• Industry structure stable
• Maturity of markets
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External
Factors
Business’s relative strengths
Prospector Analyzer Differentiated
Defender
Low-Cost
Defender
• SBU has strong R&D, product engineering and marketing research and marketing capabilities
• SBU has good
R&D, product engineering, and marketing research capabilities
• Low-cost position or strong sales, marketing, distribution
• SBU has no outstanding strengths in
R&D or product engineering
• Costs are higher
• SBU’s outstanding strengths are in process engineering and quality control
• SBU has superior sources of supply and/or process engineering and production capabilities
© 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.

© 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.

© 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.

• 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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