Chapter 4 - Business-level strategy

Question 1

Define Business-Level Strategy

Answer 1

Overall competitive theme of a business, way a company positions itself in the marketplace to gain a competitive advantage
=> How to compete

Question 2

What are the two options for exploiting differentiation?

Answer 2

1) Increase prices more than costs
2) Moderate of no price increase -> increased demand -> economies of scale and lower costs

Question 3

Define the Efficiency Frontier

Answer 3

Show all the positions a company can adopt with regard to differentiation and low cost

Has a convex shape because of diminishing returns

Question 4

What should a company do to get to the efficiency frontier?

Answer 4

i) Pursue the right functional-level strategies
ii) Be properly organized
iii) Ensure its business-level strategy, functional-level strategy, and organizational arrangement align with each other

Question 5

Define Value Innovation

Answer 5

Value innovation occurs when innovations push out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was thought possible

Enables a company to outperform its rivals for a long period of time

Question 6

Define Market Segmentation

Answer 6

Decision of a company to group customers, based on important differences in their needs, to gain a competitive advantage

Question 7

What are the three market segmentation strategies?

Answer 7

i) standardization strategy
ii) segmentation strategy
iii) focus strategy

Question 8

Define Standardization strategy

Answer 8

Producing a standardized product for the average customer, ignoring different segments

Question 9

Define Segmentation strategy

Answer 9

Producing different offerings for different segments, serving many segments or the entire market

Question 10

Define Focus strategy

Answer 10

Serving a limited number of segments or just one segment

Question 11

Defines Generic Business-Level Strategy

Answer 11

Gives a company a specific firm of competitive position and advantage in relation to its rivals

Question 12

What are the four types of business-level strategies?

Answer 12

i) Broad low-cost
ii) Broad differentiation
iii) Focus low-cost
iv) Focus differentiation

Question 13

Define Broad low-cost strategy

Answer 13

Lowers costs to lower process and still make a profit

Question 14

Define Broad differentiation strategy

Answer 14

Differentiates a company’s product in some way

Question 15

Define Focus low-cost strategy

Answer 15

Targets a niche and tries to be the low-cost player in that niche

Question 16

Define Focus differentiation strategy

Answer 16

Targets a niche and customizes offering with features and functions

Question 17

What are the two variables to take into account when implementing business-level strategy?

Answer 17

i) Functional strategy
ii) Organizational arrangements

Question 18

Define Blue Ocean strategy

Answer 18

Successful companies build their competitive advantage by redefininf their product offering through value innovation
=> Creating a new market space

Question 19

Define Blue Ocean

Answer 19

Wide open market space where a company can chart its own course

Question 20

What must a company do to redefine its market and create a new business-level startegy?

Answer 20

i) ELIMINATE factors that rivals take for granted, and reduce costs
ii) REDUCE certain factors below industry standards, and lower costs
iii) RAISE certain factors above industry standards, and increase value
iv) CREATE factors that rivals do not offer, and increase value