Chapter 4

Question 1

V-REEL Model

Answer 1

• value
• rare
• eroding
• enabling
• longevity

Question 2

Who must have a business-level strategy?

Answer 2

every firm must form and use a business-level strategy for each one of its businesses

Question 3

What is linked to a firm’s strategy?

Answer 3

long-term performance

Question 4

One business-level strategy

Answer 4

a single product market/single geographic location firm employs one business-level strategy

Question 5

Core Competencies

Answer 5

resources and superior capabilities that are sources of competitive advantage over a firm’s risk

Question 6

Strategy

Answer 6

an integrated and coordinated set of actions taken to exploit core competencies and gain competitive advantage

Question 7

Business-Level Strategy

Answer 7

providing value to customers and gaining competitive advantage by exploiting competencies in individual product markets

Question 8

Key issues in business-level strategy

Answer 8

• who will be served?
• what needs will be satisfied?
• how will those needs be satisfies?

Question 9

Effective Global Competitors

Answer 9

• adopt at identifying customer needs across cultures and geography
• quickly and successfully adapt products/services to meet those needs

Question 10

Business-Level Strategies Are:

Answer 10

GENERIC; plain, and every firms picks the same ones

Question 11

Difference in busn-level strategy across companies:

Answer 11

how effectively a company carries out their planned strategy

Question 12

effectively managing relationships with customers

Answer 12

• reach: access and connection to customers
• richness: depth and detail of two-way flow of information between a firm and their customers
• affiliation: facilitating useful interactions with customers

Question 13

Market Segmentation

Answer 13

(who?) a process used to cluster people with similar needs into individual and identifiable groups; consumer and industrial markets

Question 14

Consumer Markets

Answer 14

• demographic
• socioeconomic
• geographic
• psychological
• consumption
• perceptual

Question 15

Industrial Markets

Answer 15

• end-use
• product
• geographic
• common buying factor
• customer size

Question 16

What?

Answer 16

• customers wants/demands
• neither right nor wrong
• customers are the lifeblood of a firm

Question 17

How?

Answer 17

• firms use core competencies to implement value creating strategies
• value means goods or services that provide either low cost with acceptable features or highly differentiated features with acceptable cost

Question 18

Business-Level Strategy in terms of purpose

Answer 18

a deliberate choice about how the firms will perform the value chain activities to create unique value

Question 19

Sources of competitive advantage from busn-level strategy

Answer 19

• achieving lower overall costs than rivals
• providing a low cost product that customer deem as acceptable/comparable
• possessing the capability to differentiate

Question 20

3 Generic Business-Level Strategies

Answer 20

1. cost leadership
2. integrated cost leadership/differentiation
3. differentiation

Question 21

Broad Target Market

Answer 21

firms serving a broad market seek to use their capabilities to create value for customers on an industry-wide basis

Question 22

Narrow Target Market

Answer 22

firm intends to serve the needs of a narrow customer group; tailoring its strategy to serving them at the exclusion of others

Question 23

Cost Leadership Strategy

Answer 23

an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost (not necessarily price), relative to that of competitors with features that are acceptable to customers

Question 24

Cost Leadership - Value Chain Activities

Answer 24

• competitive advantage in logistics

Question 25

Inbound Logistics

Answer 25

materials handling, warehousing, and inventory control

Question 26

Outbound Logistics

Answer 26

collecting, storing, and distribution

Question 27

Cost Leadership - Cost Savings Actions

Answer 27

- employing process innovations - building efficient scale facilities - controlling production costs and overhead - minimizing cost of sales

Question 28

Cost Leadership - Competitors

Answer 28

- hesitate to compete on basis of price - lack of price competition - rivalry is based on other aspects

Question 29

Cost Leadership - Buyers

Answer 29

- low prices shift power away from the buyers and to the company - powerful customers can force cost leaders to reduce its prices further

Question 30

Cost Leadership - Suppliers

Answer 30

- absorb cost increases due to low cost position - very large purchase ability - outsourcing

Question 31

Cost Leadership - New Entrants

Answer 31

- need to enter on a large scale - time it takes to move up - efficiency serves as a high barrier

Question 32

Cost Leadership - Substitutes

Answer 32

- create substitutes - buy substitute patents - lower prices

Question 33

Cost Leadership - Risks

Answer 33

- obsolescence | - cost reduction affecting value perception

Question 34

Obsolescence

Answer 34

processes used to produce and distribute goods/services may become obsolete due to competitors' innovations

Question 35

Differentiation

Answer 35

an integrated set of actions taken to produce goods or services that customers perceive as being different in ways that are important to them - huge in luxury world

Question 36

Qualities of Differentiated Firms

Answer 36

- focus is on non-standardized products - appropriate when customers value differentiated features more than they value low cost - must be able to produce products at competitive costs

Question 37

Differentiation - Competitors

Answer 37

- relationship between brand loyalty and price sensitivity insulates a firm from competitive rivalry - reputation can sustain competitive advantage

Question 38

Differentiation - Buyers

Answer 38

- can mitigate buyers' power because of well differentiated products - customers are willing to accept a price increase when a product satisfies their needs/wants

Question 39

Differentiation - Suppliers

Answer 39

- absorbing price increases due to higher margins from high-quality components - alternatively, considering buyers' relative insensitivity to price increase and brand loyalty

Question 40

Differentiation - New Entrants

Answer 40

- consumer loyalty and the need to overcome the uniqueness | - new products must surpass proven products

Question 41

Differentiation - Substitutes

Answer 41

- brand loyalty reduces customers trying new products | - brand loyalty reduces customers switching brands

Question 42

Differentiation - Risks

Answer 42

- price differential too large - value diminished - experience effect - counterfeits

Question 43

Integrated Strategy

Answer 43

- best cost | - efficiently produce products with differentiated attributes

Question 44

Three sources of flexibility with integrated strategy

Answer 44

1. flexible manufacturing systems 2. information networks 3. total quality management

Question 45

Flexible Manufacturing Systems

Answer 45

computer controlled processes used to produce a variety of products in moderate, flexible quantities with a minimum of manual intervention

Question 46

Information Networks

Answer 46

links to companies electronically with their suppliers, distributors, and customers

Question 47

Total Quality Management Systems

Answer 47

emphasize total commitment to the customer through continuous improvements