Chapter 6 - Test 2 Flashcards
Goal-directed actions
To achieve a competitive advantage in a single
product market
What Is Business Level Strategy?
Goal-directed actions and “How should we
compete?”
“How should we compete?”
Who: which customer segments?
What: customer needs will we satisfy?
Why: do we want to satisfy them?
How: will we satisfy our customers’ needs?
Strategic Position
Based on value creation and cost in a specific product-market
valuable and unique position
- Meets customer needs
- Maximizes product value
- Lowest possible product cost
Strategic Trade-Offs
Choices between a cost OR value position
Generic Business Strategies
Differentiation & Cost Leadership
Differentiation
Seeks to create higher value vs. competitors by offering unique features
Cost Leadership
Seeks to create similar value vs. competitors by charging lower prices
Focused Business Strategies
Narrower competitive scope with Focused Differentiation & Focused Cost Leadership
Differentiation competitive advantage is achieved when
Value – Cost > Competitors
Economies of Scale
Decreases in cost per unit and achieved as output
increases
Economies of Scope
Savings that come from producing two outputs at a
lesser cost by sharing the same resources or technology
Three Drivers That Increase Perceived Value
- Product features
- Customer service
- Complements
Drivers That Keep Costs Low
- Cost of input factors
- Economies of scale
- Learning-curve effects
- Experience-curve effects
Cost of input factors
Cost of raw materials, capital, labor, and IT services
Experience-curve effects
Improvements to technology and production processes
Learning-curve effects
Less time to produce output with experience
Diseconomies of Scale
- Firm’s too big
- Complexities of too much coordination
- Inflexible and slow
Successful Business Strategy
- Leverages the firm internal strengths
- Mitigates internal firm weaknesses
- Exploits external opportunities
- Avoids external threats
Blue Ocean Strategy
A strategy that combines both differentiation and
cost-leadership activities
Blue oceans represent
- Untapped market space
- Creation of additional demand
- Opportunities for highly profitable growth
To Achieve Successful Value Innovation
Lower costs and Increase perceived consumer benefits
Four Actions to Create a Blue Ocean
- Raise
- Create
- Eliminate
- Reduce
