Chapter 6

Question 1

Strategic Choices

Answer 1

1. Business strategy ( business positioning )
2. Strategic Directions ( choices of products, markets to pursue )
3. Strategy Methods ( how to pursue strategies )

Question 2

Generic Strategies

Answer 2

1. Cost Leadership
2. Differentiation
3. Focus
4. The strategy clock

Question 3

Interactive Strategies

Answer 3

1. Hypercompetitive strategy
2. Cooperation
3. Game theory

Question 4

Strategic business units (SBUs)

Answer 4

supplies goods or services for a distinct domain of activity

Question 5

The purpose of SBUs

Answer 5

1. Decentralize
2. vary business strategies
3. encourage accountabilty

Question 6

Competitive strategy

Answer 6

concerned with how a strategic business unit achieves competitive advantage in its domain of activity

Question 7

Competitive advantage

Answer 7

how an SBU creates value for its users both greater than the costs of supplying them and superior to that of rival SBUs.

Question 8

Cost Leadership Strategy

Answer 8

becoming the lowest-cost organization in a domain of activity

Question 9

Four key cost drivers that can help deliver cost leadership

Answer 9

• lower input costs
• economies of scale
• Experience
• product process and design

Question 10

Differentiation Strategies

Answer 10

involves uniqueness that is sufficiently valued by customers to allow a price premium.

Question 11

Two key issues of differentiation

Answer 11

• The strategic customer on whose needs the differentiation is based.
• Key competitors

Question 12

Focus strategies

Answer 12

targets a narrow segment of domain of an activity and tailors its products to the needs of that specific segment to the exclusion of others.

Question 13

Two types of focus strategies

Answer 13

1. cost-focus strategy

2. differentiation focus strategy

Question 14

Strategy clock – differentiation

Answer 14

 differentiation without price premium – used to increase market share.
 differentiation with price premium – used to increase profit margins.
 focused differentiation – used for customers that demand top quality and will pay a big premium.

Question 15

Strategy clock – low price

Answer 15

Low price combined with:
 low perceived product benefits
 lower price than competitors while offering similar product benefits

Question 16

Strategy clock – hybrid

Answer 16

• Seeks to simultaneously achieve differentiation and low price relative to competitors.
Used to:
1. enter markets and build position quickly
2. win market share
3. build volume sales

Question 17

Strategy clock – non-competitive

Answer 17

• Increased prices without increasing service/product benefits.
• In competitive markets such strategies will be doomed to failure.

Question 18

Strategic lock-in

Answer 18

where users become dependent on a supplier and are unable to use another supplier without substantial switching costs.

Question 19

Lock-in can be achieved in two main ways

Answer 19

 Controlling complementary products or services. E.g. Cheap razors that only work with one type of blade.
 Creating a proprietary industry standard. E.g. Microsoft with its Windows operating system.

Question 20

Game theory

Answer 20

encourages an organisation to consider competitors’ likely moves and the implications of these moves for its own strategy.

Question 21

hypercompetitive conditions

Answer 21

Competitors need to be able to cannibalise, make small moves, be unpredictable and mislead their rivals.

Question 22

Three Generic Strategies are

Answer 22

1. Cost Leadership
2. Cost Focus
3. Differentiation