Chapter 4 Flashcards
cost leadership
generate economic value by having lower costs than competitors
product differentiation
generate economic value by offering a product that customers prefer over competitor’s product
if the focal firm has the cost advantage in the market:
develop a strategy to exploit the advantage
if the competitor has the cost advantage in the market:
develop a strategy to either capture the advantage or compete on some other basis
sources of cost advantage
economies of scale diseconomies of scale learning curve economies differential low-cost access to productive inputs technology independent of scale policy choices
diseconomies of scale occur when firms:
become too large and bureaucratic
learning curve economies
a firm gets more efficient at a process with experience
policy choices
firms can make policy choices that give people incentives to reduce cost at every opportunity
strategy is implemented through ______ _______ and ________.
organizational structure and control
3 organizational structures:
simple
functional
multi-divisional
simple structure
owner/manager makes all major decisions
functional structure
divides mgmt responsibilities by function; CEO is responsible for strategy and coordination of functions
Multi-Divisional Structure
functions are replicated in each division as appropriate; CEO has help from VPs
organizational controls
policies intended to influence behavior by aligning the interests of the individual with the interests of the organization
some compensation policies are:
stock options
bonuses
nonmonetary awards (vacations, parking places)
