Business-Level Strategy

Question 1

What factor affect the feasibility of cost leadership

Answer 1

Cost of input factors
Economies of scale
Learning-curve effects

Question 2

What’s the risk of cost leadership strategy?

Answer 2

• source of cost advantage becomes obsolete
• focus on cost may cause to overlook on some important customer references like quality
• imitation of price

Question 3

What are the risk of differentiation?

Answer 3

-counterfeiting
-cost of differentiation is too high
-the means of differentiation may cease to provide value for which customers are willlingt to pay
over differentiation

Question 4

In which conditions should a firm focus on a particular segment?

Answer 4

• may serve more properly a narrow segment than larger industry-wide competitors
• may lack resources to complete in a broader market
• large firms may overlook special needs/small niches

Question 5

What’s the risk of a focused strategy?

Answer 5

• a large competitor may also be able to properly focus on a narrow segment and outfocus the focuser
• customer needs within the narrow market may become more similar to the needs of the industry.wide customers

Question 6

What’s the risk of an integrated strategy?

Answer 6

getting stuck in the middle- cost structure is not low enough for attractive pricing of products, and products are not sufficiently differentiated

Question 7

Q: How can you describe Cost leadership strategy with the 5 forces?

Answer 7

Rivalry: firms hesitate to compete on the basis of prices

Bargaining Power of Buyers- powerful buyers may demand reduced prices by may drive competitors out of business leaving the cost leader with a monopoly.

Bargaining Power of Suppliers- absorb supplier price increases, Force suppliers to hold down their prices (due to volumes)

Threat of new entrants- cost reduction serve as entry barriers and continuously need to be improving levels of efficiency

Product Substitute- flexibility to lower prices in order to retain customers

Question 8

Q: How can you ‘describe the differentiation strategy with the 5 forces

Answer 8

Threat of new entrants- differentiation is a barrier to entry
Bargaining power of suppliers- protection against increase of prices from suppliers, which can be passed on to customers
Bargaining power of buyers- protection against the demand of price decrease by buyers because of differentiation features(well-differentiated prices are not perfect imitations)
Threat of substitutes- protection against substitutes because of differentiation appeal
Rivalry- protection against rivalry if product has sufficient differentiation appeal to command premium price