Chapter 5- Business-Level Strategy Flashcards
Business-Level Strategy
A business’s overall competitive theme; the way it positions itself in the marketplace to gain a competitive advantage, and the different positioning strategies that it can use in different industry settings.
Value Innovation
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 previously thought possible.
Market Segmentation
The way a company decides to group customers, based on important differences in their needs, in order to gain a competitive advantage.
Standardization Strategy
When a company decides to ignore different segments and produces a standardized product for the average consumer.
Segmentation Strategy
When a company decides to serve many segments, or even the entire market, producing different offerings for different segments.
Focus Strategy
When a company decides to serve a limited number of segments, or just one segment.
Generic Business-Level Strategy
A strategy that gives a company a specific form of competitive position and advantage vis-a-vis its rivals, resulting in above-average profitability.
Broad Low-Cost Strategy
When a company lowers costs so that it can lower prices and still make a profit.
Broad Differentiation Strategy
When a company differentiates its product in some way, such as by recognizing different segments or offering different products to each segment.
Focus Low-Cost Strategy
When a company targets a certain segment or niche and tries to be the low-cost player in that niche.
Focus Differentiation Strategy
When a company targets a certain segment or niche and customizes its offerings to the needs of that particular segment through the addition of features and functions.
What are the two advantages that differentiation can give a company?
1) It can allow the company to charge a premium price for its good or service, should it choose to do so.
2) It can help the company grow overall demand and capture market share from its rivals.
Diminishing Returns
Imply that when an enterprise already has significant differentiation built into its product offering, increasing differentiation by a relatively small amount requires significant additional costs.
What are the three basic approaches to market segmentation?
1) Companies can decide to not tailor different offerings to different segments and instead produce and sell a standardized product that is targeted at the average customer in that market.
2) A company can recognize differences between segments and create different product offerings for each segment.
3) A company can target only a limited number of market segments, or just one, and try to become the very best at serving that particular segment.
What are the two reasons that customization can drive up costs?
1) The company may sell less of each offering, making it harder to achieve economies of scale.
2) Products targeted at segments at the higher-income end of the market may require more functions and features, which can raise the costs of production and delivery.
