Lecture 5/6 - Business Strategy & Competitive Advantage Flashcards
What is Strategy (in general)?
How the organization intends to COMPETE and SUCCEED in the marketplace.
Strategy provides the firm with…
Its overall direction, aimed at achieving SUSTAINED, SUPERIOR PERFORMANCE over the long run
What are the 4 main points relating to strategy that are brought up by Porter is his article “What is Strategy?”
- Strategy is NOT simply operational effectiveness (this can be imitated).
- Strategy rests on unique activities, being different than competitors
- A sustainable strategy requires trade-offs (can’t be all things to all people)
- Creating a clear strategy often depends on leadership.
Describe the 4 elements of a business strategy.
- Goals - what the business wants to achieve.
- Core Activities - the primary value-adding activities that the business intends to perform, and how it intends to perform them
- Product Market Focus - what do we sell, and to what markets?
- Value Proposition - how will we attract customers? What benefits are we offering?
What is the difference between hard goals and soft goals?
Hard goals are more financial-based, focus on performance, measurable targets and time frames (E.g., increase sales, increase market share)
Soft goals are more social-based (e.g., contribute to community, good working conditions)
What are the 4 different strategic choices under product market focus?
New Product, New Market: Diversification
New Product, Existing Market: Product development
Existing Product, New Market: Market development
Existing Product, Existing Market: Market penetration
When can value proposition create a competitive advantage?
When it is hard for competition to match/copy.
What are the 4 types of strategies?
- Differentiation
- Low Cost
- Best Cost Provider/Hybrid
- Black Hole
Describe the low-cost strategy.
Firm produces with a low cost focus and then provides products/services at lower price than the competition in order to compete on price.
Describe the differentiation strategy.
Firms sets itself apart from competition through something different (product features, service, quality) which allows them to charge a premium price.
What are 2 approaches to securing a cost advantage?
- Do a better job than rivals of performing value chain activities efficiently and cost effectively.
- Revamp value chain to bypass cost-producing activities that add little value from the buyer’s perspective
What are some ways that companies can differentiate themselves from competitors?
- Unique products
- Multiple features
- Wide selection
- Superior service
- Reliability
- Prestige and distinctiveness
Describe the best-cost provider strategy.
Combination of low-cost and differentiation.
- Incorporate attractive features at a lower cost then rivals
- Manufacture good-excellent quality products at a lower cost than rivals
What is the risk of a best-cost provider strategy.
Could get stuck in the middle between being unique and being affordable. Could potentially end up not satisfying either group of customers. This leads into the Black Hole Strategy!
Describe the focused cost leadership strategy, and give an example of a company that uses this strategy.
Competing based on price in a narrow market.
Example: Claire’s sells cheap jewellery to young girls/teens.
