Exam 1: Chapter 5- Business Level Strategy Flashcards Preview

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Flashcards in Exam 1: Chapter 5- Business Level Strategy Deck (36):
1

In developing a business level strategy, a manager must answer three fundamental questions:

1) Who do we serve? (a broad or narrow market segment)
2) What do we provide (a small or large range of products/services)?
3) How do we provide it (our unique production approaches or delivery processes)?

2

Porter's 5-Forces Model

Framework to assess an industry's long-run profit potential

3

List the 5 Forces in Porter's Model

1) Threat of New Entrants
2) Bargaining Power of Suppliers
3) Threat of Substitutes
4) Bargaining Power of Customers
5) Rivalry among Existing Competitors

4

The Threat of New Entrants results in

more of the same products being supplied to the same customer base, ultimately decreasing profits for all players

5

Barriers to Entry

obstacles a firm may face while trying to enter a market or an industry

6

Supply Side Economies of Scale

When a firm manufactures products in high volumes. Large volumes results in a lower production cost, lower costs can deter other firms from entering the market

7

Demand Side Benefits of Scale

in situations where the buyers' willingness to pay for a product increases as the number of other buyers for the industry's product increases. buyers feel a sense of safety buying from a reputable source

8

Customers switching Costs

arises when the consumer has to make changes to their product or operating procedure when using a new supply source

9

Capital Requirements

large amounts of capital (money) are required by any new entrant just to begin operating

10

Unequal access to distribution channels

many industries have overcrowded distribution channels, the barriers are significant in the form of obtaining distribution channels for its product

11

Restrictive Government Policy

Gov't can limit or even foreclose entry to industries via controls such as license requirement,s patents protection, foreign investment barriers, and limits on access to local raw material markets

12

Bargaining Power of Suppliers

when the supplier limits production, the supplier does not consider the industry as one of its major customers

13

First-mover advantage

a competitive advantage that occurs when a firm is first to offer desirable products or services that secure customer loyalty

14

Characteristics of a Powerful Supplier Group

-supplier industry more concentrated than industry it sells to
-participants in industry face switching costs in changing suppliers
-no substitutes exist for what supplier provides
-supplier group can threaten to integrate forward into the buyer industry
-supplier group does not depend heavily on the industry

15

Characteristics of a Powerful Customer Group

-group is concentrated or purchases in large volumes relative to the supplier
-industry's products are undifferentiated
-buyers face few switching costs in changing vendors
-buyers could potentially integrate backward to produce the industry's product

16

Bargaining Power

the pressure that a supplier or buyer can exert on a company

17

Porter's Five Forces Model generally...

works to increase or decrease profit potential

18

Resource Based View of the Firm

a theory that a firm can develop a competitive advantage through the collection and harvesting of resources

19

Tangible Resources

tend to be most plan and equipment or what it uses to manufacture products,
also can be: real estate, inventory, raw materials, and computing systems

20

Intangible Resources

include a firm's internal processes or systems, bran names, technology, culture, and intellectual property

21

Human Resources

include employees of all levels, from lower level employees to the CEO
just as important as its tangible and intangible resources

22

SWOT Analysis

a tool that allows managers to take a snapshot of their firm's internal strengths and weaknesses as well as the opportunities and threats that are evident the external environment

23

4 Components to SWOT Analysis

Strengths
Weaknesses
Opportunities
Threats

24

Strategic Flexibility

the capability to identify and react to changes in the external environment and to mobilize internal resources to deal with those changes

25

Value

the amount consumers are willing to pay for a product or service, and it comes from offering a lower price than that of competitors or providing a unique product whose benefits outweigh a higher potential cost to consumers

26

Cost Leadership

a strategy that aims to provide a product or service at as low a price as possible to a broad audience

27

Economies of Scale

cost savings achieved when the volume of a product produced by a firm enables it to reduce per unit costs

28

Differentiation

a strategy in which a firm seeks to be unique in its industry along a dimension or a group of dimensions that are valued by consumers

29

Focus

a strategy in which a company "focuses" its sales efforts on a specific geographical region, a specific group of purchasers, or a specific product type

30

Two types of focus strategies

-Low cost focus strategy
-Differentiation focused approach

31

Stuck in the Middle

a firm that engages in numerous strategies but fails to master any one

32

Value chain analysis

a systematic way of examining all of the activities a firm performs and determining how they interact to form a source of competitive advantage

33

Primary activites

the activities involved in the physical creation of the product and its sale and transfer to the buyer

34

Support activities

activities that provide the support necessary for the primary activities to occur

35

Cost leadership strategy

involves tight control systems and cost minimization

36

Value Chain Analysis 3 Aspects

1) how the firm uses its resources and capabilities to develop core competencies
2) compare the firm's value chain with competitors' value chains to better understand the competitive forces in the market and determine how to improve the firm's value-creating activities
3) view the firm's value chain in the context of a larger value system that includes the value chains of suppliers and distribution channels