session 3 -ash Flashcards
(21 cards)
What is Creating Shared Value (CSV), and how does it differ from Corporate Social Responsibility (CSR)?
CSV is a strategic approach that integrates social and environmental goals into a firm’s core strategy to create both economic and societal value. Unlike CSR, which is often reactive and PR-driven, CSV is proactive and rooted in competitive advantage by aligning business success with societal progress
What are the three standard dimensions used to assess competitive advantage?
- Accounting metrics
- Shareholder value creation
- Economic value creation
How does the concept of economic value creation relate to competitive advantage?
A firm achieves competitive advantage when it creates more economic value than its rivals. Economic value is calculated as the difference between what a customer is willing to pay (V) and the firm’s cost to produce it (C), or (V − C).
What is a business-level strategy, and what questions does it aim to answer?
Business-level strategy outlines goal-directed actions to gain competitive advantage in a single product market. It answers the questions:
- Who are the customers?
- What are their needs?
- Why do we want to satisfy them?
- How will we satisfy them?
Define strategic position and explain its importance.
A strategic position reflects a firm’s profile based on value creation and cost. It determines the firm’s ability to generate economic value and influences how effectively it can sustain competitive advantage.
they have to:
1. meet customer needs
2. maximise product value
3. lowest possible product cost
What are value drivers in a differentiation strategy?
Value drivers are factors that increase the perceived value of a product or service, allowing firms to charge premium prices. Common drivers include product features, customer service, brand image, and complements
Why might a firm get “stuck in the middle” when trying to implement both cost leadership and differentiation strategies?
Firms attempting both strategies without a clear focus may face conflicting operational goals and strategic trade-offs, leading to inefficiencies and a diluted value proposition. This lack of clarity can result in poor performance compared to focused rivals.
Economic value creation is calculated by
A. Cost – Revenue
B. Price – Cost of goods sold
C. Customer’s willingness to pay – Firm’s cost to produce
D. Revenue – Administrative expenses
C
Which of the following is a risk of a differentiation strategy?
A. Excessively low customer switching costs
B. High cost of innovation and potential imitation
C. Over-reliance on economies of scale
D. Unstable input prices
B
Which of the following best describes Creating Shared Value (CSV)?
A. Donating profits to charity after maximizing shareholder value
B. Integrating social and environmental issues into core strategy to create economic and societal value
C. Implementing ethical sourcing only when required by law
D. Minimising taxes through offshoring practices
B
Which of the following is a limitation of accounting profitability metrics?
A. They are forward-looking
B. They ignore tangible assets
C. They vary greatly across firms and industries
D. They overemphasise future projections
C
Which of the following is NOT one of the three levels of shared value creation according to Porter and Kramer?
A. Reconceiving products and markets
B. Redefining productivity in the value chain
C. Maximising quarterly shareholder returns
D. Enabling local cluster development
C
Which of the following is a common value driver in a differentiation strategy?
A. Low-cost inputs
B. Product standardisation
C. Customisation
D. Price matching
C
What key question does a business-level strategy NOT directly answer?
A. Who are our customers?
B. What are their needs?
C. What is our balance sheet structure?
D. How will we serve them better than competitors?
C
What are the three standard approaches to assess competitive advantage?
A. Customer loyalty, ROI, and benchmarking
B. Accounting profitability, shareholder value creation, and economic value creation
C. Net income, branding strength, and growth rate
D. Revenue growth, CSR score, and asset turnover
B
What is a business level strategy?
How a firm competes within an industry to gain an advantage. They have to find the right balance between value creation and cost efficiency to determine its strategic position in the market
What is differentiation strategy?
where companies compete by offering unique products or services that create more value for customers.
What types of differentiation are there?
Normal
Focussed (in narrow/niche competitive scope)
E.g. Focused differentiation (Mont Blanc)
What is cost leadership strategy?
which involves minimising costs while maintaining an acceptable level of quality. Firms that adopt this strategy focus on reducing expenses in areas such as raw materials, production, and distribution.
What type of cost leadership strategies are there?
Normal cost leadership
Focused cost leadership (low price to niche market)
E.g. Focused cost leadership (BIC)
what are 3 drivers that increase perceived value of a product?
- Product features - increase the perceived value of the product or service offering
- Customer service
- Complements - add value to a product or service when they are consumed in tandem
