Session 8 Flashcards
What is a business-level strategy?
Coordinating commitments and actions to build a competitive advantage
What is purpose of business-level strategy?
Something that every firm must have to create a difference between them and their competitors
What is a business model?
Describes how the firm creates, delivers and captures value. Framework for how they will use processes. Path to gain competitive advantage
What is a franchise model?
A firm licenses its trademark and the processes it follows to
create and deliver a product to franchisees.
What is freemium model?
The firm provides a basic product to customers for free and
earns revenues and profits by selling a premium version of the
service.
What is advertising model?
For a fee, a firm provides advertisers with high-quality access to
its target customers
What is subscription model?
A firm offers a product to customers on a regular basis such as
once-per-month, once-per-year, or upon demand.
What is peer-to-peer model?
A business matches those wanting a particular service with
those providing that service.
What are the two dimensions of a potential competitive advantage?
- Basis for customer value:
- achieve lower cost than rivals
- Possess ability to differentiate or perform different/higher value activities - Competitive scope:
- Broad scope: firm competes in many segments
- Narrow scope: Selects a segment or group of segments and tailors their offering to them
What changes the effectiveness of business-level strategies?
SWOT of the environment and resources
What is cost leadership strategy?
Provide P/S at lowest cost relative to competitors.
Standardized G/S, sometimes a little differentiation and industries that process innovation is possible.
What are the risks of cost leadership?
Loss of competitive advantage due to newer competition
Failure to detect changes in needs
Imitating cost leader’s competitive advantage
What is the differentiation strategy
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
What are the risks of differentiation?
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
How do you implement cost leadership strategy?
Process engineering, centralized staff, formalized procedures, very mechanical.
How do you implement differentiation strategy?
Marketing, R&D, decentralized functions, less formalized to foster change, less structured job roles
What is a focused strategy?
Serve needs of a specific segment. Can be focused cost leadership or focused differentiation.
What drives focused strategies?
Small niches, lack of resources, direct resources to build competitive advantage in value chain, serve smaller segment more effectively
What are the risks of a focus strategy?
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
What is an integrated Cost leadership / differentiation strategy?
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
What are the three sources of flexibility in integrated strategy?
- Flexible manufacturing systems (FMS)
- Information networks
- Total quality management (TQM)
What is FMS
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
What is information networks?
Helps the firm satisfy customer expectations in terms of product quality and delivery speed
What is TQM?
effective TQM allows the firm to develop flexibility needed to identify opportunities to simultaneously increase differentiated features and reduce costs
What are the risks of integrated strategy?
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.
