Business Strategy

Question 1

Define business-level strategy

Answer 1

Creating differences between the firm’s position and those of its rivals (who, what and how)

Question 2

How do differentiation and low-cost strategies…

a) capture market share
b) earn high margins

Answer 2

Differentiation:
a) products are higher quality at similar price
b) charging more than competitors
Low-Cost:
a) low prices
b) price parity

Question 3

What are the 3 characteristics of the cost leadership strategy?

Answer 3

1. Lowest cost with features that are acceptable to customers
2. High volume
3. Relatively standardized products

Question 4

What are the 6 drivers of the cost leadership strategy?

Answer 4

1. economies of scope
2. economies of scale
3. product design
4. learning
5. locating operations in cheap areas
6. production technologies

Question 5

For the cost leadership strategy, what are the 4 key elements in the value chain?

Answer 5

1. Operations: efficient facilities, simplifying production processes
2. Efficient logistics and supplier links (eg. JIT)
3. Minimizing costs of sales, R&D and services
4. Culture is of cost containment

Question 6

What are the 3 characteristics of the differentiation strategy?

Answer 6

1. being different in ways that are valuable to customers
2. acceptable costs
3. the differentiators are either real or perceived

Question 7

What are the 6 key drivers of the differentiator strategy?

Answer 7

1. Image
2. Support
3. Service
4. Quality
5. Design
6. Undifferentiation

Question 8

For the differentiation strategy, what are the 4 key elements of the value chain?

Answer 8

1. R&D
2. High quality sources of supply
3. Shape perceptions through advertising
4. Maximize HR (low turnover and high motivation)

Question 9

What is the “stuck in the middle” dilemma

Answer 9

When a firm tries to pursue low cost and differentiator…

1. it’s hard to pursue low cost with premium pricing
2. lacks a strong commitment to either

Question 10

What are the 2 dimensions of the productivity frontier and what is it?

Answer 10

Two dimensions:
1. Perceived value
2. Cost
Any company that falls on the frontier is operating effectively

Question 11

What are the cautions to a low-cost strategy?

Answer 11

1. New technology
2. Inferior quality
3. Risks associated with outsourcing (political, social and economic)

Question 12

What are the cautions to a differentiation strategy?

Answer 12

1. Not properly increasing a buyer’s willingness to pay
2. Underestimating costs of differentiation
3. Over-fulfilling buyers’ needs
4. Lower-cost imitation