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Bus 478 > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

What is the business level strategy about?

A
  1. Whom a company wants to serve
  2. What customer needs
  3. Desires of the company to satisfy
  4. how the company decides to satisfy those needs and desires
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2
Q

What are the two basic ways a company chooses how to compete in a market

A
  1. Lower costs
  2. Differentiate product offered by competition to create more value
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3
Q

What are the advantages of low costs

A
  1. Enables company to make a profit at price points where rivals are losing money
  2. Allow company to gain market share
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4
Q

What is differentiation

A

Differing itself from rivals by offering things that are hard to match

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5
Q

How do companies differentiate themselves

A
  1. Superior reliability
  2. Better designs
  3. Superior functions and features
  4. Better point of sale service
  5. Better after sales service and support
  6. Better branding
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6
Q

What are the advantages of differentiation

A
  1. Charge at a premium price
  2. Help grow demand and capture market share from its rivals
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7
Q

What is the trade off

A

Managers must make a choice between choosing basic ways of attaining a competitive advantage

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8
Q

What does successful differentiation give

A

Options to managers to raise prices and cover any incremental increase in costs

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9
Q

What is efficiency frontier

A

Shows different positions companies can adopt differentiation and low costs

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10
Q

Why does the efficiency frontier have a convex shape

A

Diminishing returns

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11
Q

What is diminishing returns

A

Company has significant differentiation built into its product, increasing more by a small amount requires significant additional costs

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12
Q

What is market segmentation

A

Refers to the process of subdividing the market into clearly identifiable groups of customers with similar needs, desires and demand characteristics

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13
Q

What type of customers are within the market segments

A

Relatively homogenous and differ in important ways from customers in other segments of the market

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14
Q

What are the three approaches to market segmentation

A
  1. Standardization strategy
  2. Segmentation strategy
  3. Focus strategy
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15
Q

Which approach is associated with lower costs

A

Standardization strategy

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16
Q

How can companies successfully implement a business level strategy and reach the efficiency frontier

A
  1. Must pursue right functional level strategies and be organized
  2. Business level strategy, functional level strategy and organizational arrangement must be all in alignment
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17
Q

What is standardization strategy

A

Targets the average customer in that market

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18
Q

What is segmentation strategy

A

Customize its product offering to different segments, producing multiple offers

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19
Q

What is focus strategy

A

Target limited number of market segments or just one and become the very best at serving that particular segment

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20
Q

What are the costs and revenues of standardization strategy

A
  1. Associated with lower costs
  2. Involves producing basic offerings and trying to attain economies of scale by achieving high volumes of sales
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21
Q

What are the costs of segmentation strategy

A
  1. Company sells less of each offering making it harder to achieve economies of scale
  2. costs of production and delivery because products are aimed for higher income segments
22
Q

How can customization drive up costs

A
  1. Company may sell less of offering
  2. Products may require more functions and features
23
Q

What is a focus strategy for higher segments

A

Higher income = higher costs

24
Q

What is the focus strategy for lower segments

A

More basic offers that is inexpensive to produce and delivery

25
Q

What is broad low cost strategy

A

Company concentrates on lowering costs so that it can lower prices and make profit

26
Q

What is broad differentiation strategy

A

Company tries to differentiate its products in some way

27
Q

What is Focus low cost strategy

A

Company that targets a few segments or just one is pursuing a focus or niche strategy

28
Q

What is focus differentiation strategy

A

Company that tries to customize its product to the needs of a particular segment by adding features and functions

29
Q

What is the goal of companies to ward off competition

A

Brand loyalty

30
Q

Who is the originator of the generic business level strategy

A

Michael Porter

31
Q

What is differentiation according to Michael Porter

A

Raises costs and makes it impossible to attain the low cost position in the industry

32
Q

Why must companies have an alignment between business level, functional and organizational strategy

A

So that structure, control systems, incentive systems and culture are emphasized and reward employee behaviors are consistent with higher productivity and greater efficiency

33
Q

How can low costs make it hard for rivals to enter its market and be a substitute

A

Creates a cost that is hard for other businesses to match, protect a company against a substitute against goods or services

34
Q

What protects successful differentiators from competitive forces

A
  1. Brand loyalty
  2. Non price factors are important to its customers
  3. Be protected from substitutes
35
Q

What do low cost positions of functional level strategies result to

A

Superior efficiency and superior product reliability

36
Q

Why must low cost firms be organized

A

Structure, control, incentives systems, culture and employees are consistent with higher productivity and greater efficiency

37
Q

What does superior quality bring

A

Emphasis on innovation, customer responsiveness, reliability and excellence

38
Q

What specific functional level strategies improve differentiation

A
  1. Customization and marketing mix
  2. Design high quality products that increase reliability
  3. Well developed customer care function
  4. Marketing efforts focused on brand building and perceived differentiation
  5. Hiring employees that align with the image of the company
39
Q

What is value innovation

A

Figures out ways to offer more value through differentiation at a lower cost

40
Q

What is blue ocean

A

Characterization of the open market space where a company can chart its course

41
Q

What is eliminating in searching for a blue ocean

A

Look for eliminating factors that rivals take for granted and reduce costs

42
Q

What is reducing in searching for a blue ocean

A

Look for factors that should be reduced well below the industry standard to lower costs

43
Q

What is raise in searching for blue ocean

A

Look for factors that should be raised above industry standard to increase value

44
Q

What is create in searching for blue ocean

A

Look for factors that can be created that rivals don’t offer and increase value

45
Q

What do companies believe in blue ocean strategy

A
  1. To be a wide open market space where a company can chart its own course
  2. Present opportunities for untapped revenues
46
Q

What are some strategies surrounding blue ocean strategy

A
  1. Create uncontested market spaces
  2. Make the competition irrelevant
  3. Focus non customers
  4. Create and capture new demand
47
Q

What is value innovation

A

Describes what happens when innovation is pushed out the efficiency frontier in an industry

48
Q

What are the advantages of successful value innovation

A
  1. Makes it hard for competitors to catch up
  2. Result to sustained competitive advantage
49
Q

Why can’t low cost and differentiation strategies may not work together

A

Different ways of competing

50
Q
A

Bus 478 (12 decks)

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