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Development of Strategy > 10.4 Business-level strategy > Flashcards

10.4 Business-level strategy Flashcards

1
Q

What is meant by “business level strategy”?

A

The development of strategy and the choices that take place within a defined business unit.

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2
Q

Why is business level strategy important for large company groups?

A

There may be many unrelated business entities as part of a group, and each will require an individual strategy, although this can be part of the larger Group strategy.

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3
Q

What does “SBU” stand for?

A

Strategic business unit

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4
Q 
Porter sets out 4 choices for businesses to follow when selecting strategy as a matrix. These four choices a re:
- cost l\_\_\_\_\_\_\_\_\_\_
- d\_\_\_\_\_\_\_\_\_\_\_\_
- cost f\_\_\_\_\_\_\_ and
d\_\_\_\_\_\_\_\_\_ focus
A

cost leadership
differentiation
cost focus
differentiation focus

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5
Q

Johnson states that there are four key cost drivers to consider when pursuing a cost leadership model. These are:

  • input c_____ (i.e. minimising the cost of labour and materials)
  • e_________ of scale (spreading cost over time and avoiding large upfront costs
  • ex__________ (employing experience people who already know what they are doing)
  • d______ (using a rational strategy to ensure that the design of the product is efficient).
A

costs
economies
experience
design

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6
Q

What are reasons why a cost leadership approach might fail?

A
  • unjustified focus on the cost of one or more elements of the supply chain while ignoring others
  • insufficient supply base to share across competitors (i.e. you cannot be the cheapest if another supplier controls key resources).
  • the product and cost savings are easily imitated by others
  • cost restrictions have caused a drop in quality.
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7
Q

What is meant by “differentiation” as a business strategy?

A

Using different variants of the same product to drive up sales (e.g. the various types of Coca Cola)

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8
Q

Johnson suggests there are thee primary drivers for a “differentiation” strategy:

  • product and service a__________ (appealing to customers with a variety of choice)
  • customer r_________ (the manner in which a business deals with their customer base)
  • c________ (the add ons that come with a product to improve its service (e.g. inclusion of software with certain computers)
A

attributes
relationships
complements

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9
Q

Garvin (1987) defined 8 dimensions of quality in providing a “differentiation” approach:
1 P________ - is it better than the competition?
2 Features - does it have unique aspects
3 Reliability - will it outperform others?
4 C_________ - does it meet laws and standards?
5 Durability - will it last?
6 Serviceability - if it breaks can it be repaired?
7 A_________ - does it look. sound or feel better?
8 Perceived quality - is the customer satisfied?

A

performance
conformance
aesthetics

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10
Q

What could be some possible downsides to differentiation?

A
  • too much differentiation could confuse customers
  • too high a price
  • competitors could easily copy
  • different perceptions between buyers and sellers
  • striving for uniqueness of value
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11
Q

What is an “organisational focus” strategy?

A

Tailoring a product or service to the specific needs of the perceived customer. (e.g. Ryanair target budget travelers)

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12
Q

Johnson (2017) gives examples of two different organisational focus strategies:
1 c____ focus strategy - e.g. Ryanair targeting price conscious travelers
2 d_________ focus strategy - e.g. Ecover targeting environmentally conscious customers

A

cost

differentiation

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13
Q

Porter suggests that an organisation is only successful through following a distinct strategy:

  • a c_____ l______ will end up adding cost if it attempts to diffenrentiate
  • a d________ will lose its point of difference if it fails have clarity over why it is different
  • a f______ s________ can find its customer base eroded by being perceived as losing its specialism
A

cost leader
differentiation
focus strategy

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14
Q

What is meant by a “hybrid strategy”?

A

A strategy whereby elements of multiple different strategies are employed together - e.g. a cost leader with elements of focus strategy.

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15
Q

Wearden provides two examples of organisations that have successfully employed hybrid strategies - which are these?

A

1) Tesco - has succeeded in being UK’s largest retailer for over 25 years through using a combination of Porter’s three generic strategies
2) MacDonald’s - moved from initial product differentiation to a cost leader (this was only possible because of its size and dominance).

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16
Q

Wearden discussed the methods used to ensure that different strategies remain sustainable over a long period.

Cost leadership can be monitored and controlled through the effective and ongoing use of a robust v______ c_____ a________.

A

value chain analysis

17
Q

Wearden discussed the methods used to ensure that different strategies remain sustainable over a long period.

Differentiation can be monitored and controlled through a close understanding of different stakeholder expectations, through the ongoing use of a s_________ m__________ e_________.

A

stakeholder mapping exercise

18
Q

Wearden discussed the methods used to ensure that different strategies remain sustainable over a long period.

Focus can be monitored and controlled through a robust understanding of the different options available to customers through the ongoing use of a model such as P________ f____ f______ model.

A

Porter’s five forces.

19
Q

What might “BPR” stand for?

A

Business Process Re-engineering

20
Q

“Business Process Re-engineering” (BPR) requires a … radical redesign of organisational p________ with the aim of achieving significant improvement in operation to achieve strategic o_________.

A

processes

objectives

21
Q

There are 5 rules to “Business Process Re-engineering” (BPR):

  • s_______ must be determined before redesign
  • existing p________ should be used as a basis for redesign
  • use of i_______ t________ should be optimised
  • governance, c_______ and organisational structures must align with the process flow
  • people need to understand and participate (buy-in)
A

strategy
processes
information technology
culture

22
Q

Define “synergy” in the context of discussing business units working together.

A

The alignment of assets or activities such that the combined results can deliver a greater advantage than the separate parts.

23
Q

Porter identified three ways in which an organisation can gain advantage. What are these?

A

Cost - be the cheapest
Differentiation - offer something different
Focus - hone in on a particular target market or markets

24
Q

When pursuing a cost leadership strategy, what are the key tactics?

A

A detailed understanding of product costs (direct and indirect)
A focus on cost reduction based on historic performance
Removal of inefficiencies
Focus on customers who pay on time and in full
A focus on product quality

25
Q

Johnson suggests 4 key cost drivers that need to be taken into consideration in a cost leadership approach. What are these?

A

Input costs - raw materials and labour
Economies of scale - spread cost over time
Experience - a person who knows what they are doing will be more efficient
Design - efficiency built into product design

26
Q

What are the possible risks in pursuing a cost leadership approach?

A

Focus on cost can be to the detriment of quality
Restricted supply base being shared across competitors
Imitation by competitors

27
Q

What is a differentiation approach to competitive advantage?

A

Development of one more aspects of a product or service that are unique (or perceived by the customer to be unique).

28
Q

Johnson suggests three primary drivers of a differentiation strategy. What are these?

A

Product and service attributes - traits tailored to appeal to the consumer.
Complements - perceived or actual receipt of additional products or services online to enhance the core purchase.
Customer relationships - the way customers are treated.

29
Q

Garvin (1987) identified eight dimensions of differentiation quality. What are these?

A 
Performance
Features
Reliability
Conformance
Durability
Serviceability
Aesthetics
Perceived quality
30
Q

What are the risks of pursuing a differentiation strategy?

A
  • too much differentiation confuses the customers
  • too high a price
  • imitation by competitors
  • differing perception of the meaning of “quality” between buyer and seller
  • striving for uniqueness that fails to bring value
31
Q

What does Porter mean by an “organisational focus approach” to strategy?

A

Targeting a more defined and narrower consumer group. The product will be tailored to their needs.

32
Q

What are the two types of focus strategy identified by Porter?

A

Cost focus

Differentiation focus

33
Q

Give an example of a cost focus business.

A

Ryan Air

34
Q

Giver an example of a differentiation focus business.

A

Ecover

35
Q

How does Porter suggest that a cost leadership approach can be monitored and controlled?

A

Through robust value chain analysis

36
Q

How does Porter suggest that a differentiation approach can be monitored and controlled?

A

Understanding of stakeholder expectations through stakeholder mapping.

37
Q

How does Porter suggest that a focus approach can be monitored and controlled?

A

Robust understanding of of options available to customers through a “five forces” approach.

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