5. Business-level strategy Flashcards
What is a Business Level Strategy?
Integrated and coordinated actions to gain competitive advantage by exploiting core competencies in specific markets.
Basically how to perform primary and secondary value chain activities.
What are the three questions asked when forming a business level strategy?
1) Who will be served?
2) Which customer needs must be satisfied?
3) How will those needs be satisfied?
Define a generic strategy.
A strategy that can be used by any firm in any industry.
Define reach.
A firm’s access/connection with customers.
Define richness.
Detail of two-way information flow between firms and customers.
Define affiliation.
Facilitating useful interactions with customers.
Define market segmentation.
Clustering customers with similar needs into groups.
What is a basic customer need?
Product that creates value.
What is the purpose of a business level strategy?
To create differences between firm’s position in industry and competitors.
List the five types of business level strategies.
1) Cost leadership
2) Differentiation
3) Focused cost leadership
4) Focused differentiation
5) Integrated cost leadership/differentiation
What are the two types of competitive scope?
1) Broad target (broad customer group)
2) Narrow target (narrow customer group)
Define cost leadership strategy.
Integrated actions to produce goods/services at the lowest cost acceptable to customers.
What are the risks of cost leadership strategy?
1) Competitor innovations can lower costs or add differentiated features without increasing costs.
2) Too much focus on cost reductions.
3) Competitors can imitate.
Define differentiation strategy.
Integrated actions to produce goods/services that are important to customers.
What are the risks of differentiation strategy?
1) Customers find price differentiation too high.
2) Differentiation does not create enough value for customers.
3) Counterfeit goods
Define focus strategy.
Integrated actions to produce goods/services that meet needs of a market segment.
Give three examples of market segments.
1) Buyer group (youth vs elderly)
2) Differentiation of product line (professional vs beginner)
3) Geographic market (Europe, Asia etc)
Define focus cost leadership strategy.
Offering lowest prices for a particular market segment. (Where broad-cost strategies fail)
Define focus differentiation strategy.
Looking for specific needs that broad differentiation does not serve.
What are the three risks of focus strategies?
1) Rivals “out focus” firms. (Are even more focused)
2) Large competitors entering niche market.
3) Preferences of niche market become similar to broad market.
Define an integrated cost/differentiation strategy.
Primary and support activities that allow firms to simultaneously pursue cost and differentiation strategy.
Focusing on two competitive advantages means firms must have strong networks that outsource.
What are two risks of integrated cost/differentiation strategies?
1) Forces consumer compromise (neither lowest cost or most differentiated).
2) “Stuck in the middle” firms earn average returns.
Flexibility helps firms achieve _____________ strategies.
integrated cost/differentiation
What are three ways a firm can be more flexible?
1) Flexible Manufacturing Systems (FMS): easily changing from making one product to another while keeping low costs and differentiation.
2) Information Networks: linking firms with suppliers and customers.
3) Total Quality Management Systems (TQMS): reducing/eliminating errors while keeping low costs and differentiation.
