Business Strategies

Question 1

What skills and resources can foster cost leadership?

Answer 1

1. Sustained capital investment and access to capital.
2. Process engineering skills.
3. Intense supervision of labor or core technical operations.
4. Products or services designed for ease of manufacture or delivery.
5. Low-cost distribution system.

Question 2

What skills and resources can foster differentiation?

Answer 2

1. Strong marketing abilities.
2. Product engineering.
3. Creative talent and flair.
4. Strong capabilities in basic research.
5. Corporate reputation for quality or technical leadership.
6. Long tradition in an industry or unique combination of skills drawn from other businesses.
7. Strong cooperation from channels.
8. Strong cooperation from suppliers of major components of the product or service.

Question 3

What are the two most prominent sources of competitive advantage?

Answer 3

1. business’s cost structure
2. ability to differentiate

Question 4

What does business success built on cost leadership require?

Answer 4

the business to be able to provide its product or service at a cost below what its competitors can achieve

Question 5

What are low-cost policies?

Answer 5

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

Question 6

What are some advantages sustainable low-cost activities?

Answer 6

1. reduces the likelihood of buyers’ pricing pressure
2. it may push rivals into other areas
3. New entrants competing on price must face an entrenched cost leader
4. it lessens the attractiveness of substitute products
5. Higher margins allow low-cost producers to withstand supplier cost increases

Question 7

What are some risks of cost leadership policy?

Answer 7

1. Many cost-saving activities are easily duplicated
2. Exclusive cost leadership can be a trap
3. Obsessive cost cutting can shrink other competitive advantages
4. Cost differences often decline over time

Question 8

What does differentiation as a competitive advantage require?

Answer 8

It requires that the business have sustainable advantages that allow it to provide buyers with something uniquely valuable to them

Question 9

How can speed as a competitive advantage be created?

Answer 9

1. Customer responsiveness
2. Product development cycles
3. Product or service improvements
4. Speed in delivery or distribution
5. Information Sharing and Technology

Question 10

What are the risks of using a speed-based policy?

Answer 10

1. 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.
2. Some industries may not offer much advantage to the firm that introduces some forms of rapid response.
3. Customers in such settings may prefer the slower pace or the lower costs currently available, or they may have long time frames in purchasing.

Question 11

What is a market focus?

Answer 11

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

Question 12

What are the risks of using a market focus as a competitive advantage?

Answer 12

1. The risk of focus is that you attract major competitors who have waited for your business to “prove” the market
2. Publicly traded companies built around focus strategies become takeover targets for large firms seeking to fill out a product portfolio
3. Slipping into the illusion that it is focused on itself, not low cost, is creating the business’s success.

Question 13

What are emerging industries?

Answer 13

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

Question 14

What are some characteristics of emerging industries?

Answer 14

1. Technologies that are mostly proprietary to the pioneering firms and technological uncertainty will unfold
2. Competitor uncertainty because of inadequate information about competitors, buyers, and the timing of demand
3. High initial costs but steep cost declines
4. Few entry barriers
5. First-time buyers requiring initial inducement to purchase
6. Inability to obtain raw materials and components until suppliers gear up to meet the industry’s needs
7. Need for high-risk capital because of the industry’s uncertain prospects

Question 15

To be successful in an emerging industry setting, business policies must require one or more of what features?

Answer 15

1. The ability to shape the industry’s structure
2. The ability to rapidly improve product quality and performance features
3. Advantageous relationships with key suppliers and promising distribution channels
4. The ability to establish the firm’s technology as the dominant one
5. The ability to forecast future competitors

Question 16

A business policy of a business in a growing industry requires one or more of what features?

Answer 16

1. The ability to establish strong brand recognition
2. The ability and resources to scale up to meet increasing demand
3. Strong product design skills to be able to adapt products and services
4. The ability to differentiate the firm’s product[s] from competitors entering the market
5. R&D resources and skills to create product variations
6. The ability to build repeat buying from established customers
7. Strong capabilities in sales and marketing

Question 17

What are some policy elements of successful firms in maturing industries

Answer 17

1. Product line pricing
2. Emphasis on process innovation that permits low-cost product design, manufacturing methods, and distribution synergy
3. Emphasis on cost reduction
4. 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
5. Horizontal integration to acquire rival firms whose weaknesses can be used to gain a bargain price
6. International expansion to markets where attractive growth and limited competition still exist

Question 18

What themes should firms in declining industries use to make strategies?

Answer 18

1. Focus on higher growth or a higher return.
2. Emphasize product innovation and quality improvement.
3. Emphasize production and distribution efficiency.
4. Gradually harvest the business

Question 19

What is a declining industry?

Answer 19

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.

Question 20

What is a fragmented industry?

Answer 20

It is one in which no firm has a significant market share and can strongly influence industry outcomes

Question 21

Business strategists in fragmented industries focus on competitive advantages in which ways?

Answer 21

1. Tightly managed decentralization.
2. “Formula” facilities.
3. Increased value added.
4. Specialization.
5. Bare bones/no frills.

Question 22

What is a global industry?

Answer 22

It is one that comprises firms whose competitive positions in major geographic or national markets are fundamentally affected by their overall global competitive positions

Question 23

What are the 3 basic options used to pursue global coverage?

Answer 23

1. License foreign firms to produce and distribute the firm’s products
2. Maintain a domestic production base and export products to foreign countries
3. Establish foreign-based plants and distribution to compete directly in the markets of one or more foreign countries

Question 24

What are the 4 generic global competitive policies?

Answer 24

1. Broad-line global competition
2. Global focus policy
3. National focus policy
4. Protected niche policy

Question 25

What are the organizational requirements to support and sustain cost leadership activities?

Answer 25

1. Tight cost control.
2. Frequent, detailed control reports.
3. Continuous improvement and benchmarking orientation.
4. Structured organization and responsibilities.
5. Incentives based on meeting strict, usually quantitative targets

Question 26

What are some examples of ways businesses achieve competitive advantage via cost leadership?

Answer 26

1. Process innovations that lower production costs
2. Product redesign to reduce the number of components.
3. Safety training for all employees reduces absenteeism, downtime, and accidents.
4. Reduced levels of management cuts corporate overhead
5. Computerized, integrated information system reduces errors and administrative costs
6. Favorable long-term contracts; captive suppliers or key customers for suppliers.

Question 27

What skills and resources foster differentiation?

Answer 27

1. Strong marketing abilities.
2. Product engineering.
3. Creative talent and flair.
4. Strong capabilities in basic research.
5. Corporate reputation for quality or technical leadership.
6. Long tradition in an industry or unique combination of skills drawn from other businesses.
7. Strong cooperation from channels.
   8.Strong cooperation from suppliers of major components of the product or service

Question 28

What organizational requirements to support and sustain differentiation activities?

Answer 28

1. Strong coordination among functions in R&D, product development, and marketing.
2. Subjective measurement and incentives instead of quantitative measures.
3. Amenities to attract highly skilled labor, scientists, and creative people.
4. Tradition of closeness to key customers.
5. Some personnel skilled in sales and operations—technical and marketing.

Question 29

What are some examples of ways businesses achieve competitive advantage via differentiation

Answer 29

1. Cutting-edge production technology and product features to maintain a “distinct” image and actual product
2. Programs to ensure technical competence of sales staff and a marketing orientation of service personnel
   3.Comprehensive, personalized database to build knowledge of groups of customers and individual buyers to be used in “customizing” how products are sold, serviced, and replaced
3. Quality control presence at key supplier facilities; work with suppliers’ new product development activities

Question 30

What skills and resources can foster speed?

Answer 30

Process engineering skills.
Excellent inbound and outbound logistics.
Technical people in sales and customer service.
High levels of automation.
Corporate reputation for quality or technical leadership.
Flexible manufacturing capabilities.
Strong downstream partners.
Strong cooperation from suppliers of major components of the product or service