Mgt 487 Missouri State Test 4

Front 1

Generic Strategy

Back 1

*A general way of positioning a firm's business-level strategy within an industry

-Diff. generic stategies offer diff. value propositions to customers
-A firm may not match every characteristic that its generic strategy entails

Front 2

Four Main Generic Strategies

Back 2

1. Cost Leadership

2. Differentiation

3. Focused Cost Leadership

4. Focused Differentiation

Front 3

1. Cost Leadership (4 Main Gen. Strat.)
(and characteristics)

Back 3

*Broad Target + Cost (Competitive Advantage)

*Prods/Services with acceptable qualities and features are offered to a broad set of customers at low price.

-Ability to charge low $$ and make profit by emphasizing efficiency
-Spend little on adv, mkt rsch, or R&D
-Rely on economies of scale to achieve efficiency (cost advantage created when firm can produce good or service at a lower per-unit-price due to producing the good or service in large quantities)

Front 4

1. Cost leadership (4 Main Gen. Strat.)
(Advantages and Disadvantages)

Back 4

Advantages: *Can create high profit margins if the company has a high market share. *Can withstand price wars because they’re insulated by efficiency

Disadvantages: *Perceptions of quality can become too low. *Large volumes of scale are needed because of slim profit margins. *Late detections in environmental trends can occur because of need to keep expenses low. *Emphasis on efficiency makes quick changes difficult.

Front 5

2. Differentiation (4 Main Gen. Strat.)
(what does it depend on?)

Back 5

*Cost+Uniqueness (Comp Adv)

Differentiation Strategy: Customers are convinced to pay a premium price for goods or services because of unique and desirable features

Depends on: *Unique product/service features. *Communicating value of features to potential customers: -Advertising -Brand-Building

Front 6

2. Differentiation (4 Main Gen. Strat.)
(Advantages and Disadvantages)

Back 6

Advantages: *Creates buyer loyalty. *Creates strong profit margin.

Disadvantages: *May dissuade price sensitive buyers (The extent to which a price increase makes a buyer less likely to purchase an item). *May be imitated.

Front 7

Focus strategies
(include advantages and disadvantages)

Back 7

*Generic business approaches that involve targeting a relatively narrow niche of potential customers.

-Advantages: *High prices can be charged. *Great expertise can be developed.

-Disadvantages: *Limited demand makes every sale count. *Areas of focus may be over taken by others or disappear. *Other firms may provide an even narrower focus.

Front 8

3. Focused Cost Leadership (FCL) (4 Main Gen. Strat.)
(and characteristics)

Back 8

*Narrow Target + Cost.

*(FCL) Competition based on price to target a narrow market.

-A FCL firm does not necessarily charge the lowest prices in the industry
-Instead, it charges low prices relative to other firms that compete within the target market
-In some cases, the target market is defined by demographics.
-In other cases, the target market is defined by the sales channel.

Front 9

4. Focused differentiation (4 Main Gen. Strat.)
(and characteristics)

Back 9

*Narrow Target + Uniqueness

*Offering unique features that fulfill the demands of a narrow market.

-In some cases, the target market is defined by demographics.
-In other cases, the target market is defined by the sales channel.
-Takes pursuit of uniqueness to next level.

Front 10

Best-Cost Strategy
(What type of business model?)

Back 10

*A business-level strategy followed by firms that charge relatively low prices and offers substantial differentiation.

-Often includes a business model whose fixed costs and overhead are very low relative to competitors costs.

Front 11

Neither, Nothing, Outmaneuvered
-"Stuck in the Middle"
-Michael Porter on strategy
-Why are they stuck in the middle?

Back 11

*Not enough unique features are offered and prices are too high to be competitive.

-Michael Porter: Strategy is as much about executives deciding what a firm is not going to do as it is about deciding what the firm is going to do.

-In many cases, firms become stuck in the middle not because executives fail to arrive at a well-defined strategy but because firms are simply outmaneuvered by their rivals.

Front 12

Avoid Being Stuck in the middle

Back 12

*Strategy is of little use unless people understand it and can apply it.

*Distill the company’s strategy into a pithy, memorable, prescriptive phrase:
-Helps maintain strategic focus - empowers workers to be innovative and take risks (foreseen&unforseen opps, little rigidity in method) - Helps seize fleeting opportunities. -Helps create prods and serv that meet subtle shifts in customers' needs.

Front 13

80-100 Rule

Back 13

You’re better off with a strategy that’s 80% right and 100% implemented than one that is 100% right and 80% implemented.

Front 14

SouthWest Airlines (Strategic Principles)

Back 14

-“Meet customers’ short-haul travel needs at fares competitive with the cost of automobile travel”.

Front 15

eBay (Strategic Principles)

Back 15

“Focus on trading communities”

Front 16

Vanguard (Strategic Principles)

Back 16

“Unmatched value for the investor-owner”

Front 17

Walmart (Strategic Principles)

Back 17

“Low prices, every day”