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Exam Prep > Strategic management > Flashcards

Strategic management Flashcards

1
Q

What does a strategy provide a firm?

A
  • A prescription for doing business.
  • A road map to competitive advantage.
  • A game plan for pleasing customers.
  • A formula for attaining marketplace performance.
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2
Q

What is a sustainable competitive advantage.

A
  • The firm’s capability to make its product or service the preferred choice among customers.
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3
Q

How does a firm develop a strategic vision?

A
  1. Defining Future Goals: Outline management’s goals and ambitions for the future.
  2. Providing Direction: The vision offers guidance on the path the company should take.
  3. Justifying the Path: It presents a compelling rationale for the chosen strategy or course of action.
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4
Q

What are the three tests to determine if a strategy is a winner?

A
  1. Fit Test.
  2. Competitive Advantage Test.
  3. Performance Test.
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5
Q

Explain the relationship between a firm’s strategy and its business model.

A
  • A firm’s strategy: Outlines how it will compete and succeed in the market.
  • Business model: Describes how it will generate revenue and provide value to customers.
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6
Q

How should managers respond to changing market conditions? Make 4 examples of such conditions.

A
  • Modify their strategy in response to changing market conditions:
  1. Advancing technology.
  2. Competitor actions.
  3. Shifting buyer needs.
  4. Emerging opportunities.
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7
Q

What is the role of strategic management in a company?

A
  • Crafting and executing strategies that provide a roadmap for competitive advantage and long-term performance.
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8
Q

Describe the components of the strategy-making process

A
  1. Developing a strategic vision.
  2. Setting objectives.
  3. Crafting a strategy to achieve those objectives.
  4. Executing the strategy.
  5. Monitoring progress.
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9
Q

How can a firm ensure its strategy is aligned with its stakeholders?

A
  • Emphasize stakeholders’ interests and needs ensure buy-in and support.
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10
Q

Why is a company’s customer value proposition important?

A
  1. Defines how a company provide value to its customers.
  2. To align the value with the price being charged.
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11
Q

How does effective communication of a strategic vision benefit a firm?

A
  • Encourage employee commitment.
  • Ensures understanding of the firm’s strategic direction.
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12
Q

What is the purpose of crafting an action plan in strategic management?

A
  • Outlines the steps necessary to achieve the strategic vision and objectives.
  • Guiding the firm towards its desired future.
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13
Q

How does a firm achieve competitive advantage over its rivals?

A
  1. Differentiation: Creating unique value that sets the firm apart from competitors.
  2. Cost Efficiency: Offering lower costs, allowing competitive pricing or better margins.
  3. Innovation: Driving new ideas, products, or processes to stay ahead of market trends.
  4. Customer Focus: Providing exceptional service and meeting customer needs to build loyalty.
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14
Q

Which external factors can lead to the evolution of a firm’s strategy over time?

A
  1. Changing market conditions.
  2. Technological advancements.
  3. Competitor.
  4. Actions.
  5. Shifting buyer needs.
  6. New ideas for improvement.
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15
Q

Explain the concept of dynamic fit in strategy.

A

Refers to how well a strategy aligns with both the external environment and the internal capabilities of the firm.

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16
Q

Why is it important to monitor strategic developments?

A
  • To evaluate execution and make necessary adjustments to its vision, mission, objectives, or strategy.
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17
Q

How does a creative and distinctive strategy impact a firm’s performance?

A
  • Can generate above-average profits and increase challenges for competitors.
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18
Q

What is the role of objectives in the strategy-making process?

A
  • Objectives serve as measurable targets for performance and progress, guiding the execution of the strategy.
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19
Q

Describe the importance of first-rate capabilities in strategy-making and execution.

A

It is essential for successfully managing the strategy-making and execution process, ensuring that the firm
can adapt and thrive.

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20
Q

Describe the role of a mission statement in a
firm.

A
  1. Establish the firm’s unique identity.
  2. Define its present business operations and goals.
  3. Highlight the specific activities and services the company engages in.
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21
Q

How can a firm effectively communicate its strategic vision?

A
  • Put in writing.
  • Hold meetings to elaborate on the vision.
  • Create a memorable slogan.
  • Emphasize positive payoffs of making the vision happen.
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22
Q

Define core values in the context of a firm.

A
  • Beliefs, traits, and behavioral norms that employees are expected to represent while carrying out the firm’s operations and working towards its strategic vision and mission.
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23
Q

What is the purpose of setting objectives in a
firm?

A
  • Measure, time and track performance targets.
  • Align actions throughout the organization.
  • Motivate employees.
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24
Q

How do financial objectives differ from strategic objectives?

A
  • Financial objectives: Communicate top management’s targets for financial performance and focus internally.
  • Strategic objectives: Relate to marketing standing and competitive vitality, focusing externally on competition.
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25
Q

Explain the importance of good strategic performance.

A
  • Serves as a leading indicator of a firm’s capability to deliver:
  1. Improved future financial performance.
  2. Signaling growth in competitiveness.
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26
Q

What is a balanced scorecard and why is it important?

A
  • Measures a firm’s optimal performance by comparing financial and strategic objectives.
  • Ensuring focus on competitiveness and market position, rather than just on financial outcomes.
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27
Q

Describe the benefits of setting stretch objectives.

A
  • Promotes better company performance by pushing for inventiveness.
  • Increasing urgency for improvement.
  • Focusing actions.
  • Preventing complacency (Stop striving for improvement.
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28
Q

What is the difference between short-term and long-term objectives?

A
  • Short-term objectives: Focus on quarterly and annual performance improvements.
  • Long-term objectives: Consider actions needed for optimal long-term performance.
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29
Q

What is the role of the CEO in strategy making?

A

Responsibility for leading the strategy-making process as the strategic visionary and chief architect of
strategy.

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30
Q

Why is strategy-making often a collaborative process?

A
  • Complexity of strategic issues: Require diverse expertise and delegation to various managers.
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31
Q

Define strategic intent in an organization.

A
  • When an organization single-mindedly pursues an ambitious strategic objective, focusing its resources and competitive efforts on achieving it.
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32
Q

What characteristics define strategic intent?

A
  • The firm’s ambition to achieve significant advantages over rivals.
  • Setting ambitious performance targets.
  • Set aside majority of resources to achieve those targets over time.
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33
Q

How can a mission statement clarify a firm’s business to stakeholders?

A
  • Identify its products or services.
  • Specify buyer needs.
  • Identify customer groups.
  • Set the firm apart from rivals.
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34
Q

What is the significance of aligning objectives at all organizational levels?

A
  • Breaks down performance targets for separate units.
  • Fosters achievement of firm-wide strategic and financial objectives.
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35
Q

How does a memorable slogan contribute to a firm’s vision?

A
  • Captures the essence of the vision.
  • Making it easier for stakeholders to remember.
  • Relate to the firm’s strategic direction.
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36
Q

What is the relationship between strategic performance and financial performance?

A

Strategic Performance: The effectiveness of a firm’s strategies in achieving its goals and competitive capabilities.

Describe the actions involved in taking
market share from rivals.Financial Performance: The measurement of a firm’s profitability and financial health, often influenced by its strategic decisions.

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37
Q

Describe the actions involved in taking market share from rivals (2 types).

A

Sustained Actions: Consistent effort to maintain pressure on competitors.

Aggressive Actions: Strategies to challenge rivals directly and capture their market share.

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38
Q

Define the key components necessary for executing a strategic plan.

A
  • Directing organizational action.
  • Motivating people.
  • Building competencies.
  • Creating a supportive work climate.
  • Meeting performance targets.
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39
Q

How can a firm ensure effective strategy execution? (9 factors).

A
  1. Staffing with Needed Skills.
  2. Building Supporting Resources.
  3. Organizing Work Along Best Practices.
  4. Allocating Resources.
  5. Ensuring Policies Facilitate Execution.
  6. Installing Effective Systems.
  7. Motivating People.
  8. Creating a Conducive Culture.
  9. Providing Internal Leadership.
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40
Q

Describe the obligations of the Board of Directors in corporate governance.

A
  1. Appraise the Firm’s Direction.
  2. Evaluate Executives’ Leadership Skills.
  3. Institute Compensation Plans.
  4. Oversee Financial Practices.
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41
Q

How does a strong, independent board of directors contribute to corporate governance?

A
  1. Guide Executives.
  2. Curb Inappropriate Actions.
  3. Certify CEO Performance.
  4. Provide Insights.
  5. Debate Key Strategic Decisions.
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42
Q

What is the macro-environment in which a firm operates?

A
  1. Broad Context of the Firm’s Industry.
  2. General Economic Conditions.
  3. Immediate Competitive Environment.
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43
Q

Define the seven components of a company’s macro-environment.

A
  1. Demographics.
  2. Social forces.
  3. Political/legal factors.
  4. Natural environment.
  5. Technological factors.
  6. Global forces.
  7. General economic conditions.
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44
Q

How do social forces impact businesses?

A
  • Societal Values.
  • Attitudes.
  • Cultural Factors.
  • Lifestyles (Variation by Locale, which change over time).
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45
Q

What role do technological factors play in a company’s macro-environment?

A
  • The pace of technological change.
  • Developments that can have wide-ranging effects on society.
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46
Q

Describe the Five Competitive Forces in an industry.

A
  1. Competition from Rival Sellers.
  2. Potential New Entrants.
  3. Substitute Products.
  4. Supplier Bargaining Power.
  5. Customer Bargaining Power.
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47
Q

How can a company assess the strength of competitive forces?

A
  • Identify Parties Involved.
  • Evaluate the Strength of Pressures from Each Force.
  • Determine Overall Strength.
  • Assess Conduciveness to Earning Attractive Profits.
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48
Q

What are common competitive weapons used against rivals? (5 factors).

A
  1. Price Discounting.
  2. Clearance Sales.
  3. ‘Blowout’ Sales.
  4. Lower Prices.
  5. Boost Sales Volume.
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49
Q

What are the stages in an industry’s life cycle?

A
  1. Emergence.
  2. Rapid Growth.
  3. Maturity.
  4. Decline.
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50
Q

What considerations should be made when evaluating market growth?

A
  1. Current Market Size.
  2. Past Growth Rates.
  3. Expected Growth Rates.
  4. Growth Does Not Guarantee Profitability.
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51
Q

How can a company create a strategy-supportive work climate?

A
  • By fostering a culture that supports strategic goals and inspires employees to meet performance objectives.
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52
Q

What is the importance of installing information and operating systems in strategy execution?

A
  • Effective systems enable efficient performance and support the execution of strategic plans.
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53
Q

How can a firm initiate corrective adjustments in its strategy?

A

Change the firm’s vision, mission, objectives, strategy, and execution methods based on organizational learning.

54
Q

Describe the impact of couponing on sales and revenues (5 factors).

A
  1. Increase Unit Sales Volume
  2. Increase Total Revenues
  3. Lower Price (P)
  4. Increase Unit Costs (C)
  5. Lower Profit Margins per Unit Sold (P – C)
55
Q

How does advertising influence buyer demand and market share? (7 factors).

A
  1. Boosts Buyer Demand.
  2. Increases Product Differentiation.
  3. Enhances Perceived Value (V).
  4. Increases Total Sales Volume.
  5. Grows Market Share.
  6. May Increase Unit Costs (C).
  7. May Lower Profit Margins per Unit Sold.
56
Q

What is the effect of introducing new or improved features on product sales? (6 factors).

A
  1. Improves Product Performance.
  2. Enhances Product Quality.
  3. Increases Product Differentiation.
  4. Increases Product Value (V).
  5. Boosts Buyer Demand.
  6. Likely Increases Unit Costs (C).
57
Q

How does increasing customization affect product differentiation, product value and costs? (4 factors).

A
  1. Increases Product Differentiation.
  2. Enhances Product Value (V).
  3. Raises Switching Costs.
  4. Often Increases Unit Costs (C).
58
Q

Describe the benefits of building a bigger dealer network (4 factors).

A
  1. Broadens Access to Buyers.
  2. Boosts Total Sales Volume.
  3. Increases Market Share.
  4. May Increase Unit Costs (C).
59
Q

What impact do improved warranties and low-interest financing options have on buyer behavior? (6 factors).

A
  1. Increases Product Differentiation
  2. Enhances Product Value (V)
  3. Increases Unit Costs (C)
  4. Raises Buyer Costs to Switch Brands
  5. Boosts Total Sales Volume
  6. Increases Market Share
60
Q

How do competitive pressures increase rivalry among sellers?

A
  1. Slow or Declining Buyer Demand.
  2. Lower Switching Costs for Buyers.
  3. Industry Products Becoming More Alike.
  4. Unused Production Capacity.
  5. Increasing Number of Competitors.
  6. High Exit Barriers.
61
Q

Define the factors affecting the strength of rivalry in an industry.

A
  1. Buyer Demand Trends.
  2. Switching Costs.
  3. Product Similarity.
  4. Unused Production Capacity.
  5. Number of Competitors.
  6. Diversity Among Competitors.
62
Q

What considerations affect the threat of new entrants in a market?

A
  1. Strength of Barriers to Entry.
  2. Expected Reactions of Incumbent Firms.
  3. Market Growth Attractiveness.
  4. Capabilities of Potential Entrants.
  5. Entry of Existing Competitors into New Segments.
63
Q

Describe the market entry barriers facing new entrants.

A
  1. Economies of Scale.
  2. Experience Effects.
  3. Unique Cost Advantages of Incumbents.
  4. Strong Brand Loyalty.
  5. Network Effects.
  6. High Capital Requirements.
  7. Restrictive Government Policies.
64
Q

What factors affect competition from substitute products?

A
  1. Availability.
  2. Pricing.
  3. Quality.
  4. Performance.
  5. Switching Costs.
  6. Growth Rate of Substitute Producers.
  7. Profitability of Substitute Producers.
65
Q

Define the considerations related to supplier bargaining power.

A
  1. Availability of Supplier Products.
  2. Criticality of Supplier Products.
  3. Number of Suppliers.
  4. Switching Costs for Buyers.
  5. Ratio of Suppliers to Buyers.
66
Q

How does buyer bargaining power influence market dynamics

A
  1. Switching Costs.
  2. Product Commoditization.
  3. Buyer Size Relative to Sellers.
  4. Demand Strength.
  5. Buyer Knowledge.
  6. Price Sensitivity.
67
Q

What questions should be asked to assess the profitability of an industry?

A
  1. Strength of Competition.
  2. Expected Profit Levels.
  3. Impact of Competitive Forces on Industry Profitability.
68
Q

How can firms match their strategy to competitive conditions?

A
  1. Shield Themselves from Competitive Pressures.
  2. Shift Competitive Forces in Their Favor.
  3. Identify Attractive Arenas for Expansion.
69
Q

What are the common drivers of industry change?

A
  1. Changes in Industry Growth Rates.
  2. Globalization.
  3. Buyer Behavior.
  4. Technological Change.
  5. Product Innovation.
  6. Major Firm Entry or Exit.
  7. Regulatory Influences.
70
Q

How do changes in technology impact industry dynamics?

A
  1. Introducing New Capabilities.
  2. Improving Efficiency.
  3. Altering How Products Are Marketed.
  4. Changing How Products Are Used.
71
Q

Identify the factors influencing industry change and explain their effects on demand.

A
  1. Technological Advancements: Innovations can create new products or improve existing ones, increasing demand.
  2. Societal Concerns: Growing awareness of environmental and social issues can lead to increased demand for sustainable products.
  3. Changing Consumer Attitudes: Shifts in preferences, such as a move toward health-conscious choices, can enhance demand for certain products while decreasing it for others.
  4. Economic Conditions: Factors like recession or economic growth can significantly affect consumers’ purchasing power, influencing demand levels.
  5. Regulatory Changes: New regulations can either limit or promote demand, such as stricter safety standards increasing demand for compliant products.
  6. Market Trends: Trends in lifestyle, such as remote work, can change the types of products that are in demand, like home office equipment.
  7. Demographic Changes: Changes in population demographics, such as aging populations, can shift demand for specific products and services.
72
Q

How do the drivers of change affect competition in an industry?

A

The collective impact of the drivers of change can make competition more or less intense, influencing how firms interact and compete in the market.

73
Q

Define the relationship between change drivers and industry profitability.

A

The combined impacts of change drivers can lead to either higher or lower industry profitability, depending on how well firms
adapt to these changes.

74
Q

What strategy adjustments are necessary in response to industry changes?

A

Firms need to identify and implement strategy adjustments to effectively deal with the impacts of changes in industry conditions.

75
Q

How can firms prepare for future adjustments in industry conditions?

A

Firms can take proactive steps now to prepare for anticipated adjustments, ensuring they remain competitive.

76
Q

Describe the characteristics of a strategic group in an industry.

A

Industry rivals that share similar:

  1. Competitive Approaches.
  2. Product-Line Breadth.
  3. Price/Quality Range.
  4. Distribution Channels.
  5. Technological Approaches.
77
Q

How is a strategic group map constructed?

A
  1. Identify Differentiating Competitive Characteristics.
  2. Plot Firms on a Two-Variable Map.
  3. Group Firms with Similar Positions.
78
Q

What variables are typically used to differentiate market positions on strategic group maps? (6 variables).

A
  1. Price/Quality Range.
  2. Geographic Coverage.
  3. Product-Line Breadth.
  4. Degree of Service Offered.
  5. Distribution Channels.
  6. Degree of Vertical Integration.
79
Q

How should map axes be selected for strategic group maps?

A
  1. Map Axes Must Not Be Highly Correlated.
  2. Reflect Key Customer Value Approaches.
  3. Expose Significant Differences in Rivals’ Marketplace Positions.
80
Q

What guidelines should be followed when constructing strategic group maps?

A
  1. Map Circles Proportional to Sales of Firms.
  2. Different Variable Sets to Show Various Competitive Relationships.
81
Q

Identify the strategic group with the least favorable market position.

A
  • Typically the one facing the most competitive pressures and challenges.
82
Q

What insights can be gained from analyzing strategic group maps?

A
  1. Identify Close and Distant Rivals.
  2. Reveal the Attractiveness of Different Map Positions.
  3. Highlight Varying Profit Prospects Among Groups.
83
Q

How can competitive intelligence aid in predicting rivals’ strategic moves?

A
  1. Provides Insights into Rivals’ Pressures.
  2. Reveals Rivals’ Intentions.
  3. Analyzes Market Strategies.
  4. Helps Firms Anticipate Rivals’ Next Moves.
84
Q

What are key success factors in an industry?

A
  1. Essential Strategy Elements.
  2. Product Attributes.
  3. Operational Approaches.
  4. Resources Necessary for Competitive Success.
85
Q

How does industry profitability relate to competitive forces?

A
  1. Overall Growth Potential.
  2. Strong Competitive Forces.
  3. Prevailing Drivers of Change.
  4. Competitive Strength of Firms.
86
Q

Evaluate the effectiveness of a firm’s current strategy.

A

A well-conceived and executed strategy is recognized by:

  • Achieving financial and strategic objectives.
  • Performing above average in the industry.
87
Q

What indicators suggest a firm’s strategic success?

A
  1. Growth in Sales
  2. Growth in Market Share
  3. Achieving Stated Financial Objectives
88
Q

Describe the importance of customer acquisition and retention for a business.

A

It contributes to the overall financial strength:

  1. Increasing Profit Margins.
  2. Increasing Net Profits.
  3. Improving Return on Investment (ROI).
  4. Enhancing Credit Rating of the Company.
89
Q

Define competitive assets in the context of a firm’s resources.

A

The firm’s resources and capabilities that provide a competitive advantage in the marketplace.

90
Q

How do tangible resources differ from intangible resources in a company?

A

Tangible Resources:

  • Physical Assets.
  • Financial Resources.
  • Technological Assets.

Intangible Resources:

  • Human Assets.
  • Intellectual Capital.
  • Brands.
  • Company Culture.
91
Q

What is a capability in a business context?

A

The firm’s capability to perform an activity proficiently e.g. superior marketing skills.

92
Q

Identify the components of a firm’s resource and capability analysis.

A
  1. Identifying the Firm’s Resources and Capabilities.
  2. Testing Their Competitive Power.
  3. Evaluating Resources Against Criteria:
  • Valuable
  • Rare
  • Hard to Copy
93
Q

Describe the concept of an organizational capability.

A

The intangible capacity of a firm to perform a critical activity proficiently using a combination of its resources.

94
Q

How can a firm manage its resources and capabilities dynamically?

A

By creating new or updating existing resources and capabilities to maintain a competitive advantage.

95
Q

What is SWOT analysis and its purpose in business strategy?

A

A tool to asses the firm’s internal and external environment.

96
Q

Define core competence in a business context.

A

An internal activity that a firm performs proficiently and is central to its strategy and competitiveness.

97
Q

What characterizes a market opportunity that a firm should pursue?

A

If it represents significant potential for growth and aligns with the firm’s strengths.

98
Q

Identify the types of threats a company may face.

A
  1. Normal Course-of-Business Threats.
  2. Sudden-Death Threats.
  3. Impact on Future Profitability.
99
Q

How does a firm assess its competitive strength?

A
  1. Evaluate Prices and Costs for Competitiveness
  2. Assess the Appeal of the Customer-Value Proposition
  3. Determine if Capabilities Provide Sustainable Competitive Advantage
100
Q

What is the value chain and its significance in a business?

A

The value chain identifies the primary internal activities that create customer value and helps analyze the firm’s cost structure and differentiation strategies.

101
Q

Explain the process of value chain analysis.

A

Comparing a firm’s activities with competitors to evaluate how effectively and efficiently value is delivered to customers.

102
Q

What are the components in a value chain?

A
  1. Internal Value Chain.
  2. Value Chains of Industry Suppliers.
  3. Value Chains of Channel Intermediaries.
103
Q

How can the activities of channel partners affect a firm’s performance?

A
  1. Influence Costs and Margins of Suppliers.
  2. Affect Prices to End Consumers.
  3. Impact Industry Sales Volumes.
  4. Impact Customer Satisfaction.
104
Q

What is benchmarking?

A

A tool to improve internal activities:

  • Learning from other company’s best practices.
  • Assessing competitiveness against competitors.
105
Q

Describe how to achieve cost-based competitiveness in distribution.

A
  1. Pressure Forward Channel Allies to Reduce Costs and Markups
  2. Collaborate to Identify Win-Win Opportunities
  3. Switch to More Economical Distribution Strategies
106
Q

Define the role of cooperative advertising in enhancing differentiation.

A

Cooperative advertising engages forward channel allies to promote products together, increasing visibility and customer value.

107
Q

How can a firm translate its performance in value chain activities into competitive advantage?

A
  1. Assess Competitive Strength Relative to Rivals.
  2. Identify Key Success Factors.
  3. Determine Net Competitive Advantage.
108
Q

What indicators suggest a firm has a competitive advantage?

A
  1. Ability to Bundle Resources Effectively.
  2. High Rankings on Key Success Factors.
  3. Net Competitive Advantage Over Rivals.
109
Q

Explain the competitive strength assessment process.

A
  1. List Key Success Factors
  2. Assign Weights Based on Importance
  3. Rate the Firm and Rivals
  4. Calculate Weighted Scores
110
Q

How does a higher weighted strength rating affect a firm’s competitiveness?

A
  • A higher rating indicates stronger competitiveness versus rivals.
  • Reflects the firm’s total net competitive advantage.
111
Q

Identify strategic issues that require managerial attention.

A
  1. Market Challenges from Foreign Competitors.
  2. Price Discounting by Rivals.
  3. High Costs.
  4. Sustaining Growth.
  5. Product Line Expansion.
112
Q

What are the five generic competitive strategies?

A
  1. Low-Cost Provider.
  2. Broad Differentiation.
  3. Focused Low-Cost.
  4. Focused Differentiation.
  5. Best-Cost Provider.
113
Q

Describe the low-cost provider strategy.

A

It aims to achieve lower overall costs than rivals for products appealing to a broad spectrum of buyers.

114
Q

What are effective approaches for a low-cost provider strategy?

A

Pursue difficult-to-imitate cost savings and avoid unacceptable reductions in product quality.

115
Q

Explain the major opportunities for achieving a cost advantage.

A
  1. Lower Cumulative Costs in Its Value Chain Compared to Rivals.
  2. Perform Value Chain Activities More Cost-Effectively.
116
Q

How can a firm secure a cost advantage?

A
  1. Using Lower-Cost Inputs.
  2. Minimizing Assets.
  3. Offering Essential Features.
  4. Utilizing Economical Distribution Methods.
117
Q

What is a cost driver?

A

A factor that strongly influences a firm’s costs, which can be asset- or activity-based.

118
Q

How can revamping the value chain system lower costs?

A
  1. Bypassing Distributors.
  2. Coordinating with Suppliers for Efficiency.
  3. Reducing Handling and Shipping Costs.
119
Q

When does a low-cost provider strategy work best?

A

When price competition is strong and products are similar, customers can easily change sellers.

120
Q

What are the pitfalls of a low-cost provider strategy?

A
  1. Reduced Profits from Price Cuts
  2. Unsustainable Cost Advantages
  3. Overly Simplistic Offerings That Lack Buyer Appeal
121
Q

Describe effective differentiation approaches in business strategy.

A
  1. Studying Buyer Needs and Behaviors.
  2. Incorporating Appealing Features into Products.
  3. Using Higher Prices to Recoup Differentiation Costs.
122
Q

Define the advantages of differentiation in a competitive market.

A
  1. Ability to Charge Premium Prices.
  2. Increased Unit Sales.
  3. Enhanced Brand Loyalty.
  4. Cost-Efficient Management of Value Chain Activities.
123
Q

What are the pitfalls of a differentiation strategy?

A
  1. Relying on Easily Copied Product Attributes.
  2. Introducing Features That Do Not Resonate with Buyers.
  3. Overspending on Differentiation Efforts.
  4. Failing to Create Meaningful Quality Gaps.
  5. Adding Unnecessary Features.
  6. Charging Excessive Price Premiums.
124
Q

How can uniqueness drivers create a differentiation advantage?

A
  1. Strong Differentiating Effect.
  2. Based on Physical and Functional Attributes.
  3. Resulting from Superior Performance Capabilities.
  4. Affecting Multiple Value Chain Activities.
  5. Creating Buyer Perception of Value.
125
Q

When is a focused low-cost or focused differentiation strategy attractive?

A
  1. Target Market Niche is Profitable.
  2. Industry Leaders Do Not Prioritize the Niche.
  3. Difficult for Competitors to Meet Niche Needs.
  4. Presence of Many Niches.
  5. Rivals Show Little Interest.
  6. Focuser Has Buyer Goodwill.
126
Q

What are the risks associated with a focused low-cost or focused differentiation strategy?

A
  1. Competitors Matching the Focused Firm’s Capabilities.
  2. Shifting Preferences of Niche Members Toward Majority Buyer Attributes.
  3. Increased Competition as the Segment Becomes More Attractive.
127
Q

Describe market characteristics that favor a best-cost provider strategy.

A
  1. Product Differentiation is the Norm.
  2. Large Number of Value-Conscious Buyers.
  3. Competitive Space for Midrange Products.
  4. Economic Conditions Increasing Value Consciousness.
128
Q

How can product quality lower product costs in a best-cost provider strategy?

A
  1. Reduces Defects.
  2. Improves Production Efficiency.
  3. Enhances Customer Satisfaction (Leads to Lower Returns and higher Sales).
129
Q

What distinguishes the five generic competitive strategies

A

Each strategy is tailored to meet different market needs and preferences, influencing competitive positioning and profitability.

130
Q

How do successful competitive strategies leverage resources?

A

By aligning resources with strategic goals correctly, it could gain a competitive advantage and thereby generate revenue.

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