Session 8

Question 1

What is a business-level strategy?

Answer 1

Coordinating commitments and actions to build a competitive advantage

Question 2

What is purpose of business-level strategy?

Answer 2

Something that every firm must have to create a difference between them and their competitors

Question 3

What is a business model?

Answer 3

Describes how the firm creates, delivers and captures value. Framework for how they will use processes. Path to gain competitive advantage

Question 4

What is a franchise model?

Answer 4

A firm licenses its trademark and the processes it follows to
create and deliver a product to franchisees.

Question 5

What is freemium model?

Answer 5

The firm provides a basic product to customers for free and
earns revenues and profits by selling a premium version of the
service.

Question 6

What is advertising model?

Answer 6

For a fee, a firm provides advertisers with high-quality access to
its target customers

Question 7

What is subscription model?

Answer 7

A firm offers a product to customers on a regular basis such as
once-per-month, once-per-year, or upon demand.

Question 8

What is peer-to-peer model?

Answer 8

A business matches those wanting a particular service with
those providing that service.

Question 9

What are the two dimensions of a potential competitive advantage?

Answer 9

1. Basis for customer value:
   - achieve lower cost than rivals
   - Possess ability to differentiate or perform different/higher value activities
2. Competitive scope:
   - Broad scope: firm competes in many segments
   - Narrow scope: Selects a segment or group of segments and tailors their offering to them

Question 10

What changes the effectiveness of business-level strategies?

Answer 10

SWOT of the environment and resources

Question 11

What is cost leadership strategy?

Answer 11

Provide P/S at lowest cost relative to competitors.

Standardized G/S, sometimes a little differentiation and industries that process innovation is possible.

Question 12

What are the risks of cost leadership?

Answer 12

Loss of competitive advantage due to newer competition

Failure to detect changes in needs

Imitating cost leader’s competitive advantage

Question 13

What is the differentiation strategy

Answer 13

Integrated set of actions to produce products (at an acceptable cost) that customers perceive as being different in ways that are important to them.

Non-standardized products, ppl value different features instead of only low cost

Question 14

What are the risks of differentiation?

Answer 14

differentiated products are no longer worth a premium

Unable to create enough differentiation for which ppl will pay additional price

Counterfeiting

competitiors creating similar features but at a lower cost

Question 15

How do you implement cost leadership strategy?

Answer 15

Process engineering, centralized staff, formalized procedures, very mechanical.

Question 16

How do you implement differentiation strategy?

Answer 16

Marketing, R&D, decentralized functions, less formalized to foster change, less structured job roles

Question 17

What is a focused strategy?

Answer 17

Serve needs of a specific segment. Can be focused cost leadership or focused differentiation.

Question 18

What drives focused strategies?

Answer 18

Small niches, lack of resources, direct resources to build competitive advantage in value chain, serve smaller segment more effectively

Question 19

What are the risks of a focus strategy?

Answer 19

Competitors serve an evern more narrow market segment and serve them better

The industry decides it needs to focus more on this segment

Reduction in differences between needs of narrow segment and industry wide market

Question 20

What is an integrated Cost leadership / differentiation strategy?

Answer 20

Low cost and some product differentiation. By having two sources of competitive advantage, it is possible to increase primary value chain activites in which the firm becomes competent

Must be flexible

Question 21

What are the three sources of flexibility in integrated strategy?

Answer 21

1. Flexible manufacturing systems (FMS)
2. Information networks
3. Total quality management (TQM)

Question 22

What is FMS

Answer 22

Computer controlled process used to produce variety of products in moderate, flexible quantities with limited manual intervention.

allows low cost versus product variety tradeoff that happens in manufacturing

Question 23

What is information networks?

Answer 23

Helps the firm satisfy customer expectations in terms of product quality and delivery speed

Question 24

What is TQM?

Answer 24

effective TQM allows the firm to develop flexibility needed to identify opportunities to simultaneously increase differentiated features and reduce costs

Question 25

What are the risks of integrated strategy?

Answer 25

Involves compromises, wont become lowest cost nor most differentiated. Stuck in the middle, you compete at a disadvantage are are unable to earn more than average returns.