Business Strategies Flashcards
purpose of business strategies
gain (or maintain) competitive advantage through business units –> enables implementaton of corporate strategy
what is the difference between SBA and SBU?
SBA = group of products (similar in content), has its own characteristics only SBU = organisational unit, has its own management, business functions (at least some)
define the term business strategy
= a set of commitments a SBU takes to gain (or maintain) strategic advantage
what are the two possibilities of CA influence on compan’s performance?
1: sources of CA have direct influence
2: sources of CA are defined in a form (e.g. cost-based, differentiation etc.) and only then influences the performance
from which perspective are the CA forms analysed?
the customers.
the firm can only observe behaviour and not engage -> prob the most objective
state the classification of forms of competitive advantage
- lower price (than competitiors)
- differentiation (extra value over competitors)
- — a. product or service (functionality, extra features, durability, realiability, accordance with standards, practicability of repairs, aesthethics, percieved quality)
- — b. totality of supply (the whole package vs going to multiple stores)
- —- c. speed (delivery)
- —- d. flexibility (customisation)
- —- e. positive image (past strategic advantages that don’t exist anymore)
why is ‘lower price’ and not ‘lower costs’ in terms of forms of comp. adv.?
because it’s the customer’s perspective, not the company’s
could a company sustainabily follow both forms of competitive advantage?
only in short term situations (e.g. tech breakthrough). porter says 90% of cases are unsuccessful (not flexible enough).
state the two schools regarding the sources of competitive advantage. what do they disagree on?
where to start the analysis: inside or outside (analysis of env., finding a spot VS analysis of resources, finding a place on the market)
- external (industrial-organisation based)
- —- classical variety (Mason, Bain)
- —- new variety (Porter) - internal
- — resource-based (Penrose, Barney, Wernerfelt)
- — capability-based (Evans, Lado, Boyd)
- — knowledge-based (Demarest, Edvinsson)
define the approach of the external school (sources of competitive advantage) and define the S-C-P model
outside-in
- STRUCTURE: industry analysis (porters 5F) + general env. analysis (___) = company environment
- CONDUCT: value chain analysis + analysis of cost drivers + analysis of differentiation drivers = corporate strategy
- PERFORMANCE: competitive advantage and good company’s performance
which part of the S-C-P model did the classical variety skip a lot?
conduct (how should we adapt the company to external factors so it will succeed?)
state the classification of business strategies (6)
- generic BS
- BS based on portfolio matrix
- BS based on product life-cycle
- BS based on attitude towards cooperation
- BS based on attitude towards innovation
- BS based on attitude towards competitors
why are generic BS called that?
because they are generally applicable (in all situations)
what does broad or narrow competitive scope mean?
broad = SBU has many customer segments narrow = SBU has one/few customer segments and intentionally serves only them
define the generic strategy matrix
broad comp. scope + lower cost = cost leadership
broad comp. scope + differentiation = differentiation
narrow comp. scope + lower cost = focused cost leadership
narrow comp. scope + differentiation = focused differentation
which competitive advantages (from which point in time) are used in the generic strategy matrix?
from right now - your current competitive advantage determines your future business strategy
define the term cost leadership strategy
= a set of actions that ensure the lowest price possible for the final product
what are the general requirements of the cost leadership strategy? (4)
- higher efficiency than competitors
- cost reduction wherever possible
- standardisation
- broad mass market (economies of scale)
what are the risks of the cost leadership strategy? (4)
- less customer loyalty
- obsolete processes due to competitors’ inventions
- easily imitated
- focused cost leadership gets even lower costs+prices in particular segments
define the term differentiation strategy
= a set of actions that ensure that the final product is percieved (by customers) as fundamentally different than others (at a reasonable cost!)
what are the general requirements of the differentiation strategy? (4)
- unique and superior value of products
- lower customer sensitivity to price
- relative non-standardisation
- broad mass market (economies of scale)
what are the risks of the differentiation strategy? (4)
- price difference (with cost leader) could become too high
- adaptation could lower or diminish perception of differentiation
- possible imitation
- focused differentiation gets even higher results
define the term focus strategy
= a set of actions that ensure the product serves a very particular segment (e.g. geographical, DIY vs professional, generations)
what factors drive focus strategies? (4)
- overlooked small niche (by bigger companies)
- lack of resources to compete bigger
- higher efficiency with serving a smaller market
- more focus on one particular activity increases the chances of it being a competitive advantage
what are the competitive risks of focus strategies? (4)
- new focusers further segment the segment
- target segment becomes unattractive (structure erodes / demand disappears)
- broadly targeted competitors overwhelm the segment
- may be ‘outfocused’ by competitors
what is an example of a focused cost leadership strategy?
ikea, which is focused on lower prices for young families
what are the requirements for a company to implement an integrated cost/differentiation strategy?
- flexibility (information system, manufacturing system, total quality management system)
- quick learning of skills and techs
- effective in leveraging internal factors
what is the risk of having an integrated cost/differentiation strategy?
- impossible compromises
- becoming stuck in the middle (for about 95% of companies) = becoming neither the lowest cost nor the highest differentiated company
define the four strategies based on the portfolio mix
- investment strategy (for stars)
- selective investment strategy (for question marks)
- milking strategy (for cash cows)
- divestment strategy (for dogs)
define the strategies based on attitude towards cooperation
completely the same as corporate strategies, but here they are concerning the business(es), not the whole company
define the 2 strategies based on attitude towards innovation and state 3/2 motives for them
- being a pioneer (= first mover)
- reputation (industry leader)
- high profits (at the beginning only)
- setting standards for others - being an imitator (= late mover)
- keeping r&d costs down
- keeping risk down
state 2 groups of strategies (5/6 strategies for each) based on attitude towards competitors
- offensive strategies (attackers = market challengers)
- frontal attack
- flank attack
- bypass attack
- encirclement
- guerrilla attack - defensive strategies (market leaders)
- static defense
- flank defense
- preventive defense
- counterattack as defense
- mobile defense
- strategic retreat
