 Strategic Management: Strategic Managment Gregory G. Dess,
University of Texas at Dallas
G.T. Lumpkin,
University of Illinois--Chicago
Business-Level Strategy: Creating and Sustaining Competitive Advantages
Chapter Overview| How and why firms outperform each other goes to the heart of strategic management. In this chapter, we identified three generic strategies and discussed how firms are able not only to attain advantages over competitors, but also to sustain such advantages over time. Why do some advantages become long-lasting while others are quickly imitated by competitors?
The three generic strategies—overall cost leadership, differentiation, and focus—form the core of this chapter. We began by providing a brief description of each generic strategy (or competitive advantage) and furnished examples of firms that have successfully implemented these strategies. Successful generic strategies invariably enhance a firm’s position vis-à-vis the five forces of that industry—a point that we stressed and illustrated with examples. However, as we pointed out, there are pitfalls to each of the generic strategies. Thus, the sustainability of a firm’s advantage is always challenged because of imitation or substitution by new or existing rivals. Such competitor moves erode a firm’s advantage over time.
We also discussed the viability of combining (or integrating) overall cost leadership and differentiation generic strategies. If successful, such integration can enable a firm to enjoy superior performance and improve its competitive position. However, this is challenging and managers must be aware of the potential downside risks associated with such an initiative.
The concept of the industry life cycle is a critical contingency that managers must take into account in striving to create and sustain competitive advantages. We identified the four stages of the industry life cycle—introduction, growth, maturity, and decline—and suggested how these stages can play a role in decisions that managers must make at the business level. These include overall strategies as well as the relative emphasis on functional areas and value-creating activities.
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2002 A McGraw-Hill Online Learning Centre