Lecture 8/9 - Content of Strategy, Business Level Strategy & Strategic Positioning

Question 1

What are the 2 main criteria for SBU formation?

Answer 1

Market-based criteria: Targeting specific customer types (or location) through the same channels and facing similar competitors.

Capabilities-based criteria: Similar strategic capabilities

Question 2

Name 4 Generic SBU business strategies

Answer 2

Cost leadership

Differentiation

Focus

The Strategy Clock

Question 3

Name 3 Interactive SBU business strategies

Answer 3

Hyper competitive strategy

Cooperation

Game theory

Question 4

What is cost-leadership strategy?

Answer 4

Becoming the lowest-cost organisation in a domain of activity

Question 5

Name the 4 key cost drivers that can help deliver cost leadership:

Answer 5

1) Lower Input Costs
2) Economies of Scale
3) Economies of Learning
4) Production Techniques and Design

Question 6

What is the economies of learning? (experience curve)

Answer 6

As a firm gains experience in building a product, its costs in real terms will decline in predictable rate

Question 7

Name 2 factors that contribute to economies of learning

Answer 7

Labour efficiency - Workers become physically more dexterous, mentally more confident and spend less time hesitating, learning, experimenting, or making mistakes

Technology improvements – Experience provides opportunity to improve firm’s production and operations. As processes, parts, and products become more standardized, efficiency tends to increase.

Question 8

Which analytical tool could be used to locate cost drivers?

Answer 8

VALUE CHAIN ANALYSIS

Question 9

Differentiation requires/involves:

Answer 9

Uniqueness along some dimension that is sufficiently valued by customers to allow a price premium

Tangible (size, colour, material, packaging, complementary services)

Intangible (style, image, excellence, identity)

Innovation

Question 10

What are the 3 key issues in Strategy and Differentiation Advantage?

Answer 10

The strategic customer on whose needs the differentiation is based.
(Think: application industry – who is the strategic customer?)

Key competitors – who are the rivals and who may become a rival.

Key drivers of Uniqueness

Question 11

Name 9 drivers of uniqueness

Answer 11

Product service features and performance.

Complementary services.

Intensity of marketing activities.

Technology embedded in design and manufacture.

The quality of purchased inputs.

Quality control, frequency of visits to customers

Skills, experience and expertise of employees

Location

Vertical integration and supply chain management

Question 12

What does a focus strategy entail?

Answer 12

Targets a narrow segment or domain of an activity and tailors its products/services to the needs of that specific segment to the exclusion of others.

Question 13

Name 2 types of focus strategy

Answer 13

Cost-focus

Differentiation

Question 14

Successful focus strategies depend on at least 1 of 3 key factors:

Answer 14

Distinct segment needs

Distinct segment value chains

Viable segment economics

Question 15

What does Porter’s ‘Stuck in the Middle’ theory argue?

Answer 15

It is best to choose which generic strategy to adopt and then stick rigorously to it.

Failure to do this leads to a danger of being ‘stuck in the middle’ i.e. doing no strategy well.

Question 16

The argument FOR pure generic strategies is…

Answer 16

Controversial

Question 17

What are the key features of the Strategy Clock?

Answer 17

Market-focused: focused on prices rather than costs

Allows for continuous choices with incremental adjustments between each section

Question 18

What is 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

A strategic lock-in can be achieved through:

Answer 19

Controlling complementary products or services.
E.g. printers that only work with particular ink cartridges

Creating a proprietary industry standard.
E.g. Microsoft with its Windows operating system.

Enjoy size & market dominance OR have a first mover dominance

Question 20

What are red oceans?

Answer 20

Industries that are already well defined and rivalry is intense

Question 21

What are blue oceans?

Answer 21

New market spaces where competition is minimised

Question 22

Blue ocean thinking encourages…

Answer 22

Entrepreneurs and managers to be different by finding or creating market spaces that are not currently being served

Question 23

What is a strategy canvas?

Answer 23

Compares competitors according to their performance on key success factors in order to develop strategies based on creating new market spaces

NO benchmarking against competitors

Question 24

Kim and Mauborgne, 2005

Answer 24

Value Innovation Critique

Question 25

Value Innovation Critique

Answer 25

Kim and Mauborgne, 2005

Question 26

What does do Kim and Mauborgne contest?

Answer 26

VALUE INNOVATION CRITIQUE Challenging acceptance assumptions about industry definitions, Looking across existing industries boundaries or the strategic groups, redefine buyers, etc. Tapping on existing technology whilst providing simultaneously better value for better prices.

Question 27

Red Ocean Strategy (5 points)

Answer 27

Compete in existing market space Beat the competition Exploit existing demand Make the value-cost trade off Align strategic choice of differentiation or low cost strategy

Question 28

Blue Ocean Strategy (5 points)

Answer 28

Create uncontested market space Make the competition irrelevant Create / Capture new demand Break the value-cost trade off Simultaneously pursuit of differentiation and low cost strategy

Question 29

Game Theory

Answer 29

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

Question 30

Game theorists...

Answer 30

... consider the competitor response and the strategic signals to make their decisions

Question 31

Game theory is relevant where:

Answer 31

competitors are interdependent. Interdependency exists where the outcomes of choices made by one competitor is dependent on the choices made by other competitors.