5

Question 1

What is the SWOT analysis?

Answer 1

The SWOT analysis is a framework that allows managers to synthesise insights obtained from an internal analysis of a company’s strengths and weaknesses with those from an analysis of exernal opportunities and threats.

Question 2

What can be gleaned from the SWOT insights?

Answer 2

• Identify company resource strength and competitive capabilities
• identify company resource weaknesses and competitive deficiencies
• identify the company’s market opportunities
• identify external threats to the company’s future well-being.

Question 3

What are the implications from improving the company strategy?

Answer 3

• Use company strength and capabilities as cornerstones of strategy
• pursue those market opportunities best suited to company strengths and capabilities
• correct weaknesses and deficiencies which impair pursuit of important market opportunities or heighten vulnerability to external threats
• use company strength to lessen the impact of important external threats.

Question 4

How do I use these strengths to take advantage of these opportunities?

Answer 4

Matching strategies.

Question 5

Hoe do I overcome the weaknesses that prevent me taking advantage of these opportunities?

Answer 5

Change strategies.

Question 6

How do I use my strengths to reduce the likelihood and impact of these threats?

Answer 6

Neutralizing strategies.

Question 7

How do I dress the weaknesses that will make the threats a reality?

Answer 7

Defensive strategies.

Question 8

What is part of the internal analysis?

Answer 8

Resources, core competencies, value chain.

Question 9

What is part of the external analysis?

Answer 9

Macro environment, industry and competitive environment, strategic groups.

Question 10

What are the requirements for imitation in a sustainable competitive advantage?

Answer 10

• Identification
• incentives for imitation
• diagnosis
• resource acquisition.

Question 11

What is the isolating mechanism of identification?

Answer 11

Obscure superior performance.

Question 12

What is the isolating mechanism of incentives for imitation?

Answer 12

Deterrence: signal aggressive intentions to imitators.
Preemption: exploit all available investment opportunities.

Question 13

What is the isolating mechanism of diagnosis?

Answer 13

Rely on multiple sources of competitive advantage to create causal ambiguity.

Question 14

What is the isolating mechanism of resource acquisition?

Answer 14

Base competitive advantage on resources and capabilities that are immobile and costly to replicate.

Question 15

What are the possible elements of cost advantage?

Answer 15

• Cost control
• product/service standardization
  -economies of scale and scope
• learning effects
• outsourcing/vertical integration
  -bargaining power

Question 16

What are the risks of cost advantage?

Answer 16

• catch-up of competitors
• cost-price dynamics (“hypercompetition”)
• technical changes
• changes in consumer behaviour.

Question 17

What is the experience curve?

Answer 17

Evaluating the positive relationships between market shares and cost level.
The experience or learning curve as an empirical estimate of the proportion by which unit costs fall as volume of production increases.
Firms that manage itself to establish first in the market can realize cost advantages through higher market shares and accelerated learning.

Question 18

What are economies of scale?

Answer 18

• Economies of scale (EoS) refer to the extent to which cost per unit of output falls as the scale of operations increases.
• Scale economies usually arise in the case of capital intensive operations.
• The strategic significance of scale economies depends on the minimum efficient scale (MES).
• Sources of economies of scale are indivisibilities and spreading of fixed costs

Question 19

What happens when the minimum efficient scale gets higher?

Answer 19

The higher the MES to market size ratio, the lower the number of firms that compete in the market since achieving economies of scale is harder.

Question 20

What are economies of scope?

Answer 20

Average costs of product lowered by joint production with other products.
Economies of scope depend on increased variety and not higher volume of output.

Question 21

What are the sources of economies of scope?

Answer 21

• Use of one or more common resources (or inputs) in the production of both outputs
• Spreading fix costs over more products
• Application of knowledge and core capabilities to the production of several
  outputs

Question 22

What are the divers of cost advantages?

Answer 22

• Economies of scale
• Economies of learning
• Production techniques
• Product design
• Input costs
• Capacity utilization
• Residual efficiency

Question 23

How do we use the value chain to analyse costs?

Answer 23

1. Identify activities
2. Allocate total costs
3. Identify cost drivers
4. Identify linkages
5. Identify opportunities for cost reduction

Question 24

What are the possible elements of differentiation strategy?

Answer 24

• brand name / reputation / image
• superior product quality
• first mover advantage
• strong service and process skills
• design / marketing skills
• ability to attract creative employees

Question 25

What are the risks of differentiation strategy?

Answer 25

- overspending erodes profitability - inadequate price premiums - imitation by the competitors

Question 26

How do we deliver value via broad differentiation?

Answer 26

1. Lower buyer ́s costs of using the product: e.g. autonomous or energy efficient devices for business customers. 2. Incorporate tangible features to the product to increase customer satisfaction: e.g. design features, services and long term warranty. 3. Incorporate intangible features to enhance buyer satisfaction: e.g. exclusivity, status, prestige. 4. Signal the value of the product (justify it in the customers’ minds): e.g. high price, fancy packaging, focused advertisement on the unique features.

Question 27

What is the characterisation of a focus niche strategy?

Answer 27

- Satisfy the needs of a specific customer segment better than any other competitor. - This niche may be defined by geographic uniqueness, specialized requirements in the product usage or special product attributes appealing only to members of this segments.

Question 28

What are the two types of focus niche strategy?

Answer 28

- Achieve lower costs than rivals in serving a well-defined buyer segment (focused low-cost strategy) - Offer a product appealing to unique preferences of a well-defined buyer segment (focused differentiation strategy)

Question 29

What are the elements of a focus niche strategy?

Answer 29

- Protect niche through entry barriers: ▪ Patents/technology ▪ Customer loyalty ▪ Unique service ▪ Unique bundling

Question 30

What are the risks of a focus niche strategy?

Answer 30

- Niche becomes unattractive - Niche becomes attractive to competitors - New players re-segment the market - The strategy is imitated in duration

Question 31

When is cost leadership best to pursue?

Answer 31

- Products of rivals are identical - It is difficult to achieve differentiation - Buyers use the product in same way - Switching costs of customers are low Avoid relying on easily replicable cost reduction approaches and becoming obsessed with cost cutting!

Question 32

When is product differentiation best to pursue?

Answer 32

- Few rivals would be able to follow same approaches - It is possible to achieve differentiation - Buyer needs are diverse - Technological change pace is high, buyers are interested Avoid relying on easily replicable differentiation approaches and investing in improvements with no customer value!

Question 33

When is focused (niche) low cost or focused differentiation strategy best to pursue?

Answer 33

Best to pursue a focused strategy when there is a market niche to which competitors show low interest due to its costly and specialization needs.

Question 34

When is best-cost provider strategy best to pursue?

Answer 34

- Product differentiation is a norm and when there are a large number of value conscious customers (e.g. recessionary times) - There is a competitive space for a price/performance optimal product(e.g.high quality medium price or medium quality low price) Avoid sticking in the middle!

Question 35

What is stuck in the middle?

Answer 35

Porter stressed the idea that a firm should either adopt a cost leadership or a differentiation strategy and failure to do so will result in a “stuck in the middle” scenario.