Chapter 5 competitive strategies

Question 1

outline of strategic clock model

Answer 1

there are two factors in providing value to the customers are the price and perceived benefits

companies use the strategic clock to assess the business strategies of competitors

position 1( no frills)
position 2 (low price strategy)
position 3 (hybrid strategy)
position 4 (differentiation strategy)
position 5 ( focused differentiation strategy)
position 6, 7 and 8 will be failed strategies

Question 2

describe the position 1 strategy

Answer 2

this is no frills strategy
which is at 7’o clock
product offers lower benefits at low price
customers are price conscious
customers understand that they are buying the product that inferior in benefits from rival products or services

Question 3

describe the position 2 strategy

Answer 3

this is low price strategy
this is 9’o clock strategy
-customers perceive that the product gives normal benefits
-it is not regarded as low quality product
-only lowest cost producer can implement this strategy
-a low price strategy can be applied in segments or sections of the market

Question 4

describe the position 3 strategy

Answer 4

higher than average benefits and lower than average price
-to be successful it requires low production cost and ability to provide larger benefits

Question 5

describe the position 4 strategy

Answer 5

it is differentiation strategy
it is located at 12’o clock
-making a product that appears to offer more benefits than rival
-companies often promotes that their products offer much better quality
-it involves charging average price for the product that appears to offer slightly above average benefits than rival products.

Question 6

describe the position 5 strategy

Answer 6

it is focused differentiation strategy
-to sell a product that offers above average benefits for a higher price
-products in this category often branded as premium products
-for example ferrari or bon vivant

Question 7

outline of porter’s generic strategies

Answer 7

porter suggested three strategies for sustaining competitive advantage over rival firms

1. cost leadership strategy(operational effectiveness)
2. differentiation strategy(strategic positioning)
3. Focus strategy

Question 8

characteristics of cost leadership strategy

Answer 8

1. being the lowest cost producer in the market
2. only least cost producer is able to compete effectively on price
3. companies have excellent system of cost control and should continually plan for it.
4. large companies are usually able to benefit from it with large economies of scale rather than smaller ones.

Question 9

characteristics of differentiation strategy

Answer 9

1. Making a product that is different and customers can perceive the difference
2. charging a premium price for the product usually to cover the cost and extra value-added features provided for the customer
3. it usually requires some investment and innovation.

Question 10

characteristics of focus strategy

Answer 10

cost leadership and differentiation strategies might be pursued in the markets that are not segmented
1. Focus strategy is the strategy that concentrates on selling a product to a particular segment of the market.
2. within a particular segment a business entity might seek a competitive advantage by
cost leadership or differentiation strategy.

Question 11

six principles of strategic positioning

Answer 11

1. superior long term return on investments.
2. must offer unique value propositions
3. distinct value chain
4. selected strategies may come with trade-offs
5. different elements of strategy and value chain should link and reinforce each other.
6. there should be continuity of strategic direction.

Question 12

deciding the target market

Answer 12

to decide which market it should target it should;
1. identify the total market
2. identify the ways in which the market can be segmented
3. decide whether to sell the products to all customers
4. determine whether to adopt the leadership strategy or differentiation strategy
5. if the entity adopts the focus strategy then identify which segment it wants to sell its product
6. determine whether to adopt the leadership or differentiation strategy within the selected segment.

Question 13

strategies for a hypercompetitive environment

Answer 13

1. Shorter product life cycles(seek to introduce the product with improvements quickly)
2. Imitate competitors
3. respond quickly to prevent competitors from gaining strong initial position.
4. Unpredictability (prepared to abandon
   current approaches)
5. By building alliances with some smaller competitors
6. Concentrate on small market segments

Question 14

what is lock-in strategy?

Answer 14

lock-in’ is when a customer has made an initial decision to purchase a company’s product, it is committed to making more purchases from the same company in the future. The customer is ‘locked in’ to the supplier and the supplier’s
products.

• successful lock in strategy depends on becoming the industry leader
• Lock-in tends to be achieved early in a product’s life cycle
• another type of lock-in strategy is used by companies that make and sell expensive equipment with a long useful life,