Business Level Strategy And The Industry Environment

Question 1

Consolidating a fragmented industry through value innovation.

Answer 1

• value innovator: defines innovation differently than established companies
• offers the value at lower costs with the use of scale economies
• chainning: getting advantage of leadership by creating network of linked merchandising outlets
• interconnected by information tech that functions as one large company
• aids in building national brand
• franchising
• horizontal mergers: merging/acquiring competitors to create larger enteprise

Question 2

Discuss the strategies in embryonic and growth industries

Answer 2

• Limited demand for products of embryonic industry due to:
• failure in quality of previous product
• unfamiliar brand/product
• poorly developed distribution channels
• lack of complementary product
• high production costs due to low volumes of production
• industry enters growth when mass market starts to develop for its products
• occurs when:
• product value increases due to tech and complementary product development
• decrease in product costs

Question 3

Strategic implications: crossing the chasm

Answer 3

• Competitive chasm refers to transition from embryonic market to mass market
• new strategies required to improve business model as market develops
• customers in different segments require different needs
• innovators and early adopters
• tech sophistication and tolerate product limitations
• reached through specialised channels
• small quantity of high priced products

Question 4

List the factors that promote customer demand

Answer 4

Relative advantage 
Compatability
Trialability 
Observability
Complexity
Viral model of infection

Question 5

Describe the strategies used to deter entry in mature industries

Answer 5

• Product proliferation strategy: accommodating all market segments to deter competitors
• limit price strategy: lower price to affect cost structure of potential entrants
• strategic commitments: investments that signal long term commitment to a market or segment of the market

Question 6

List the strategies to manage rivalry

Answer 6

Price signaling
Price leadership
Non-price competitors
Market penetration 
Product development
Market development product proliferation

Question 7

Choosing strategy that best suites company in moderate to failing industry

Answer 7

• Leadership strategy: develops strategies to become dominant player in declining industry
• Niche strategy: focus on certain segments of industry that are declining slower than others
• Harvest strategy reduces assets to minimum in order to extract maximum profits where possible
• Divestment strategy: exit industry by selling off business assets

Question 8

Define and discuss the fragmented industry

Answer 8

Composed of a large number of small and medium-sized companies

• reasons for fragmentation include:
• lack of scale economies
• brand loyalty is primary local
• low entry barrier due to national brand loyalty and scale of economies
• focus strategy works best in a fragmented industry