WEEK 12_STRATEGIES IN ACTION Flashcards
(32 cards)
According to Porter, there are two basic types of competitive advantage a firm can possess:
low cost or differentiation.
According to Porter, there are two basic types of competitive advantage a firm can possess:
low cost or differentiation.
The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry:
cost leadership, differentiation, and focus.
The focus strategy has two variants, _________________ and __________________
cost focus
differentiation focus.
a firm sets out to become the low cost producer in its industry.
The sources of cost advantage are varied and depend on the structure of the industry.
They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors
Cost leadership
A low cost producer must find and exploit all sources of cost advantage.
If a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.
Cost Leadership
In a ___________________ a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers.
It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.
Differentiation OR differentiation strategy
The generic strategy of _______ rests on the choice of a narrow competitive scope within an industry.
The _______ selects a segment or group of segments in the industry and tailors its strategy to serve them to the exclusion of others.
focus
focuser
The focus strategy has two variants.
(a) In cost focus a firm seeks a _____________ in its target segment, while in (b) differentiation focus a firm seeks differentiation in its _________________.
cost advantage
target segment
The _________ must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments.
target segments
____________ exploits differences in cost behaviour in some segments, while __________________ exploits the special needs of buyers in certain segments.
Cost focus
differentiation focus
The world is changing more and more rapidly, and consequently industries and firms themselves are changing faster than ever.
Some industries are changing so fast that researchers call them __________, _________________, such as telecommunications, medical, biotechnology, pharmaceuticals, computer hardware, software, and virtually all Internet-based industries
turbulent, high-velocity markets
______________________ is clearly becoming more and more the rule rather than the exception, even in such industries as toys, phones, banking, defense, publishing, and communication.
High-velocity change
Meeting the challenge of _______________ presents the firm with a choice of whether to react, anticipate, or lead the market in terms of its own strategies.
To primarily react to changes in the industry would be a defensive strategy used to counter, for example, unexpected shifts in buyer tastes and technological breakthroughs.
high-velocity change
The ______________________ would not be as effective as the anticipate-change strategy, which would entail devising and following through with plans for dealing with the expected changes.
However, firms ideally strive to be in a position to lead the changes in high-velocity markets, whereby they pioneer new and better technologies and products and set industry standards.
react-to-change strategy
Strategy making is not just a task for top executives. Middle and lower-level managers too must be involved in the strategic-planning process to the extent possible.
In large firms, there are actually four levels of strategies: corporate, divisional, functional, and operational.
Levels of Strategies
Levels of Strategies:
Strategy making is not just a task for top executives. Middle and lower-level managers too must be involved in the strategic-planning process to the extent possible.
In large firms, there are actually four levels of strategies: (4)
corporate, divisional, functional, and operational
It is important to note that all persons responsible for strategic planning at the various levels ideally participate and understand the strategies at the other organizational levels to help ensure coordination, facilitation, and commitment while avoiding inconsistency, inefficiency, and miscommunication.
Levels of Strategies
LEVELS OF STRATEGY
IN LARGE COMPANY
TOP
1. CORPORATE LEVEL (ceo)
2. DIVISION LEVEL
3. FUNCTIONAL LEVEL
4. OPERATIONAL LEVEL
BOTTOM
LEVELS OF STRATEGY
IN SMALL COMPANY
TOP
1. COMPANY LEVEL
2. FUNCTIONAL LEVEL
3. OPERATIONAL LEVEL
BOTTOM
Strategies that stress cooperation among competitors are being used more.
For collaboration between competitors to succeed, both firms must contribute something distinctive, such as technology, distribution, basic research, or manufacturing capacity.
But a major risk is that unintended transfers of important skills or technology may occur at organizational levels below where the deal was signed.
Cooperation Among Competitors
This is a popular strategy that occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity.
Joint venture
Often, the two or more sponsoring firms form a separate organization and have shared equity ownership in the new entity.
Other types of cooperative arrangements include research and development partnerships, cross-distribution agreements, cross-licensing agreements, cross-manufacturing agreements, and joint-bidding consortia.
Joint venture
are two commonly used ways to pursue strategies.
Merger and acquisition
A _______ occurs when two organizations of about equal size unite to form one enterprise.
merger
An ____________ occurs when a large organization purchases (acquires) a smaller firm, or vice versa.
acquisition
