Business-level strategies

Question 1

Purpose and 3 key questions of BL strategy

Answer 1

To create differences between firm’s position and its competitors

1. WHO will be served by the firm?
2. WHAT needs do those target customers have that the firm will satisfy?
3. HOW will those needs be satisfied?

Question 2

What are the two key decisions before selecting a BL strategy?

Answer 2

1. Firms must chose between cost and differentiation (competitive advantages)
2. Firms must determine broad and narrow target (competitive scope)

Question 3

What are the different BL strategies?

Answer 3

1. Cost leadership: low cost/broad market
2. Differentiation: differentiation/broad market
3. Focused cost leadership: low cost/narrow market
4. Focused differentiation: differentiation/narrow market
5. Integrated cost leadership/differentiation

Question 4

Red ocean strategy

Answer 4

• compete in existing market space
• beat the competition
• exploit existing demand
• make the value/cost trade-off
• choice between differentiation OR low cost

Question 4

Blue ocean strategy

Answer 4

• create uncontested market space
• make the competition irrelevant
• create and capture new demand
• break the value/cost trade-off
• pursue differentiation AND low cost

Question 5

Competitive rivalry model

Answer 5

1. Competitor analysis
2. Drivers of competitive behavior
3. Competitive rivalry
4. Outcomes

Question 6

What is competitive behavior?

Answer 6

The set of competitive actions and responses the firm takes to build or defend competitive advantages

Question 7

What are the drivers of competitive behavior?

Answer 7

• Awareness
• Motivation
• Ability

Question 8

What is competitive rivalry?

Answer 8

Ongoing set of competitive actions and responses occurring between competitors as they contend with each other for an advantageous market position

Question 9

What are the drivers of competitive rivalry?

Answer 9

In addition to awareness, motivation, ability:

Likelihood of attack:
- first-mover benefits
- organizational size
- quality

Likelihood of response:
- type of competitive action
- actor’s reputation
- market dependence

Question 10

What is MMC?

Answer 10

Multimarket contact is when firms compete against each other in distinct geographic markets, product categories or market segments.

Question 11

What are the consequences of MMC?

Answer 11

• increases interdependence between firms
• often leads to mutual forbearance: decreases likelihood of attack out of fear for counterattacks in other markets
• increases likelihood of responses to actions