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9 Cards in this Set

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  • Back

Define each generic business-level strategy and describe how they are different from each other

Differentiation- firms offer unique product or services.

Total cost leadership- firms have a low cost position.

Focus- the same as above, but a narrow target.

What are the risks and benefits of each of differentiation strategy?

- Benefits- brand loyalty lowers customer sensitivity to price and raises customer switching costs, avoid need for low cost position, loyalty and uniqueness build high barriers of entry, reduces buyer power from less alternatives, supplier power decreased through association of product, reduced threat of substitutes

- Risks- uniqueness is not valuable, too much differentiation, too high price premium, easily imitated, dilution of brand identification through product line extensions, perception of differentiation may vary between buyer and seller

What are the risks and benefits of each of total cost leadership strategy?

- Benefits- above-average returns, protect against rivalry, protect against powerful buyers, more flexibility with demands from powerful suppliers, create high entry barriers

- Risks- too much focus on one value-chain activity, increase in cost of inputs, strategy imitated easily, lack of parity on diff, reduced flexibility, obsolescence on the basis of cost advantage

What are the risks and benefits of each of focus strategy?

- Benefits- select niches least vulnerable to substitutes or other competitors, decreased buyer power, less rivalry

- Risks- erosion of cost advantages within narrow segment, threat of new entrants and imitation, too focused to satisfy buyer needs

What are the general characteristics of firms that pursue each of the generic strategies?

Low cost - Efficient scale facilities, cost reductions form experience curve, tight cost and overhead control, avoidance of marginal customer accounts, cost minimization in a value chain activities

Differentiation - Prestige or brand image, technology, innovation, features, customer service, dealer network

What is the relationship between each of the five forces and each of the generic strategies?

Low cost - Low intensity, decreased power from buyers, decreased power from suppliers, high entry barriers, low substitutes

Differentiation - Protection against rivalry, high entry barriers, reduced buyer and supplier power, reduced threat of substitutes

What does “stuck in the middle” mean?

Why is it risky to be in the “middle”?

- It means you are not competing on low cost or differentiation.

- It is risky because you will lose all market share if you don’t decide which type to compete in.

How does the industry life cycle concept influence a firm’s business-level strategy?

It influences a firms business level strategy because the factors involved at each stage impact the decisions of managers. Intro, growth and maturity use differentiation. Maturity and decline use cost leadership and decline also includes focus as a possibility. Check chart on page 164.

Explain why the industry life cycle concept is an important factor in determining a firm’s business-level strategy.

The factors included are market growth rate, number of segments, intensity of competition, emphasis on product design, emphasis on process design, major functional areas of concern, over objective.