Lecture 8/9 - Content of Strategy, Business Level Strategy & Strategic Positioning Flashcards
What are the 2 main criteria for SBU formation?
Market-based criteria: Targeting specific customer types (or location) through the same channels and facing similar competitors.
Capabilities-based criteria: Similar strategic capabilities
Name 4 Generic SBU business strategies
Cost leadership
Differentiation
Focus
The Strategy Clock
Name 3 Interactive SBU business strategies
Hyper competitive strategy
Cooperation
Game theory
What is cost-leadership strategy?
Becoming the lowest-cost organisation in a domain of activity
Name the 4 key cost drivers that can help deliver cost leadership:
1) Lower Input Costs
2) Economies of Scale
3) Economies of Learning
4) Production Techniques and Design
What is the economies of learning? (experience curve)
As a firm gains experience in building a product, its costs in real terms will decline in predictable rate
Name 2 factors that contribute to economies of learning
Labour efficiency - Workers become physically more dexterous, mentally more confident and spend less time hesitating, learning, experimenting, or making mistakes
Technology improvements – Experience provides opportunity to improve firm’s production and operations. As processes, parts, and products become more standardized, efficiency tends to increase.
Which analytical tool could be used to locate cost drivers?
VALUE CHAIN ANALYSIS
Differentiation requires/involves:
Uniqueness along some dimension that is sufficiently valued by customers to allow a price premium
Tangible (size, colour, material, packaging, complementary services)
Intangible (style, image, excellence, identity)
Innovation
What are the 3 key issues in Strategy and Differentiation Advantage?
The strategic customer on whose needs the differentiation is based.
(Think: application industry – who is the strategic customer?)
Key competitors – who are the rivals and who may become a rival.
Key drivers of Uniqueness
Name 9 drivers of uniqueness
Product service features and performance.
Complementary services.
Intensity of marketing activities.
Technology embedded in design and manufacture.
The quality of purchased inputs.
Quality control, frequency of visits to customers
Skills, experience and expertise of employees
Location
Vertical integration and supply chain management
What does a focus strategy entail?
Targets a narrow segment or domain of an activity and tailors its products/services to the needs of that specific segment to the exclusion of others.
Name 2 types of focus strategy
Cost-focus
Differentiation
Successful focus strategies depend on at least 1 of 3 key factors:
Distinct segment needs
Distinct segment value chains
Viable segment economics
What does Porter’s ‘Stuck in the Middle’ theory argue?
It is best to choose which generic strategy to adopt and then stick rigorously to it.
Failure to do this leads to a danger of being ‘stuck in the middle’ i.e. doing no strategy well.
