Strategy Formulation Flashcards
What is competitive advantage?
The ability to perform in ways competitors are unwilling or unable to match
What are the two sources of competitive advantage?
- Lowering cost base to be a low-cost player.
- Adding extra value to justify higher prices.
Why shouldn’t a company pursue cost leadership and differentiation simultaneously?
It risks being “stuck in the middle,” which can lead to poor financial performance
Give an example of a company using cost leadership.
McDonald’s – Standardisation, operational efficiencies, economies of scale.
What strategy does Aldi follow?
Cost focus, but shifting towards cost leadership.
What strategy does Apple use?
Differentiation.
What strategy does Rolls Royce use?
Differentiation focus.
What is Bowman’s Strategy Clock?
A model that shows different competitive strategies, where low-cost players are in positions 1 and 2 with no differentiation.
How does IKEA successfully operate while being “stuck in the middle”?
By keeping costs low while adding value through unique design, self-assembly, and supply chain control.
What are the four product-market growth strategies?
- Market Penetration – Selling existing products in the same market.
- Product Development – Creating new products for existing customers.
- Market Development – Selling existing products to new markets.
- Diversification – Selling new products to new customers.
What is the difference between Red Ocean and Blue Ocean strategies?
Red Ocean: Compete in existing markets, beat competition, exploit existing demand.
Blue Ocean: Create new markets, make competition irrelevant, generate new demand.
What is Porter’s Four Corners Model used for?
Competitor analysis – understanding why competitors act by examining their resources and capabilities.
What does the VRIO model analyse?
A firm’s internal resources and capabilities, but can also be used to evaluate competitors.
