Business Strategy Flashcards
What is business-level strategy?
Creating differences between the firm’s position and those of its rivals (customer groups, customer needs and resources and capabilities)
How do differentiation and low-cost strategies capture market share and high margins?
Differentiator: - MS: high quality, similar price - Margins: high prices compared to competitors Low Cost: - MS: low prices - Margins: price parity
What are 3 characteristics of cost leadership?
- Lowest cost with features acceptable to customer
- High volume
- Relatively standardized products
What are the 6 key drivers to the cost leadership strategy?
- Economies of scale
- Economies of scope
- Production technology
- Learning
- Location of operations
- Product design
What are the 4 elements of the value chain key to cost leadership?
- Operations - efficient facilities and simplifying production processes
- Logistics - efficient supplier links (eg. JIT)
- Minimum Costs - sales, service, R&D
What are the 6 key drivers in the differentiation strategy?
- Image
- Support
- Service
- Quality
- Design
- Undifferentiation
What are the 3 characteristics of the differentiation strategy?
- Different in way that are important to customers
- Acceptable costs
- Difference can be real or perceived
What are the 4 elements of the value chain that related to the differentiation strategy?
- R&D
- High quality sources of supply
- Shape perceptions through advertising
- Maximize HR (low turnover, high motivation)
What do firms get “stuck in the middle”?
Because they try and pursue low costs and high prices and lack a strong commitment to either.
What are the threats of low-cost strategic positioning?
- new technologies
- inferior quality
- social, political and economic risks of outsourcing
What are the threats of a differentiation strategy?
- not increasing buyers WTP
- underestimating costs of differentiation
- over-fulfilling buyers’ needs
- lower-cost imitation
