October 20 Lecture Flashcards
So there are differentiation and cost leadership strategies, but what are focus strategies?
Focus strategies really take a sniper approach and capture niche sections of the market like geographic location or user types
What are some forms of differentiation?
Prestige brand Quality Innovation Customer service Network Cust experience Etc
NOT price though, as that is a cost leadership strategy
These differentiation a drive up willingness to pay and generate demand
How does differentiation influence the 5 forces?
Creates higher entry barriers due to customer loyalty such as Apple did
Less threat by direct competition of substitutes due to loyalty too
Higher Margi. To deal with supplier power
And more
What are some threats to the differentiation strategy
Differentiation isn’t inherited valuable and can’t necessarily cause customers to pay more
Too much differentiation that exceed needs makes bad perception and high costs. This is what lead to apples downfall, and the reversal led to its success once again
Differentiation can be more expensive than you’d think
If the differentiation is easily imitated, no good
What are the different ways to do the cost leadership strategy?
Well ℗ of th most common is efficiency of scales, so build a very good and large chain that can pump out stuff real fast
You can minimize certain things such as admin, RandD, advertising, etc
You can avoid marginal customer accounts that make little purchases but take up capacity and resources, example such as Costco
How can it be costly to pursue a cost leadership position?
Establishing large scale operations can be costly
State of the art equipment can be costly
Can you determine if company is using cost. Leadership. By looking at price?
No! The firm might be forced to have Low price cause their product sucks. A true cost leadership will have a product that competes with others, and possibly their price is lower or same as competitors, but their margin is higher due to lower costs internally
What are some threats to cost leadership strategy?
Lack of parity on differentiation
Some low cost activities are easy to replicate
New technologies could lower industry costs past you
Cost reduction could be difficult when all rivals share common inputs
What are two variants of focused strategies?
Focus cost leadership
Focus differentiation
And remember focus strategies are when you serve a very particular segment of the market
Why doesn’t an Integrated strategy (both cost leadership and differentiation) have highest ROI?
Doing both would have lowest ROI Porter said, but we have som evidence that firms such as Tim Hortons and CAD Tire have done just that.
What did Miller reading say about integrated generic strategy trap?
He says if you only have one focus on cost or differentiation that you will be trapped and others can surpass. Could also ignore important customer segments. Paying too much attention to too few things could be distastrous.
What trade off decisions are inevitably necessary in creating sustained competitive advantage?
So if you offer all things at once without focus, you can’t really make money on that because it’s all over the place. Needs strategic focus
What are some drawbacks of strategic specialization?
It’s easy for rival to counter or imitate
No matter how much rag on the generic strategy model, what is its powerful insight?
It works most of the time, but if you work in a mature stable environment with an unsophisticated product where customers can understand features than an integrated position is best! But very few firms have successfully done an integrated strategy of both cost leadship and differentiation
What is the value creation frontier?
In other the efficiency frontier
So this is a downsloping curve that shows the maximum amount of value to buyer, as the relative cost to the firm goes down. This is why it is hard for companies to do an integrated strategy, because as costs go down, it is harder to add features that truly differentiate you
