438 Exam 2 Flashcards
(75 cards)
What are the two biggest factors in distinguishing competitive strategy?
Company’s Market target is broad or narrow
Competitive advantage linked to lower costs or differentiation
Five Generic Competitive Strategies
Low-cost provider strategy
Broad differentiation strategy
Best-Cost provider
Focused (Market Niche) strategy based on low cost
Focused (Market Niche) strategey based on differentiaton
Successful low-cost leards are:
Exceptionally good at finding ways to drive costs out of their business
A low-cost Leader’s basis for competitive advantage is
lower overall costs than competitors
Two options for low-cost advantage
Use the lower-cost edge to underprice competitors
Content with market share, keep price
Two avenues for achieving a cost advantage
Do a better job performing value chain activities more cost effectively
Revamp firms overall value chain to eliminate or bypass cost-producing activities
How companies can revamp their value chain
Selling direct to consumers, cut out costs for distributors/retailers
Use Technologies/information systems that cut out value chain activities
Streamline operations by cutting low value-added work activities
Reduce shipping costs by locating supplier warehouses near facilities
Success in achieving a low-cost edge over rivals comes from
Out-managing rivals in finding ways to perform value chain activities faster, more accurately and more cost effictiantly
Reducing price does not lead to higher total profits unless
the incremental gain in total revenues exceeds the incremental increase in total costs
How do companies achieve a differentiating-based competitive advantage
Product or service whose attributes differ significantly from your rivals
Set of capabilities for delivering customer value that rivals do not have
lower buyer’s cost, raise product performance
Differentiation works best when
Many ways to differentiate and buys perceive the differences as having value
Buyers needs and uses are diverse
Few rival firms are following a similar differentiated approach
Technogical change is fast-paced
Best-cost provider stategies
Aim at giving customers value for the money by satisfying buyers expectations
Target market is value-conscious buyer
Best cost provider strategies work best when
Markets where product differentiation is normal and value-conscious buyers purchase midrange products
Risk of best-cost provider strategy?
Being squeezed between firms using low-cost and differentiation strategies
Focused Low-cost strategy
Serves buyers in the target market niche at a lower cost and price than rivals
Lowers cost by limiting customer base
Difference between low-cost and focused low-cost strategies is
The size of the buyer group the company is trying to appeal
Focused differentiation strategy
Securing a competitive advantage with a product designed to appeal to the unique preferences and needs of a narrowly defined group of buyers
Focused differentiation strategy: success depends on?
the existence of a buyer segment looking for special product attributes and firm’s ability to stand apart from rivals.
Four distinct facets of corporate strategy
Picking new industries to enter and how to enter
Boost combined performance
Leverage cross-business value chain relationships
Establishing investment priorities
Companies should diversify when?
Can expand to industries that complement its present business
Can leverage existing competencies
Can lead to decreased cost
Powerful brand name that can be transferred to the new products
In regards to diversification, how is success measured?
By adding long-term economic value
Attractiveness Test
Competitive conditions in industry will produce a profit
Cost of entry test
Costs less to enter industry than potential profits
Better-off Test
New business improves performance of existing businesses
