SEVI Quiz 4 Flashcards
How do businesses establish maintain competitive advantage?
Focus on customer needs and wants.
Create and sustain distinct strategic position.
Have a business-level strategy.
Business-Level Strategy:
An integrated coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in SPECIFIC PRODUCT MARKETS.
Sources of Competitive Advantage:
1: Achieving lower overall costs vs rivals.
2: Differentiation the firm’s product or service to command premium price.
3: Focus on underserved buyer segments.
Three Generic Strategies:
Cost Leadership: Creating low-cost position to competitors, managing value chain to lower costs.
Differentiation: Products / Services that are uniqued and valued. Emphasis on non-price attributes that customers will pay premium.
Focus Strategy: Narrow product lines and segments, advantage through cost leadership or differentiation.
Overall Cost Leadership Strategy:
Focus on producing goods or services with features that are acceptable at the lowest cost.
Cost-Leadership Value Activities:
Construction of scale facilities using machines.
Pursuit of cost reductions
Tight overhead cost.
Cost minimization activities in sales, service, advertising, etc.
Differentiation Strategy:
Requires a level of cost parity relative to competitors, Integration of multiple points along value chain, differentiation of multiple dimensions at once.
Differentiation Value Activities:
Superior material handling to minimize damage.
Lower defect rates to improve quality.
Accurate, responsive order processing.
Personal relationships with key customers.
Innovative marketing programs and rapid customer service.
Focus Strategy:
Choosing a narrow competitive scope within an industry.
Selection of a niche group to tailor towards and serve only.
Chosen through factors like demographics, socioeconomic, psychological, geographical.
What drives a focused strategy?
Large firms overlook profitable niches.
Firm might be able to more effectively serve a narrow target needs better than industry wide competitor.
A focus strategy can be either based on ___ or ____
cost leadership, OR differentiation.
Cost focus: Creates a cost advantage in target segement, exploiting differences.
Differentiation focus: Exploits the special needs of buyers to differentiate itself in target market.
Integrated Low-Cost and Differentiation strategy:
Integration of low cost AND differentiation strategies to make it hard to duplicate strategy.
GOAL: Provide unique value in an efficient manner.
Combination Strategies:
Combines low-cost and differentiation strategies.
Can take the form of automated flexible manufacturing systems for mass customization.
Data analytics allow firms to customize products/services while using resources.
Exploitation of the profit pool.
What is exploitation of profit pools?
Profit Pools: The total profits in an industry at all points along the industry value chain.
Profit pools are deeper at some stages than others.
Combination Strategies and the Five Forces
Creates higher entry barriers due to both cost leadership and differentiation.
Can provide higher margins to prevent supplier power.
Reduces buyer power because of fewer competitors.
