Business Strategy Flashcards
What are the generic strategies that business strategy is assessed against?
- cost leadership
- differentiation
- focus
- hybrid strategy
What strategy did Michael porter introduce?
‘generic strategy’ - basic types of competitive strategy that hold across many kinds of business situations.
What does competitive strategy and competitive advantage mean?
Competitive strategy is concerned with how a company, business unit or organisation achieves competitive advantage in its domain of activity.
Competitive advantage means how a company, business unit or organisation creates value for its users, both greater than the costs of supplying them and superior to that of rivals.
What is cost leadership strategy & what helps drive it?
Cost-leadership strategy involves becoming the lowest-cost organisation in a domain of activity.
Four key cost drivers that can help deliver cost leadership:
* Lower input costs
* Economies of scale
* Experience
* Product/process design
What is differentiation strategy and what issues arise as a result of this strategy?
Differentiation involves uniqueness along some dimension that is sufficiently valued by customers to allow a price premium.
Two key issues:
- The strategic customer on whose needs the differentiation is based.
*Key competitors – who are the rivals and who may become a rival.
Name three key drivers of differentiation strategy
1) Better or unique features (different from rest = product and service attributes)
2) Complements - building on linkages with other products/services (e.g. Apple and App Store).
3) Customer relationships – customer services (e.g. John Lewis), customisation (e.g. London Business School) or marketing and reputation (e.g. Burberry).
What is a focus strategy and two types of focus strategy?
A focus strategy targets a narrow segment of domain of an activity and tailors its products or services to the needs of that specific segment to the exclusion of others.
Two types of focus strategy:
- cost-focus strategy
(e.g. easyJet)
*differentiation focus strategy
(e.g. Saga PLC: one specialist provider of travel products and insurance services to the people aged over 50 in the UK).
When can a companies strategy become “stuck in the middle”?
When firms try to mix different strategies (as porter argues)
e.g.
* Cost-leadership strategy and differentiation strategy
- Cant always be different at a low cost thus not doing nay of the strategies well
What are the unique features of the strategy clock?
1) It is focused on the prices to customers rather than the costs to organisations.
2) The circular design allows for incremental adjustments in strategy rather than stark choices.
What are hybrid strategies? and why are they used?
Seeks to achieve low prices and higher benefits simultaneously
used:
- to enter markets and build position quickly
- as an aggressive attempt to win market share
- to build volume sales and gain from mass production.
What strategies are doomed to fail?
Non-competitive strageies as in competitive markets they wont be able to compete. (only work in monopoly)
They have increased prices without no perceived product or service benefits to consumers.
Name five strategies (2 low price and 3 differentiation) that appear on the strategy clock that have incremental increases in price
1) ‘No-frills strategy’ - Focused on price sensitive market segments e.g. Ryanair
2) Std. low price strategy - low prices combined with similar quality to competitors aimed at increasing market share. e.g. Aldi. Need to have alot of volume to succeed.
3) differentiation without price premium – used to increase market share.
4) differentiation with price premium – used to increase profit margins.
5) focused differentiation – used for customers that demand top quality and will pay a big premium. e.g. Apple pro models.
What does a business model describe?
The business logic of an organization including the domains of value creation, value configuration and value capture.
What is a multi-sided platform?
Platforms that bring together two or more distinct, but interdependent groups of participants to create value on a platform. e.g. Uber app (drivers and customers)
What factors need to be considered in multi-sided platforms?
1) Platform distinctiveness and size. - company must be distint enough to get customers from competitors and large enough to attract diverse sides.
2) Choosing platform sides - deciding what sides to include is crucial as dont want to over-complicat in order to generate value for all sides and growth in the overall network.
3) Multi-homing costs - cost to use more than one platform at the same time.
