Business Strategies Flashcards
(23 cards)
What is the guiding question for business strategies?
how can companies compete in creating and capturing value
What is a business level strategy?
Goal-directed actions managers take in their quest for competitive advantage when competing in a single product market
What is segmentation?
carving focused sections of the market based on customer profiles to generate various segments a company can serve
What is targeting?
choosing the segment to which to sell products/services
What is positioning?
designing the best way to satisfy the customers’ needs in the chosen segments
What is the main goal of business level strategies?
Maximize customer’s willingness to buy
What is cost leadership strategy?
Integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost
What are the 3 cost of input factors?
- Sourcing relatively lower quality/cheaper material
- Sourcing in bulk to minimize cost
- Outsourcing value chain activities
What are 3 cost saving actions?
efficient scale + manufacturing facilities
tightly controlling production and simplifying process
monitoring outsourced activities
When does cost leadership work best?
- Price competition among rival sells is vigorous
- Products are readily available from many sellers
- Products are standardized
- Buyers incur low costs in switching
- New entrants can use low prices to attract buyers and build customer base
What are the risks with cost leadership?
- Processes used to produce and distribute products/service may become obsolete due to competitors’ innovations
- Focus on cost reduction may occur at expense of customers’ perceptions of differentiation
- Price wars
- Relying on cost advantage is not sustainable because rivals can copy
What is differentiation strategy?
an integrated set of actions take to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them
What are some characteristics of differentiation strategy?
- non standardized / unique products
- products with varied features
- products with better/higher quality
- customers value uniqueness more than they value low cost
What are some characteristics of cost leadership strategy?
- Standardized products -> commodities
- Product appeals to large segments of the market -> built in volume (EOS)
- Lowest competitive price
What are the 4 value drivers?
product features, customer service, complements, social value
What implications does a uniqueness driver have?
- Have a strong differentiating effect
- Be based on physical as well as functional attributes of a firm’s products
- Affect on more than one of the firm’s value chain activities
- Create a perception of value (brand loyalty) in buyers where there is little reason for it to exist
When does differentiation strategy work the best?
- Diversity of buyer needs and uses for the product
- Many ways that differentiation can have value to buyers
- Few rival firms follow a similar differentiation approach
- Rapid change in technology and product features
What are the risks with differentation strategy?
- Relying on product attributes easily copied by rivals
- Introducing product attributes that do not evoke an enthusiastic buyer response
- Eroding profitability by overspending on efforts to differentiate the firm’s product offering
- Charging too high a price premium
- Counterfeit goods replicate differentiated features of the firm’s products
What is integration strategy?
combination of both strategies made for a value conscious buyer
What are the value and cost drivers of integration?
- Quality -> increase perceived value and lower cost
- Economies of Scope -> leverage existing assets to sell diff
products/services to core customers - Customization -> designing value chain activities to offer diff
versions of products/services - Innovation -> using advances in technology to bring about product and process innovations
When does integration strategy work the best?
- Product differentiation is the market norm
- Presence of a large number of value conscious buyers who prefer mid-range products
- Economic conditions have caused more buyers to become value-conscious
What competitive space is ideal for integration strategy?
A competitive space near the middle of the market for a competitor with either:
medium quality product + below avg price
high-quality product + avg or slightly higher price
What are the risks of an integration strategy?
Compromises -> neither lowest cost or most differentiated
Stuck in the middle -> lacking the strong commitment and expertise that accompanies firms following one strategy
