Chapter 4: Business Level Strategy Flashcards
customers: relationship w/ BLS:
satisfy customers w/ BLS: returns from relationship w/ customers = life blood of all organizations
determine 3 things when selecting BLS
- who (target group)
- what (needs)
- how (CCs)
market segmentation
- customer markets
- industrial markets
market segmentation: 6 customer markets
- demographic
- socioeconomic
- geographic
- psychological
- consumption patterns
- perceptual
mkt segmentation: customer mkts: demographic
age, income, sex, etc.
mkt segmentation: customer mkts: socioeconomic
social class, stage in family cycle
mkt segmentation: customer mkts: geographic
cultural, regional, national
mkt segmentation: customer mkts: psychological
lifestyle, personality traits
mkt segmentation: customer mkts: consumption patterns
heavy, moderate, light users
mkt segmentation: customer mkts: perceptual factors
benefit segmentation, perceptual mapping
mkt segmentation: 5 industrial markets
- end-use
- product
- geographic
- common buyer factor
- customer size
mkt segmentation: industrial markets: end-use
identified by SIC code
mkt segmentation: industrial markets: product
based on tech change of production economics
mkt segmentation: industrial markets: geographic
country boundaries or regional differences w/in
mkt segmentation: industrial markets: common buyer factor
cut across product market & geographic segment
who
determining the customer to serve
What:
determining which customers needs to satisfy -> needs related to benefits/features of product
how:
determining core competencies necessary to satisfy customer needs -> CCs to implement value creating strategies => satisfy needs
What: customers needs/desires have been changing
- desire experience > simply purchasing G/S
- prefer customized G/S
- demand fast service
How (CCs) emphasize _____
innovation
purpose of BLS
- to create differences between the firm’s position and those of its competitors (position differently)
- develop activity maps to show how they integrate activities they perform (fit among activities = key to sustain. comp. adv.
assess 2 types of advantages (from internal assets’ nature/quality) => basis for apply BLS
- cost comp. adv.
- distinctiveness comp. adv.
2 types of market segments
- broad (industry-wide) -> larger & comprehensive
- narrow-> special needs and/or in specific region
Basis for customer value
see notes
cost leadership strategy
- targets broad customer segment/group
- effective use allows above avg returns despite strong comp. forces
- sell stdized G/S to most typical customers
- process innovation
- emergine markets
- logistics
- value chain
examples of value creating activities associated with cost leadership strategy: Finance
manage finc resources to ensure +CF & low debt costs
examples of value-creating activities associated with cost leadership strategy: HR
develop policies to ensure sufficient hiring/retention to keep costs low & implement training to ensure high e’ee efficiency
examples of value-creating activities associated with cost leadership strategy: MIS
develop/maintain cost-effective MIS operations
examples of value-creating activities associated with cost leadership strategy: SCMT
effective relationships w/ suppliers to maintain efficient flow of goods (supplies) for operations
examples of value-creating activities associated with cost leadership strategy: operations
- build economies of scale & efficient ops (ie production processes)
examples of value-creating activities associated with cost leadership strategy: distribution
use low-cost modes of transport & delivery times
examples of value-creating activities associated with cost leadership strategy: MKTG
targeted advertising & low prices for high sales volumes
examples of value-creating activities associated with cost leadership strategy: follow-up service
efficient follow up to reduce return
cost leadership: rivalry with existing competitors
- hesistate to compete on $ basis
- factors: size of rival, mkt dependence, location/prior competitive interactions
- reduce via joint ventures & guanxi
cost leadership: bargaining power of buyers (customers)
- cant force below comp or regain power & incr $
- pressure innovative products
- counterbalance w/ part.
cost leadership: bargaining power of suppliers
- higher margins -> can absorb $ incrs
- some hold down supplier $
- incr w/ outsourcing
cost leadership: potential entrants
highly efficient (economies of scale)
cost leadership: substitutes
flexibility: decr $ / incr diff w/o changing $
competitive risks of the cost leadership strategy
- processes -> obsolete
- too much focus on decr costs
- imitation
differentiation
- nonstand./dist -> (unique needs) premium $ (value>cost @ comp. lvls)
- product innovation = critical to success
- apply its knowledge capital
- offer a portfolio of products that complement each other
- less similar => more buffered from rivals
differentiation strategy: effective when firm has thorough understanding of:
- what customers value
- relative importance they attech to satisfaction
- for what they are willing to pay a premium
6 ways to differentiate
- features
- customer service
- prestige/status
- diff. tastes
- design/pref.
- innov./lead
differentiation: rivalry
incr loyalty => decr $ sensitivity
differentiation: buyer power
distinct => decr. $ sensitivity (no alternatives)
differentiation: supplier power
- high quality (bc premium) => incr costs
- high margin -> ~insulates %
- pass on to customer
- incr w/ outsourcing
differentiation: entrants - 2 barriers
- loyalty
- need to overcome uniqueness
differentiation: substitutes
- brand name => loyalty
competitive risks of the differentiation strategy
- $ change too large (features>needs; recession (luxury goods suffer))
- stop providing value (dont see diff.)
- generic experience > feature’s $
- counterfeiting
examples of value creating activities assoiciated wth the differentiation strategy: finance
- lt investment (i.e. R&D)
examples of value creating activities assoiciated wth the differentiation strategy: HR
- high skilled e’ees w? latest training
examples of value creating activities assoiciated wth the differentiation strategy: MIS
- real-time info
examples of value creating activities assoiciated wth the differentiation strategy: SCMT
- high quality supplies
examples of value creating activities assoiciated wth the differentiation strategy: ops
- high-quality goods & flexibile => change w/ demands
examples of value creating activities assoiciated wth the differentiation strategy: dist
- accurate/timely
examples of value creating activities assoiciated wth the differentiation strategy: MKTG
- promotion & ads
examples of value creating activities assoiciated wth the differentiation strategy: follow-up service
- ensure satisfaction
focus strategies
- CCs to serve needs of particular niche
focus strategies: 3 specific target segments
- partiular buyer group
- different segment of product line
- different geographic market
focus strategies: serve
serve more efficiently than broad (industry)
=> entrepreneur firms (“below radar”)
=> not served or served poorly
example: ikea
focused cost leadership strategy
example: food trucks - green trucks in LA
focused differentiation strategy
difference between focus CL and focus D
competitive scope
- industry forces often favor one over the other (CL v. D)
Competitive risks of focus strategies
1-3) general
4) “out-focus” - ikea
5) industry -> enter
6) unique needs ->(change) industry (similar)
integrated cost leadership/differentiation strategy
- simultaneous concentration => incr flexibility
- adapt quickly & strong networks
integrated CL/D: 3 sources of flexibility to balance objectives of both strategies
- flexible manufacturing systems (FMS) -> eliminate cost-variety tradeoff
- info. networks - customer relationship management (CRM) -> understand customer (predict willingness exp)
- total quality mgmt systems (TQM) -> incr satisfaction, decr costs, decr time to intro product
competitive risks of the integrated cost leadership/differentiation strategy:
- difficult to perform
- “stuck in the middle” - not optimal or dont successfully implement either (CL or D)
- costly to pursue
- alliances for diff but may extract $s
- “pure” outperform “hybrid”
