112 Part 2: Strategic Actions: Strategy Formulation
Descriptions of the purpose of business-level strategies—and of the five business-level
strategies—follow the discussion of customers. The five strategies we examine are called
generic because they can be used in any organization competing in any industry.^15 Our
analysis describes how effective use of each strategy allows the firm to favorably position
itself relative to the five competitive forces in the industry (see Chapter 2). In addition,
we use the value chain (see Chapter 3) to show examples of the primary and support
activities necessary to implement specific business-level strategies. Because no strategy is
risk-free,^16 we also describe the different risks the firm may encounter when using these
strategies. In Chapter 11, we explain the organizational structures and controls linked
with the successful use of each business-level strategy.4-1 Customers: Their Relationship with Business-Level Strategies
Strategic competitiveness results only when the firm satisfies a group of customers by
using its competitive advantages as the basis for competing in individual product mar-
kets.^17 A key reason firms must satisfy customers with their business-level strategy is that
returns earned from relationships with customers are the lifeblood of all organizations.^18
The most successful companies try to find new ways to satisfy current customers and/
or to meet the needs of new customers. Being able to do this can be even more difficult
when firms and consumers face challenging economic conditions. During such times,
firms may decide to reduce their workforce to control costs. This can lead to problems,
however, because having fewer employees makes it more difficult for companies to meet
individual customers’ needs and expectations. In these instances, firms can follow several
possible courses of action, including paying extra attention to their best customers and
developing a flexible workforce by cross-training employees so they can undertake a
variety of responsibilities on their jobs.4-1a Effectively Managing Relationships with Customers
The firm’s relationships with its customers are strengthened when it delivers superior
value to them. Strong interactive relationships with customers often provide the founda-
tion for the firm’s efforts to profitably serve
customers’ unique needs.
Importantly, delivering superior value
often results in increased customer satisfac-
tion. In turn, customer satisfaction has a posi-
tive relationship with profitability because sat-
isfied customers are most likely to be repeat
customers. However, more choices and easily
accessible information about the functionality
of the firms’ products are creating increasingly
sophisticated and knowledgeable customers,
making it difficult to earn their loyalty. As
such, many firms are working with custom-
ers to co-create value through working closely
together to ensure customer satisfaction.^19
A number of companies have become
skilled at the art of managing all aspects of
their relationship with their customers.^20
For example, Amazon.com, Inc. is widelyRubberball/Mike Kemp/Getty Images
Customers standing in a grocery store checkout line. Successful
business strategies satisfy customers’ needs.