L3- Business & Corporate Level Strategy Flashcards
define business level strategy
an integrated and coordinated set of commitments a firm uses to gain a competitive advantage by exploiting core competencies in specific product markets
key questions of business-level strategy
Who will be served?
What needs do those target customers have?
How can those needs be satisfied?
3 methods of managing customer r.ships
- reach
- richness
- affiliation
define reach (under business-level)
expanding the quantity and scope of connections
define richness (under business-level)
enhancing the quality and depth of two-way information exchange
define affiliation (under business-level)
creating meaningful connections by understanding and meeting customer needs
About viewing the world from the perspective of the customer and grasping their needs.
list consumer markets
Demographic factors (age, income, sex)
Socioeconomic factors (social class)
Geographic
Psychological
Consumption pattern
Perceptual factors
define end use segments under industrial markets
when business marketers figure out how their products will be used in final products, and then they split the market based on these uses.
product segments
a group of similar products that share common characteristics and target a specific market.
how to divide industrial markets (under business level)
- end use segments
- product segments
- geographic
- common buying factor
- customer size segments
common buying factor (under business level, industrial markets)
things that affect why people buy stuff. these factors are the same no matter product market/ geographic segment.
customer size segments
sorting customers by the size of their business or purchasing capacity
customer demands
wants for specific products backed by willingness and buying power.
Customer wants
the form human needs take, shaped by culture and personality
Customer needs
human states of felt deprivation
generic strategy
a strategy that can be used by any organization competing in any industry.
define cost leadership
Cost Leadership is offering an essentially equivalent product at a lower cost.
define differentiation
Differentiation is offering a differentiated product and charging a premium price for it.
two axis’s in buisness level strategies
- competitive scope (broad/ narrow)
- competitive advantage (cost/uniqueness)
define competitive scope under generic business level strategies
the extent to which a firm serves a narrow or broad target group
define competitive advantage
advantages based on low cost or uniqueness
drivers of cost leadership (5)
- economies of scale
- learning curve
- economies of scope
- production tech.
- production design
economies of scale is when…
Making a lot of something helps spread the fixed costs, so each unit becomes cheaper to produce.
economies of scope is when…
companies share some resources to make different products which makes everything cost less.
drivers of differentiation
- premium brand image
- customization
- unique design/ features
- rapid product innovation
cost leadership x rivalry
its hard for rivals to compete with low prices
cost leadership x customers
they don’t usually try to bargain a lot because it’s already low.
however, if they do it, and the company does discounts, this can make it hard to make profits.
cost leadership x suppliers
they’re in a good position to deal with suppliers
cost leadership x threat of new entrants
difficult for them to beat cost efficiency.
cost leadership x substitute
cost leadership companies can deal with it by lowering prices more
risks of cost leadership (3)
- becoming obsolete due to competitor innovations
- risk of imitation
- not capturing customer perception differentiation
risks of differentiation
- too much differentiation can mean customers are not into it
- affected by changing economic conditions
- customers not wanting to pay if there are imitations
differentiation x rivalry
unique products that create loyalty make it tough for rivals
differentiation x customers
uniqueness reduces price sensitivity
differentiation x suppliers
high profit margins protect the company from rising supplier prices.
differentiation x new entrants
uniqueness acts as a barier
differentiation x substitutes
if customer loyalty exists, they’re relatively safe.
diversification = ? , and differentiation = ?
diversification is CORPORATE
differentiation is BUSINESS
corporate level strategy
selecting and managing a group of different businesses competing in different product markets.
-> parent company structure, which product markets to be in, company structure, how do businesses fit together, entry/ exit decision
three types under value creating diversification
- related linked
- related constrained
- unrelated
value creating - related linked diversification
economies of scope
sharing activities, transferring core competencies
value creating- related constrained diversification
market power -> firm can sell above existing prices
diversifying into a business with some commonalities to create synergy.
multi-point competing in some product or geographic market.
value creating - unrelated diversificaiton
efficiently allocating resources, or restructuring assets
related linked diversification has (…) relatedness
corporate
related constrained diversification has (…) relatedness
operational
value reducing diversification
usually motivated by executives wanting to increase employment opportunities,
governance mechanisms try to prevent it
there is a curvelinear relationship between:
- diversification
- performance
describe the curvelinear r.ship btw performance and diversification
Good Start: When a company starts diversifying a bit (not too much), it usually sees positive results. This is because it reduces risks and opens up new opportunities.
Perfect Balance: Yet, there’s a sweet spot. When the company diversifies too much, the positive effects slow down. There’s an ideal level of diversification where the company performs its best.
Too Much Can Hurt: If a company goes too far and diversifies excessively, it can end up with more problems than benefits. Things get complicated, and performance might even go down. So, there’s a point where too much diversification is not a good idea.
how does NEC see itself?
NEC sees itself through carefully chosen core competencies, not just as a collection of business units.
What analogy describes NEC’s structure and core competencies?
NEC is compared to a tree, with the trunk as core products, branches as business units, and leaves/fruits as end products, while the roots represent core competencies.
Why is concentrating on core competencies beneficial for a company?
Focusing on core competencies creates a unique, integrated system, aligning various skills, providing a hard-to-copy advantage over competitors.
How can a company foster a core-competency mindset?
By not seeing business units as rigid, showcasing core competency projects, encouraging collaboration among managers for future competencies, and aligning these efforts with strategic goals.
