Chapter 6: Business Strategy Flashcards
what is JetBlue’s strategy?
low-cost (copied Southwest’s cost-reducing activities) but with enhanced value
goal-directed actions are aimed at
achieving competitive adv. in a single product market
business-level versus corporate-level strategy
business-level focuses on HOW to compete (who, what, why)
corporate-level focuses on WHERE to compete
strategic position
strategic profile based on value creation and cost in a specific market
a strategic position is a valuable, unique position that (3)
- meets customer needs
- maximizes profit
- offers the lowest possible cost
trade-offs
choices between cost or value;
tensions between value creation and pressure to keep cost in check
generic strategies (2)
differentiation – higher value, unique features, higher price
cost leadership – similar value, lower price
in differentiation, value is achieve when…
(Value - Cost) > Competitors
focused strategies (2)
focused differentiation – niche market willing to pay a high price (Mont Blanc Pens)
focused cost-leadership – niche market looking to pay absolute least (BIC pens)
the essence of competitive advantage is related to _______ of _____
creation of value
Value =
Willingness to Pay - Total Delivered Cost
2 basic sources of competitive adv.:
differentiation-based – create points of customer-perceived differentiation, creating WTP
cost-based advantage – equivalent WTP but lower TDC
3 drivers increasing WTP/perceived value:
- product features
- customer service
- complements
nature of differentiation can be…
Tangible vs. Intangible (ex. Luxury brands like Tiffany, Rolex)
advantages relative to cost-leadership (3)
- not as susceptible to exchange rate fluctuations
- not as susceptible to competitors from low-cost countries
- focus on innovation and reputation
learning curve
Firms/people get better as they gain more experience. This boosting of efficiency (accumulation of skill, reducing waste, etc.) lowers costs.
blue-ocean strategy
hybrid; uses value innovation to reconcile trade-offs & represent UNTAPPED market-space
(trader joes, IKEA)
red ocean
existing markets
“Stuck in the Middle”
unattractive positioning due to insufficient differentiation or prices not low enough; can get outmaneuvered by competitors on both ends
(ex. Holiday Inn)
drivers that keep cost low in cost-leadership (4)
- cost of inputs
- EofScale
- learning curve
- experience-curve effects (improvements to tech, etc.)
structural separation
where one subunit does cost-leadership and another does differentiation
(ex. Toyota, Lexus)
operations management systems
includes Total Quality Management (TQM, reduce cost while enhancing quality) and
Flexible Manufacturing Systems (FMS, changing quickly from one product to another)
