Exam 3 Topic 5 Review

Question 1

What does business-level strategy refer to

Answer 1

refers to the plan of action that strategic managers adopt for using a company’s resources and capabilities

Question 2

business-level strategy refers to the plan of action that strategic managers adopt for using a company’s resources and capabilities to provide _____________ to customers and gain a __________________

Answer 2

value; competitive advantage

Question 3

what are capabilities

Answer 3

assets and how we do things

Question 4

what is the question associated with business-level strategy

Answer 4

How are we going to compete?

Question 5

If a company has many business units do each need their own business lvl strategy

Answer 5

yes

Question 6

Does business level strategy have to do with the industries we are going to compete in?

Answer 6

No

Question 7

what is the key ingredient is business-level strategy?

Answer 7

the customer

Question 8

the first step in business level strategy is to what

Answer 8

identify the most important customer (MIC)

Question 9

The second step in the business level strategy is to distinguish between _______ and _________

Answer 9

buyers; user

Question 10

example of buyers versus users is the american cereal market versus english cereal market. In America, who drives demand for cereal?

Answer 10

The users (children)

Question 11

Why is the MIC the focal point in designing “how to compete”

Answer 11

they drive demand or decision- making in the supply chain

Question 12

Who is the most important customer

Answer 12

who stands to lose the most if the product of service fails

Question 13

Definition of demand flowing up the chain

Answer 13

happens when end-user demand drives decision upstream in the supply chain; user creates initial demand that influences the retailer then the manufacturer

Question 14

Definition of demand flowing down the chain

Answer 14

Happens when a company at the top of the chain creates demand that passes downstream to customers

Question 15

Demand starts with ______________ in demand flowing upstream

Answer 15

consumer

Question 16

Demand starts with ________________ in demand flowing downstream

Answer 16

intermediary or supplier

Question 17

What is the definition of buyers

Answer 17

individuals or entities who make purchase decision and pay for product or service

Question 18

What is the definition of users

Answer 18

individuals or entities who actually consume or use the product or service

Question 19

What is B-level strategy?

Answer 19

the three main issues to be addressed relative to customers

Question 20

what are the three main issues to be addressed relative to customers

Answer 20

1. customers to serves
2. customer’s need to satisfy
3. How will we satisfy those needs

Question 21

In the “customer to serve” issue of b-level strategy what is done

Answer 21

break the needs down and use segmention into buckets

Question 22

what are the three customer segments

Answer 22

average customer, all customers, limited customers

Question 23

Academy Sports and Walmart would likely serve what segment of customers

Answer 23

average customers

Question 24

Toyota and Total Wine would serve what segment of customers

Answer 24

all customers

Question 25

Corvette and Victoria Secret would liekly serve what segment of customers

Answer 25

limited customers

Question 26

The "what" of B-level strategy addresses what

Answer 26

the customer's needs to satisfy for all targeted segments

Question 27

How will we satisfy the needs established in B-level strategy?

Answer 27

use our core competencies to implement value- creating strategies that satisfy customer's needs

Question 28

The ones who can develop their processes and turn them into ___________ through VRD have the greatest chance of winning

Answer 28

core competencies

Question 29

What's the definition of generic strategies

Answer 29

these strategies revolve around the two ways that organization may create financial value-added

Question 30

what are the two generic strategies

Answer 30

cost suppression and revenue generation

Question 31

Is price included in the initial discussion of general strategies

Answer 31

no

Question 32

price is a __________ of generic strategies

Answer 32

byproduct

Question 33

generic strategies are ___________-level effects

Answer 33

firm

Question 34

what is cost leadership

Answer 34

outperforming competitors by doing everything it can to produce goods or services at a cost lower than competitior

Question 35

with cost leadership the company is trying to gain a _______________

Answer 35

competitive advantage

Question 36

Cost leadership results in what

Answer 36

the ability to charge a below average price

Question 37

Is price a strategy?

Answer 37

No its an outcome not a strategy

Question 38

What is price-setting

Answer 38

Ability to charge whatever price in terms of your margin

Question 39

What is a multifunctional approach to cost suppression and is it advisable?

Answer 39

Doing everything you can to produce goods and services at cost lower than competitors in multiple activities. If you lower costs in a single activity competitors may be able imitate

Question 40

the lower price (especially price difference) allows you to win on ____________

Answer 40

volume

Question 41

The more _______________ (commoditized or differentiated) environment the more important cost suppression become

Answer 41

commoditized

Question 42

the more powerful the buyers, the __________ important cost suppression becomes

Answer 42

more

Question 43

what are price takers

Answer 43

where the market decides the price of goods or services

Question 44

what are price setters

Answer 44

market where firms have more control over setting prices due to differentiated products, brand strength, or a less competitive environment

Question 45

Which functional area(s) should own cost suppression

Answer 45

multifunctional responsibility which involves integrating multiple areas like operation, supply chain, technology and finance to reduce costs and maintain a competitive advantage

Question 46

If done well, a cost model is effective in response to profit destruction of ___________

Answer 46

P5F (or in an industry)

Question 47

What is the role of cost-leadership as a response to competitors in P5F

Answer 47

better able to win price wars; intensity of rivalry usually results in a price war (destructive)

Question 48

what is the role of cost-leadership as a response to powerful suppliers in P5F

Answer 48

protected by large market share; far less impacted if you're a cost focused company, need volume to do cost model

Question 49

what is the role of cost-leadership in response to powerful buyers of P5F

Answer 49

lowers prices and preserve margin; if a buyer is powerful it can dictate prices, a cost focused company is insulated from this due to its cost advantage

Question 50

what is the role of cost-leadership in response to substitutes of P5F

Answer 50

lower prices but still preserve the margin

Question 51

what is the rile of cost leadership as a response to threat of new entrants of cost leadership of P5F

Answer 51

the new entrants won't be able to match the profitability of cost advantaged leader

Question 52

what are the potential advantages of cost leadership

Answer 52

-competitors -powerful suppliers -powerful buyers -substitues -threat of new entrants

Question 53

What are some potential disadvantages of pursuing a cost advantage (3)

Answer 53

technological changes of competitor, labor as a potential disadvantage, value destruction concerns when executing upon a cost-leadership strategy

Question 54

How is technology changes of a competitor a potential disadvantage of pursuing a cost advantage

Answer 54

technological changes may make the competitor more efficient; if you stop technological innovation a competitor could catch up and overpower your current tech

Question 55

How is labor a potential disadvantage of a cost-leadership strategy

Answer 55

competitors may draw an advantage from labor cost savings; move cost curve due to labor savings

Question 56

How does value destruction concerns when executing a cost leadership strategy lead to a potential disadvantage in cost leadership

Answer 56

a singular focus on reducing costs may result in losing sight of changes in customers tastes; in process of cutting costs you my decrease value for customer

Question 57

What is a differentiation strategy?

Answer 57

achieve an advantage by creating a good/ service that is perceived to be unique in some important way.

Question 58

In a differentiation strategy they satisfy a customer's need in a way that its competitors cannot which means they can charge a ____________

Answer 58

premium price

Question 59

Differentiation is a ________-level effect

Answer 59

firm

Question 60

what are the three principal ways that differentiation can be achieved

Answer 60

quality; innovation; customer service

Question 61

the three issues (quality, innovation and customer service) create and reinforce a company's _______ and ________

Answer 61

image and brand

Question 62

Focus on features in differentiation that provide ___________

Answer 62

an actual return

Question 63

Differentiation ---> ___________ ---> _____________ ---> ______________

Answer 63

perceptions of uniqueness ; loyalty; switching costs

Question 64

what are some aspects of a product that a company could use to differentiate it

Answer 64

-performance - features -durability - aesthetics

Question 65

what are some aspects of service that a company could use to differentiate it

Answer 65

- timeliness - courtesy - consistency - convenience - accuracy

Question 66

For differentiation through quality the consumer must accept differentiation based on one or more quality dimensions AND _________

Answer 66

must be willing to pay for it

Question 67

What are the other two ways to differentiate (aside from quality)

Answer 67

innovation and customer service

Question 68

in a perfect differentiation model investments should lead to perceptions of _____________

Answer 68

uniqueness

Question 69

loyalty leads to ____________

Answer 69

switching costs

Question 70

what are switching costs

Answer 70

cost of buyer to switch to new suppliers

Question 71

have to consider ________ v. ________

Answer 71

cost v. benefit

Question 72

what are some ways to consider the value of differentation

Answer 72

- surveys - statistics - B2B (look down supply chain) - price/ value alignment

Question 73

Need to have ___________ of differentiation for suppliers, labor/ talent and access to consumers

Answer 73

consistency

Question 74

In differentiation need to be aware of shifting __________ preferences

Answer 74

consumer Note: what differentiates you yesterday may not differentiate you tomorrw

Question 75

Need to consider your __________ to differentiate (ex: aluminum folil)

Answer 75

ability

Question 76

what is signaling

Answer 76

brand name, warranty, packaging, money-back guarantee and event sponsorship

Question 77

_____________ is telling the market we are worthy of support

Answer 77

signaling

Question 78

for services the number one asset is __________

Answer 78

trust

Question 79

differentiation can push back against _________________

Answer 79

profit destruction

Question 80

differentiation protects against ____________, ______________, ______________, __________ (think P5F)

Answer 80

competitors, powerful buyers, new entrants, and subs

Question 81

why are competitors and new entrants less of a threat with diffrentition

Answer 81

the consumers are locked in (loyalty---> switching costs)

Question 82

why are powerful suppliers not much of an issue in differentiation strategy

Answer 82

the differentiator is better able to pass price increases to customers

Question 83

what is the question to ask when seeing if the differentiator is able to maintain the perceived uniqueness in the customer's eyes

Answer 83

how is differentiation built?

Question 84

The key concern is the differentiator'a ability to maintain the perceived ____________ in the customers' eye

Answer 84

uniqueness

Question 85

Differentiator status is shorter lived when differentiation stems from what?

Answer 85

tangible resources (design or physical features of the product)

Question 86

Why is differentiation shorter lived when it stems from tangible resources?

Answer 86

Risk of imitation

Question 87

Differentiation status is more stable when is stems from what?

Answer 87

quality of service or reliability or from intangible source

Question 88

What is an integrated strategy?

Answer 88

Doing both cost and differentiation at the same time

Question 89

Can you do an integrated model?

Answer 89

Answer was originally no but companies have since successfully done it (ex: Target)

Question 90

Do you need to be able to measure the effectiveness of your strategy and if so why?

Answer 90

Yes, if you cannot measure it you cannot manage it

Question 91

How do you measure the effectiveness of a cost leadership strategy?

Answer 91

Measured at the operating profit margin (specifically- drop from GPM to OPM)

Question 92

How to measure the effectiveness of differentiation strategy?

Answer 92

Measured at GPM because there is no other place on the IS that you can recover it

Question 93

How do you measure the effectiveness of an integrated strategy

Answer 93

measure the combination; cost operating margin; differentiation (gross margin); integrated is BOTH

Question 94

A successful cost leadership strategy should result in a __________ operating margin

Answer 94

higher

Question 95

Why does successful cost leadership strategy lead to a higher operating margin even when prices are lower than competitors

Answer 95

company has minimized costs at all operational levels

Question 96

A successful differentiation strategy leads to a higher ________________

Answer 96

gross profit margin

Question 97

why does a successful differentiation strategy lead to a higher gross profit margin

Answer 97

customers are willing to pay a premium --> results in a significant revenue per unit sold relative to COGS