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30 Cards in this Set
- Front
- Back
define Business-Level Strategy |
a coordinated set of commitments/actions that the firm uses to gain a competitive advantage this is done by exploiting core competencies in specific product markets |
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3 key issues in business level strategy |
who will be served? what needs will be satisfied? how will those needs be satisfied? |
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who will be served? |
consumer markets or industrial markets market segmentation - a process used to cluster people with similar needs into individual, identifiable groups |
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what need will be satisfied? |
customer need are related to a product's benefits and features customer needs are not right, wrong, good, or bad customer needs represent desires in terms of features and performance capabilities |
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how will those needs be satisfied? |
firms must decide how to use core competencies to implement value creating strategies that satisfy target customers' needs |
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how can firms expect to exceed customer expectations? |
only firms with the capacity to continuously improve, innovate, and upgrade their competencies can expect to achieve this |
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2 types of potential competitive advantage |
1. achieving lower overall costs than rivals...performing activities differently (reducing process costs) 2. processing the capability to differentiate the firm's product/service and command a premium price (performing different (more highly valued) activities |
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2 types of competitive scope |
1. broad scope...the firm competes in many customer segments 2. narrow scope...the firm focuses on a particular segment (or group of segments) to tailor its strategy around |
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types of business level strategies (5) |
1. cost leadership (low cost, broad target) 2. focused cost leadership (low cost, narrow target) 3. differentiation (distinctiveness, broad target) 4. focused differentiation (distinctiveness, narrow target) 5. integrated cost leadership / differentiation strategy |
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cost leadership strategy |
a strategy aimed at producing goods/services with features that are acceptable to customers at the lowest cost products are relatively standardized...with broadly accepted features...and the lowest competitive price |
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cost leadership strategy (rivalry) |
rivals are hesitant to compete on the basis of price thus, lack of price competition leads to greater profits |
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cost leadership strategy (bargaining power of buyers) |
can mitigate buyers' power by driving prices as low as possible to cause competitors to exit the industry |
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cost leadership strategy (bargaining power of sellers) |
can mitigate suppliers' power by being able to: -being able to absorb slight cost increases due to low cost positioning - being able to make very large purchases, reducing the chance of suppliers using power |
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cost leadership strategy (threat of entrants) |
can scare off new entrants due to... -their need to enter the industry on a large scale in order to be cost competitive - the time it takes to overcome the industry learning curve |
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cost leadership strategy (product substitutes) |
the cost leadership strategy allows firms to... - lower prices in order to maintain its value position - make investments to add features unavailable in substitutes - buy intellectual property and patents developed by potential substitutes |
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competitive risks of a cost leadership strategy |
- processes used to produce and distribute products may become obsolete due to competitors' innovations - too much focus on cost reductions may occur at the expense of customers' perceptions - competitors may successfully imitate the cost leader's strategy |
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differentiation strategy |
a strategy used to produce goods/services (at an acceptable cost) that customers perceive as being different in ways that are important to them - focus is on non-standardized products - appropriate when customers value differentiated features more than they value low cost |
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how to obtain a differentiation advantage |
- lower buyers' costs - raise performance of your product - create sustainability through customer perceptions of uniqueness and through customer reluctance to switch to non-unique products |
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differentiation strategy (rivalry) |
the strategy defends itself against competitors...because customer's brand loyalty to differentiated products offsets price competition |
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differentiation strategy (bargaining power of buyers) |
can mitigate buyers' power because well differentiated products reduce customer sensitivity to price increases |
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differentiation strategy (bargaining power of sellers) |
can mitigate suppliers' power by... - absorbing price increases due to higher margins - having the customers pay for higher supplier prices because buyers are loyal to differentiated brands |
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differentiation strategy (threat of new entrants) |
can defend against new entrants because... - new products must surpass proven products - new products must be at least equal to performance of proven products, while simultaneously being offered at lower prices |
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differentiation strategy (product substitutes) |
this strategy is well positions against substitutes because... - brand loyalty to a differentiated product tends to reduce customers' switching brands |
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competitive risks of differentiation |
- there is a huge gap in price between the differentiated product (higher cost) and the cost leader's product (low cost) - differentiation can cease to provide value for which customers are willing to pay - counterfeit goods replicate the differentiated features of the firm's products |
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focus strategies |
a strategy used to produce goods/services that serve the needs of a particular competitive segment - particular buyer group (youth / senior citizens) - different segment of a product line (professional craftsmen / DIY-ers) - different geographic markets (east coast / west coast) |
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types of focused strategies |
1. focused cost leadership strategy 2. focused differentiation strategy |
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to implement a focus strategy, firms must be able to... |
...compete various primary and support activities in a competitively superior manner...in order to develop and sustain a competitive advantage and earn above-average returns |
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competitive risks of focus strategies |
- a focusing firm may be "out-focused" by its competitors - a large competitor may set its sights on a firm's niche market - customer preferences in niche markets may change to more closely resemble those of the broader market |
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integrated cost leadership / differentiation strategy |
commitment to strategic flexibility is necessary for implementation of this strategy - flexible manufacturing systems (FMS) - information networks (CRM) - total quality management systems (TQM) |
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risks of an integrated cost leadership / differentiation strategy |
1. often involves compromises ... becoming neither the lowest cost nor the most differentiated firm 2. becoming "stuck in the middle" ... lacking the strong commitment and expertise that accompanies firms following either a cost leadership or a differentiated strategy |