Ch2 Flashcards
Business-Level Strategies
How should we compete?
■ Cost Leadership: Providing products or services at the lowest cost.
■ Differentiation: Offering unique and desirable products or services.
■ Focus: Concentrating on a specific market niche.
■ Hybrid strategy (might become stuck in the middle)
Corporate-Level Strategies
What Business should be we in?
■ Vertical Integration: Expanding operations along the value chain (backward or forward).
■ Horizontal Integration: Expanding within the same industry.
■ Diversification: Entering new industries (related or unrelated).
Industry Life Cycle
● Introduction - New unknown products and operating loses - Focus on RND and marketing activities
● Growth - Increase in sale and increasing competition - Define product/brand
● Maturity - Direct and price competition - Repositioning?
● Decline - Declining sales and increasing price competition - Check out competitors and act accordingly
PESTEL
● Political: Tax policy
● Economic: Inflation and interest rates
● Social: Population growth
● Technological: Developments
● Environmental: Climate change
● Legal: Laws
● Gaining knowledge about the general environment
Porters Five Forces
- Threat of new entrants
- Threat of substitutes
- Bargaining power of customers
- Bargaining power of suppliers
- Competitive rivalry
SWOT Analysis
- Strength
- Weaknesses
- Opportunities
- Threats
● Gaining knowledge about industry and firm conditions
Managers tasks to achieve congruence
- (Input) Process information and notice change
- (Strategy) Make strategy and decisions
- (Transformation, work formal) Organize work by formal design
- (Transformation, informal) Lead people directly and indirectly through informal design
- (Output) Define and measure indicators of performance
- (Feedback) Reflect, learn, and adapt
Hawthorne Effect
It is not better working conditions per se that increase
productivity (and possibly motivation) but being observed and getting
performance feedback.
Which SWOT parameters are internal and which are external? What is it used for?
● Internal: Strength (resources, history), weakness
● External: Opportunities, and threats (environment)
Name two examples of when a buyer group is powerful
● Low switching costs
● Low profits earnings
Name two examples of when a supplier group is powerful
● Low amount of suppliers to choose from
● Low share of profit
What analysis would you use to gain knowledge about industry and firm conditions, about the competitive environment, and about the general environment?
● Industry and firm conditions: SWOT analysis
● Competitive environment: Porter’s 5 forces
● General environment: PESTEL analysis
Example of Backward/Horizontal/Forwards Integration by Roche
Pros and Cons of Cost Leadership
+ Tight cost and overhead control
+ Low Cost
- Imitability
- Reduced flexibility
Pros and Cons of Differentitation Strategy
+ Firms may differentiate along several dimensions (Prestige or brand image, Technology & Innovation, Customer service, Dealer network)
- Speed as first mover or quick response as second mover
- Easy imitation
What is Focus Strategy
- Focus on a narrow competitive scope within an industry
- Focus strategies can exist both for cost and differentiation strategies
- cannot exploit economies of
scale to the same extent
