Final Exam Flashcards
What are the factors of Strategic Value Position?
Price, Product, Manufacturing, Distribution, Marketing, HR, Mission
What are the Porters’ 5 Forces?
- Threat of New Entrants
- Rivalry among Existing Competitors
- Bargaining Power of Buyers
- Bargaining Power of Suppliers
- Threat of Substitutes
What are some important factors for Porters’ 5 Forces?
- Concentration
- Differentiation
- Cost of switching to another related competitor
- Economies of scale
- Likelihood of being integrated
When is bargaining power of suppliers high?
- It is more concentrated than the industry it sells to
- Suppliers offer products that are differentiated
- Industry participants face switching costs in changing suppliers
- There is no substitute for what the supplier group provides
- The supplier group does not depend heavily on the industry for its revenues
- The supplier group can credibly threaten to integrate forward into the industry
When is bargaining power of buyers high?
- Large volume buyers (somewhat concentrated)
- The industry’s products are standardized or undifferentiated
- Buyers face few switching costs
- Buyers can credibly threaten to integrate backward
When is threat of new entrants low?
1. Barriers to entry is high • Supply-side economies of scale • Demand-side benefits of scale • Customer switching costs • Capital requirements • Incumbency advantages independent of size • Unequalaccesstodistributionchannels • Restrictive government policy • Network effect 2. Expected retaliation is high • Incumbents have previously responded vigorously to new entrants • Incumbents possess substantial resources to fight back • Incumbents seem likely to cut prices • Industry growth is slow
When is intensity of rivalry high?
– Competitors are numerous
– Competitors are roughly equal in size and power
– Rivals are highly committed to the business and have aspirations for leadership
– Degree of differentiation of product is low
– Industry growth is low
– Exit barrier is high
What is a differentiation strategy?
- An integrated set of action taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.
- Product innovation is critical to the successful use of differentiation strategy. But also many ways to be differentiated, brand, technology, service, network, etc.; profit from product features, brand loyalty, etc.; buyers lack comparable alternatives, substitutes
- Low price does not mean not differentiated; high price can only signal differentiation, does not guarantee differentiated well
- There are multiple forms (directions) of differentiation, depending on the targeted market and customers
What are some value drivers of the differentiation strategy?
- Product features
- Customer service
- Brand
- Network effect
- Complements
What is a low-cost leadership strategy?
- An integrated set of actions taken to produce goods or services with features that are acceptable at the lowest cost
- Sell standard goods or services (but with competitive levels of differentiation) to the industry’s most typical customers
- Requires heavy upfront investment in manufacturing and scale
- Concentrate on finding ways to lower their costs relative to competitors while maintaining competitive levels of differentiation
- Process innovation can allow the firm to operate more efficiently, is also critical to the successful use of cost leadership strategy; the less efficient ones will lose out
- Low price ≠ Low cost
- There is only one form of low cost i.e. low cost
What are some cost drivers of the low-cost leadership strategy?
- Cost of input factors
- Economies of scale
- Learning-curve effects
- Experience-curve effects
What are some of Porters’ Generic Strategies?
- Cost-leadership strategy (broad and low-cost)
- Differentiation strategy (broad and product unique)
- Focus strategy (low-cost) (narrow and low-cost)
- Focus strategy (differentiation) (narrow and product unique)
What is a focus strategy?
• An integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment
• Firms use a focus strategy when they utilize their core competencies to serve the needs of a particular industry segment or niche
• Specific market segment:
(1) A particular buyer group
(2) A different segment of a product line (3) A different geographic market
What are the risks of a cost-leadership strategy?
- A fine line between misfit and attempt to differentiate on top of low cost
- Imitation by a resource backed entrant
- Geographical migration to the lowest cost point, a race
- Technology changes nullify learning and past investment in scale
- Low-cost image, hard to reverse
What are the risks of a differentiation strategy?
- Differentiation becomes commoditized and a standard of quality across rivals
- Overshoot differentiated appeal that does not increase willingness to pay: quality, feature, brand, etc.
- Buyers become sophisticated and their need for differentiators falls
- Loses out on network or platform competition
What is external consistency?
Does the strategy tap the opportunities and neutralize the threats posed by the outside world in a unique manner?
What is internal consistency?
Do the parts of the strategy fit together to form a whole that is greater than the sum of the parts?
What is dynamic consistency?
Is the strategy robust to the continuously changing external and competitive environment?
What is included in a value chain analysis?
- Firm infrastructure
- Human resource management
- Technology development
- Procurement
- Design
- Sourcing & manufacturing
- Distribution
- Marketing & Sales
- Operations
