Business-Level strategy Flashcards
What are the support functions of internal analysis in the value-chain model?
Finace
HR
Management IS
What are the value chain activities?
- supply cahin management
- operations
- distribution
- marketing
- Follow-up service
List the benefits of outsourcing
Increased flexibility
Risk mitigation (not always tho)
Reduce capital investment
Gain of cost advantage (probable)
Concentrating efforts in value creating areas
Two significant concerns associated to outsourcing
- potential loss of the ability to innovate
- loss of jobs within the firm
What is a business-level ?
same as strategy, but in a specific product market, its also:
➢ Something that every firm must develop and implement
➢ The core strategy—the strategy that the firm forms to describe how it intends
to compete against rivals on a day-to-day basis in its chosen product market
When selecting a business-level strategy, a firm determines:
➢ Who will be served (need for segmentation)
➢ What needs those target customers have that it will satisfy
➢ How those needs will be satisfied
Difference between BLS and Business model
Business models are part of a comprehensive business level strategy
name the 5 types of business level strategies and the two axes on which they are
- cost leadership
- differentiation
- Focused cost leadership
- focused differentiation
- integrated cost leadership/differentiation
Axes:
- Target market: broad or narrow
- Basis for customer value: Lowest cost, distinctiveness
Describe cost leadership
- produce acceptable products at the lowest cost relative to competitors
- usually standardized goods or services
- process innovation is critical for this strategy
- A cost leader generally operates with lower finished costs than its
competitors, thus making it possible for the cost leader to creates an
entry barrier to potential competitors, retain customers against
product substitutes, and absorb its suppliers’ potential price increases
Describe the differentiation strategy
- customers perceive the products as being different in important ways to them
- target customers for whom the firm create value
- Product innovation is crucial to them
- new valuable features and upgrades are necessary to maintain strategy’s success
- Customer loyalty protects a differentiator against rivals, new commers, increase
in suppliers’ prices, and probability of customers switching to substitute products.
Describe the integrated strategy
- low cost while having product differentiation
- need for great adaptability
- 3 sources of flexibility for its success:
1. flexible manufacturing systems
2. information networks
3. total quality management systems
Describe both the focused strategies
- particular segment
A focus strategy leads to success when the firm:
➢ Serves a segment well whose unique needs are so specialized that broad-based competitors
choose not to serve that segment
➢ Creates value for a segment that exceeds the value created by industry-wide competitors
The activities required to use both strategies and the way both strategies allow a
firm to deal successfully with the five competitive forces are virtually identical to
those of the industry-wide cost leadership and differentiation strategies.
Risks of business-level strategy for low cost firms
- losing comp advantage to new technologies
- failure to detect change in customer’s needs
Risk to differentiation
- customers decide a products doesn’t hold the premium’s value anymore
- competition beating them on price for similar features
Risks to focus strategy
- being out-focused
- segments becoming too similar thus losing the need for focus
