Business Strategies Flashcards
(30 cards)
What skills and resources can foster cost leadership?
- Sustained capital investment and access to capital.
- Process engineering skills.
- Intense supervision of labor or core technical operations.
- Products or services designed for ease of manufacture or delivery.
- Low-cost distribution system.
What skills and resources can foster differentiation?
- Strong marketing abilities.
- Product engineering.
- Creative talent and flair.
- Strong capabilities in basic research.
- Corporate reputation for quality or technical leadership.
- Long tradition in an industry or unique combination of skills drawn from other businesses.
- Strong cooperation from channels.
- Strong cooperation from suppliers of major components of the product or service.
What are the two most prominent sources of competitive advantage?
- business’s cost structure
- ability to differentiate
What does business success built on cost leadership require?
the business to be able to provide its product or service at a cost below what its competitors can achieve
What are low-cost policies?
These are business policies that seek to establish long-term competitive advantages by emphasizing and perfecting value chain activities that can be achieved at costs substantially below what competitors are able to match on a sustained basis
What are some advantages sustainable low-cost activities?
- reduces the likelihood of buyers’ pricing pressure
- it may push rivals into other areas
- New entrants competing on price must face an entrenched cost leader
- it lessens the attractiveness of substitute products
- Higher margins allow low-cost producers to withstand supplier cost increases
What are some risks of cost leadership policy?
- Many cost-saving activities are easily duplicated
- Exclusive cost leadership can be a trap
- Obsessive cost cutting can shrink other competitive advantages
- Cost differences often decline over time
What does differentiation as a competitive advantage require?
It requires that the business have sustainable advantages that allow it to provide buyers with something uniquely valuable to them
How can speed as a competitive advantage be created?
- Customer responsiveness
- Product development cycles
- Product or service improvements
- Speed in delivery or distribution
- Information Sharing and Technology
What are the risks of using a speed-based policy?
- Speeding up activities that haven’t been conducted in a fashion that prioritizes rapid response should only be done after considerable attention to training, reorganization, and/or reengineering.
- Some industries may not offer much advantage to the firm that introduces some forms of rapid response.
- Customers in such settings may prefer the slower pace or the lower costs currently available, or they may have long time frames in purchasing.
What is a market focus?
This is a generic strategy that applies a differentiation policy approach, or a low-cost strategy approach, or a combination – and does so solely in a narrow (or “focused”) market niche rather than trying to do so across the broader market
What are the risks of using a market focus as a competitive advantage?
- The risk of focus is that you attract major competitors who have waited for your business to “prove” the market
- Publicly traded companies built around focus strategies become takeover targets for large firms seeking to fill out a product portfolio
- Slipping into the illusion that it is focused on itself, not low cost, is creating the business’s success.
What are emerging industries?
Emerging industries are newly formed or re-formed industries that typically are created by technological innovation, newly emerging customer needs, or other economic or sociological changes
What are some characteristics of emerging industries?
- Technologies that are mostly proprietary to the pioneering firms and technological uncertainty will unfold
- Competitor uncertainty because of inadequate information about competitors, buyers, and the timing of demand
- High initial costs but steep cost declines
- Few entry barriers
- First-time buyers requiring initial inducement to purchase
- Inability to obtain raw materials and components until suppliers gear up to meet the industry’s needs
- Need for high-risk capital because of the industry’s uncertain prospects
To be successful in an emerging industry setting, business policies must require one or more of what features?
- The ability to shape the industry’s structure
- The ability to rapidly improve product quality and performance features
- Advantageous relationships with key suppliers and promising distribution channels
- The ability to establish the firm’s technology as the dominant one
- The ability to forecast future competitors
A business policy of a business in a growing industry requires one or more of what features?
- The ability to establish strong brand recognition
- The ability and resources to scale up to meet increasing demand
- Strong product design skills to be able to adapt products and services
- The ability to differentiate the firm’s product[s] from competitors entering the market
- R&D resources and skills to create product variations
- The ability to build repeat buying from established customers
- Strong capabilities in sales and marketing
What are some policy elements of successful firms in maturing industries
- Product line pricing
- Emphasis on process innovation that permits low-cost product design, manufacturing methods, and distribution synergy
- Emphasis on cost reduction
- Careful buyer selection to focus on buyers who are less aggressive, more closely tied to the firm, and able to buy more from the firm
- Horizontal integration to acquire rival firms whose weaknesses can be used to gain a bargain price
- International expansion to markets where attractive growth and limited competition still exist
What themes should firms in declining industries use to make strategies?
- Focus on higher growth or a higher return.
- Emphasize product innovation and quality improvement.
- Emphasize production and distribution efficiency.
- Gradually harvest the business
What is a declining industry?
Declining industries are those that make products or services for which demand is growing slower than demand in the economy as a whole or is actually declining.
What is a fragmented industry?
It is one in which no firm has a significant market share and can strongly influence industry outcomes
Business strategists in fragmented industries focus on competitive advantages in which ways?
- Tightly managed decentralization.
- “Formula” facilities.
- Increased value added.
- Specialization.
- Bare bones/no frills.
What is a global industry?
It is one that comprises firms whose competitive positions in major geographic or national markets are fundamentally affected by their overall global competitive positions
What are the 3 basic options used to pursue global coverage?
- License foreign firms to produce and distribute the firm’s products
- Maintain a domestic production base and export products to foreign countries
- Establish foreign-based plants and distribution to compete directly in the markets of one or more foreign countries
What are the 4 generic global competitive policies?
- Broad-line global competition
- Global focus policy
- National focus policy
- Protected niche policy
