Chap 6 Flashcards
What is a differentiated strategy?
Strategy that is focused on increasing the perceived value of goods and services
What does a differentiated strategy manipulate?
Manipulate product features, customer service, customization, and complements
What is a cost leadership strategy?
Focus on achieving lowest possible cost position
What does a cost leadership strategy manipulate?
cost of input factors, economies of scale, and learning- and experience-curve effects
What are the benefits and the risks of differentiation and cost leadership strategy?
The five forces model-
Use generic business strategies to protect against industry forces
Carve out strong strategic positions
Protect against the five forces and benefit from them
What are the benefits of the blue ocean strategy?
Align business strategy with total perceived consumer benefits, price, and cost
Lower costs by eliminating and reducing taken-for-granted factors
Increase perceived buyer value by raising existing key success factors and creating new elements
Track opportunities and risks using a strategy canvas
What are the risks of the blue ocean strategy?
Requires reconciling trade-offs between differentiation and low cost
Different strategic positions require fundamentally different internal value chain activities
Failure to resolve trade-offs leads to being ‘stuck in the middle’ and competitive disadvantage
What does cost leadership strategy rely on?
Understanding cost drivers
What are the cost drivers?
Cost of input factors, economies of scale, learning curve effects, and experience curve effects
What is learning curve?
Steeper curve = more learning
What is experience curve?
Combine economy of scale & learning curves.
Scale comes down a given learning curve.
Technology allows movement to steeper curve.
Combination can leapfrog in competitive advantage.
What is the benefit of cost leadership?
protected from competitors if price war
What is the risk of cost leadership?
new entrant arrives and new capabilities needed
What is the benefit of differentiation strategy?
reduced rivalry & high cost of imitation
What is the risk of differentiation strategy?
might overshoot features needed & vulnerable to price-sensitive customers
