Porters Flashcards Preview

Business 3+ 4 > Porters > Flashcards

Flashcards in Porters Deck (12)
Loading flashcards...
1

Porters definition

Are frameworks for strategic business planning in order to grow or transform a business in order to gain a competitive advantage

2

Key elements of porters

- strategies aim to increase business competitiveness
- there are two strategies lower cost and differentiation
- a business that tries to do both runs the risk of being stuck in the middle and being mediocre at both and therefore loses competitive advantage
- a business must monitor and understand the businesses internal and external environments and the industry to ensure opportunities are taken full advantage of

3

Lower cost definition

Where a business aims to be the low cost producer in its industry without reducing quality to the end user

4

Lower cost ways

-Lower costs and sell at or near industry average to increase profit per sale
-lower costs and sell below industry average to atttact price sensitive customers to gain market share

5

Lower cost best when

Good when market is price sensitive
Usually large businesses that can take advantage of economies of scale, large production volume and large market share
Usually a standard product with no added features

6

Lower cost advantages

Allows business to increase market share by...
Or gain higher profits by....

7

Lower cost disadvantages

-Lower cost can lead to lower customer loyalty as price sensitive customers will swap and change with no hesitation
- reputation can be affected as low cost producer can come across as bad quality
-difficult to maintain in the long term and competitors can follow lead
- lowering costs in production can lower value to consumer

8

Differentiation definition

Where a business seeks to be unique in its industry in a way that is valued by consumers
The business is then rewarded by being able to command a premium price, gain customer loyalty or sell more goods at a given price

9

Differentiation features

- can be costly
- isn’t just for products it can be in all parts of the value chain

10

Differentiation suitability

Good when the target market isn’t price sensitive
Competitive market where customers specific needs are not being addressed as they could be
Where a business has the resources and capabilities to satisfy needs in a way that other businesses cannot eg patents expertise innovation
Larger businesses to implement due to resources and influence on market
Small businesses that can find a small market niche

11

Differentiation advantages

- can command a premium price, sell more goods at a given price, increase revenue or gain customer loyalty
- successful brand management will r slut in perceived uniqueness where consumers buy the product even if it is the same as competitors

12

Differentiation disadvantages

-usually costly- the more unique the strategies that he higher the costs are likely to be which can negatively impact on profitability if additional costs do not lead to an equivalent increase in sales return
-charging a premium price will cut down the market that will buy the product narrowing the target market
- if uniqueness is not protected other businesses will follow the businesses lead and they will lose competitive advantage