9 - Strategic Positionning For Competitive Advantage

Question 1

Competitive advantage

Answer 1

A firm has a competitive advantage over its rivals when it’s able to generate more economic profit. It’s ability depends on 2 factors:
1- market economies
2- value created relative to competitors

And it is based on superior resources and capabilities

Question 2

Maximum willingness to pay

Answer 2

Depends on tates and target groups.

Question 3

Consumer surplus

Answer 3

Buy only when t is positive

For 2 substitutes at the same price but the one that creates more CS

Question 4

Consumer surplus parity

Answer 4

When firm’s price quality positions line up along the same indifference curve = firms are offering hé same amount of consumer surplus.

Question 5

Value created

Answer 5

CS + PS

Question 6

Porters value chain model

Answer 6

Support activities:

• firm infrastructure
• HR
• technology development
• procurement

Primary activities:

• inbound logistics
• production operations
• outbound logistics
• marketing and sales
• -service

Either:

1) configure its value chain differently
2) or perform activities more efficiently

Question 7

Resources

Answer 7

Firm-specific assets that cannot:
- be duplicated easily
- acquired by other firms
Ex: parents, reputation, expert workers

Question 8

Capabilities

Answer 8

Activities that a firm does outstandingly well compared to its competitors.
- valuable across multiple products
- embedded in organisational routines
- difficult to reduce to simple algorithms or procedure guides
Ex: use of technology, product design

Question 9

Ways to achieve cost leadership

Answer 9

• benefit parity: same benefit but lower cost
• benefit proximity: benefit a little lower (lower quality ink pen)
• alter quality: worse quality

Despite its quality disadvantage, the cost leader achieves a higher profit margin than its higher cost competitor.

Question 10

Ways to achieve benefit leadership

Answer 10

• cost parity:
• cost proximity: a bit higher than competitors
• substantial higher cost

Despite the cost disadvantage the benefit leader achieved a higher profit margin than its lower quality competitors.

Question 11

Pure strategies to maximise profits

Answer 11

• cost leadership with benefit parity
• benefit leadership with cost parity

Only if customer preferences are identical.

Question 12

Margin strategy

Answer 12

Low price elasticity of demand

Question 13

Share strategy

Answer 13

High price electricity of demand

Question 14

Cost advantage when

Answer 14

• the nature of the product limits opportunities for enhancing its perceived benefit
• consumers are relatively price sensitive
• search good

Question 15

Benefit leadership when

Answer 15

• niche market
• will in to pay premium for enhanced qualities
• experience good

Question 16

Stuck in the middle problem

Answer 16

When a firm pursued elements of cost leadership and benefit leadership at he same time and fail to achieve neither.

But: high quality and cost can be achieve with quality product and scale and scope economies or learning economies

Question 17

Benefit drivers

Answer 17

1- physical characteristic
2- quantity and characteristics of service/complementary goods: warranty
3- sale or delivery characteristic: timeliness
4- perception characteristic: reputation
5- subjective image: packaging

Question 18

Cost drivers

Answer 18

1- related to firm size, scope and experience 
2- non related to firm size, scope and experience 
- economies of density
- input prices
- location
- less F.C. (advertising)
- government policies
3- organisation of the transaction

Question 19

Broad coverage strategy

Answer 19

Seeks to serve all customer groups in the market by offering a full line of related products.

Question 20

Focus strategy

Answer 20

Either offers a narrow set of product varieties or a narrow set of customers or both.

• geographic specialisation
• product specialisation
• customer specialisation

Can extract firms from competition

Question 21

Techniques to estimate benefit position:

Answer 21

A) reservation price method (ask)
B) attribute-rating method (rate)
C) hedonic pricing analysis (look)
D conjoint analysis (cross)

Question 22

PA =

Answer 22

CA + (VA-VB)