Positioning

Question 1

What is the porter definition of strategy?

Answer 1

Creation of a unique and valuable position through a different set of activities than rivals. The difference cannot be easily diffused by competitors

Question 2

What are the two levers of the arithmetic of profitability?

Answer 2

Cost and value

Question 3

What is the meaning of the arithmetic of profitability?

Answer 3

Must deliver great value to customers or create comparable value at lower cost (or both)

Question 4

What is operational effectiveness (OE)?

Answer 4

Performing similar activities to rivals but better

Question 5

What is Porter’s problem with OE?

Answer 5

OE (by either decreasing cost or increasing value) only creates temporary competitive advantage

Question 6

What is meant by the “Red Queen effect”?

Answer 6

All firms spend energy getting better and better just to keep up with rivals who are in turn getting better and better

Question 7

What are the 3 sources for strategic positioning?

Answer 7

Variety-based positioning

Needs based positioning

Access-based positioning

Question 8

What is variety based positioning?

Answer 8

Producing a subset of an industry’s product or services

Ex. Jiffy lube only does oil changes.

Question 9

What is needs based positioning?

Answer 9

Positioning based on serving most or all the needs of a particular group of customers

Ex. IKEA

Question 10

What is access-based positioning?

Answer 10

Positioning based on serving a segment of customers who are accessible in different ways.

Ex. Carmike Cinemas, which purposefully operates in small towns

Question 11

What is the importance of fit?

Answer 11

Locks out imitators, activities compliment each other to the extent that cost of one activity is lowered by the performance of another activity

Question 12

What are the types of fit?

Answer 12

Simple consistency/ first order

Activities are reinforcing/ second order

Optimization of effort/ third order

Question 13

What is simple consistency fit?

Answer 13

Alignment of all activities with strategy. Advantages of activities are cumulative, and strategy is easy to communicate to customers

Question 14

What is second order fit/ activities are reinforcing?

Answer 14

Activities increase the advantages of other activities

Ex Neutrogena supplies hotels with products, and when customers see the products in drug stores they make the connection and are more likely to buy them

Question 15

What is optimization of effort?

Answer 15

Coordination and info exchange across activities to reduce redundancy

Question 16

What are trade offs and why are they important?

Answer 16

The activities the firm does not do that create the choice/ strategy based on limits. Trade offs protect against imitation

Question 17

What are three reasons for trade offs occurring?

Answer 17

• inconsistencies in image or reputation: need for company to consistently deliver on established values or risk confusing customer
• arise from the activities themselves: different activities require different resources (and trade offs)
• arise from limits on internal coordination and control: organizational priorities