Business strategy Flashcards
- Business level strategy - def
goal-directed actions managers take in their quest for competitive advantage when competing in a single product market
- important questions
- WHO are the customers
- WHAT customers needs/wishes/desires will we satisfy
- WHY do we want to satisfy them
- HOW will we satisfy them
- Industry & firm effects jointly determine competitive advantage
graph
- differentiation strategy
add unique features that will increase the perceived value of goods & services in the minds of consumers so they are willing to pay higher prices
ex: tesla
- cost leadership strategy
reduce the firm’s costs to manufacture a product or deliver a service below that of its competitors while offering adequate value
ex: general motors
- blue ocean strategy
combines for differentiation strategy and cost leadership
example: jetblue
- value drivers to improve firms strategic position
- product features
- customer service
- complements
- cost drivers to improve firms strategic position
- cost of inputs
- economies of scale (decrease in cpu as qt rises)
- learning curve effects ( tech remains constant, cumulative output rises, cpu decreases - learn by doing)
- experience curve ( tech changes, cumulative output remains constant, cpu decreases - process innovation)
- economies of scale definition
reduction in average unit costs that result from increasing the production capacity (under the assumption that the utilization rate is the same)
- economies of scale sources
- indivisibility of certain output
- effect of specialization
- lower per unit purchasing
- employing specialized systems & equipment
- taking advantage of certain physical properties
- economies of scale risks
- diseconomies of scale
- quality
- range of variation
- fixed cost absorption
- diving costs across a large number of units of output produced
- realize it by rising the rate of utilization
- higher if fixed cost represents larger fraction of total costs
- learning curve & learning economies - def
- incremental & predictable decrease in unit costs of outputs as the cumulative production volume grows
- greatest leverage at early stages of the product lifecycle
- learning curve & learning economies - sources
- enhanced human skills
- simplification of product & processes
- better selection of materials
- higher coordination
- higher programmability of activities
- economies of scope - definition
savings that come from producing two (different) outputs at lower cost than producing each output individually
