Business Strategy Test 2 - Ch 5

Front 1

An action plan the firm develops to describe how it will compete in its chosen industry of market segment. (Describes how the firm will compete in the marketplace on a day-by-day basis and how it intends to "do things right.")

Back 1

Business-Level Strategy

Front 2

What are the 5 Business Level Strategies:

Back 2

1. Cost Leadership
2. Differentiation
3. Focused Cost Leadership
4. Focused Differentiation
5. Integrated cost leadership/differentiation

Front 3

What are the two key dimensions of a firm's business-level strategy:

Back 3

1. Competitive Advantage (x-axis)
2. Competitive Scope (y-axis)

Front 4

When using these two business-level strategies, the firm seeks to apply its competitive advantage in many customer segments:

Back 4

Cost leadership or Differentiation

Front 5

When using these two business-level strategies, the firm uses its cost advantage or it uniqueness advantage in narrower market segments:

Back 5

Focused cost leadership or Focused differentiation

Front 6

Enables a firm to produce standardized products at lower costs than those of their competitors or to produce uniques products that differ from competitors:

Back 6

Their Capabilities and Core Competencies

Front 7

(Standard products or commodities) Products that are widely available and have a large customer demand:

Back 7

Cost (Standardized) products

[avg consumer, high cust demand]

Front 8

(differentiated products) Products that have features different from or in addition to the standardized product's features:

Back 8

Unique Products

[less avg cust, low cust demand, can be a good or service]

Front 9

An action plan the firm develops to produce goods and services at the lowest cost:

Back 9

Cost leadership strategy

(only 1 company can afford to follow this strategy)

Front 10

The more primary and support activities in which the firm can outperform it competitors, the more likely that its costs will be ______ that it's competitors:

Back 10

LOWER

Front 11

6 Related - Cost Leadership Strategy Issues:

Back 11

1.Rivalry w/existing competitors
2.Bargaining Power of buyers (Customers)
3.Bargaining Power of Suppliers
4.Potential Entrants
6.Competitive Risks of the Cost Leadeship Strategy

Front 12

Porter's 5 forces are used to determine the industrys:

Back 12

Profitability

Front 13

In Cost Leadership Strategy, "Rivarly with Existing Competitors" is ____ and Barriers are _____.

Back 13

Low
High

Front 14

In Cost Leadership Strategy, "Bargaining Power of Buyers (customers)" is ____.

Back 14

Low

Front 15

In Cost Leadership Strategy, "Bargaining Power of Suppliers" is ____.

Back 15

Low or High
(Depends on your relationship w/the supplier. But you really want it to be low.)

Front 16

In Cost Leadership Strategy, "Potential Entrants" is ____ and Barriers are _____.

Back 16

Low
High

Front 17

In Cost Leadership Strategy, "Product Substitues" ___ compete at cost but can add _____.

Back 17

can't
functionality

Front 18

In Cost Leadership Strategy, "Competitive Risks" become too _____. Also, competitors ______ to a price ____ than yours.

Back 18

cheap
innovate
lower

Front 19

An action plan the firm develops to produce goods or services that customers perceive as being unique in ways that are important to them:

Back 19

Differentiation Strategy

(try to sell to the people who really love your product. "who's actually visiting our sites")

Front 20

An action plan the firm develops to produce goods or services to serve the needs of a specific market segment:

Back 20

Focus Strategy

(specific market segment i.e.: group, geographic location, class)

Front 21

An action plan the firm develops to produce good or services for a narrow market segment at the lowest cost:

Back 21

Focused cost leadership strategy

Front 22

An action plan the firm develops to produce goods or services that a narrow group of customers perceive as being unique in ways that are important to them:

Back 22

Focused differentiation strategy

Front 23

An action plan the firm develops to produce good or services with a strong emphasis on both differentiation and low cost:

Back 23

Integrated cost leadership/differentiation strategy

(not a successful strategy. Need to figure out 1) what your business is 2) what do you want to become.

Front 24

Specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making process:

Back 24

Organizational Structure

Front 25

An organizational structure in which the owner/manager makes all of the major decisions and oversees all of the staff's activities (basic/flat, uses few rules, relationship informal):

Back 25

Simple structure

Front 26

An organizational structure consisting of a CEO and a small corporate staff:

Back 26

Functional structure

Front 27

Consists of those industry members with similar competitive approaches & positions in the market:

Back 27

Strategic Group

Front 28

A technique/analytical tool for revealing the market positions of industry competitors. Part of the external/industry/competitive analysis:

Back 28

Strategic Group

Front 29

Four Step Procedure of Strategic Group Mapping:

Back 29

1.Identify competitive characteristics that differentiate firms in an industry from on another (i.e. different strategice approaches)
2.Plot firms on a two-variable map based upon their strategic approaches
3.Assign firms occupying the same map location to a common strategic group
**4.Draw circles around each strategic group, making the circles proportional to the size of the group's share of total industry sales revenues.

Front 30

Typical Variables of competition:

Back 30

-Price/quality range (H,M,L)
-Geographic coverage (loc, reg, natl)
-degree of vertical integration (none, partial, full)
-product-line breadth (narrow, wide)
-Choice of distribution channels (retail, wholesale, internet, multiple)
-Degree of service offered (no frills, limited, full)

Front 31

Strategic Group Map Considerations:

Back 31

-Variable selected as axes should not be highly correlated (*not highly related)
-**Variables chosen as axes should expose big differences in "how rivals compete"
-Variables do not have to be either quantitative or continuous
-**Drawing sizes of circles proportional to combined sales of firms in each strategic group allows map to reflect sizes of each strategic group (the bigger the circle, the more sales revenue in that group.)
-If more than two good competitive variables can be used, several maps can be drawn.
-Driving forces and competitive pressures often favor some strategic groups and hurt others.
-Profit potential of different strategic groups caries due to strengths and weaknesses in each group's mark positon.
-**The closer strategic groups are on the map, the stronger the competitive rivalry among member firms tends to be.

Front 32

Strategic Group Map Example-
*a.k.a. =
*The empty spaces represent ____.

Back 32

-Competitive Position Analysis
- Opportunities

Front 33

This entity reinvented the circus using strategic group mapping:

Back 33

Circus Solei

Front 34

May identify where customers needs have gone unmet in order to gain a competitive advantage by discovering or inventing a new industry or distinctive market segment that allows a company to create and capture altogether new demand:

Back 34

Strategic decision-makers

Front 35

To make last/endure. Adopting business strategies & activities that meet the needs of the enterprise and its stakeholders today, while protecting, sustaining, and enhancing the resources that will be needed in the future.

Back 35

Sustainability

Front 36

Sustainability can be summed up as the relationship between:

Back 36

**Our business and surroundings, present and future.

Front 37

"Surroundings" in terms of sustainability is considered the:

Back 37

-environment
-local communities
-employees, customers
-suppliers
-"Our whole footprint"

Front 38

There are ____ total counties:

Back 38

193
-192 members of United Nations & 1 Vatican City

Front 39

Walmart's business-level strategy is:

Back 39

Cost Leadership

Front 40

A properly chosen business-level strategy favorably positions the firm relative to the ____ ____ ____.

Back 40

five competitive forces.

Front 41

A business-level strategy is constantly subject to changes based on industry ___ & ____.

Back 41

-opportunities
-threats.

Front 42

Know how to draw the types of business level strategies diagram (CH5)

Back 42

Know how to draw the types of business level strategies diagram (CH5)

Front 43

Means the same thing as "Business-Level" strategy:

Back 43

Generic

Front 44

Cost leadership strategy is build on Economies of ____.

Back 44

Economies of SCALE.

Front 45

Cost leadership/Economies of scales is achieved through (as we get more efficient cost goes down):

Back 45

Strong process activities

Front 46

In Cost Leadership strategy -

-Type of products:
-Type of customers:
-Demand:

Back 46

- Standardized
- Average customers
- High

Front 47

In Cost Leadership strategy:

-Rivalry with Existing Competitors
-Bargaining Power of Buyers (Customers)
-Bargaining Power of Suppliers
-Potential Entrants
-Product Substitutes
-Competitive Risks

Back 47

- Low (b/c barriers are high)
- low
- low or high (it depends on your relationship with the supplier. But you want it to be LOW)
-low
-can't compete @cost, but can add functionality
-1)it becomes too cheap, 2)competitors innovate to a price lower than yours

Front 48

In differentiation Strategy-

-Type of products:
-Type of customers:
-Demand:
-Perception - physical or psychological:
-Examining the value chain:

Back 48

- Unique, different
- Specific, "A" Typical
- Low
- how to build the strategy
- What the customer perceives to be different.

Front 49

Differentiation Strategy is built on:

Back 49

Perception (physical or psychological)

Front 50

Differentiation focuses/is achieved through activities that:

Back 50

Create more Value

(Depends on marketing. focus on things that add cost to product. Cust's willing to pay more for the added value)

Front 51

In Differentiation Strategy:

-Rivalry with Existing Competitors
-Bargaining Power of Buyers (Customers)
-Bargaining Power of Suppliers

-Potential Entrants
-Product Substitutes
-Competitive Risks

Back 51

-Low
-High (not as many buyers so they do have bargaining power)
-High (b/c they provide special materials/knowledge)

-High
-Hard to compete
-Pricing is out of line from what the customer values. Competitors will make products good enough to steal customers. "The early bird gets the worm but, the 2nd mouse gets the cheese."

Front 52

In Differentiation Strategy price is ___ a real problem. Demand is ___, put profits are ____.

Back 52

- not
- lower
- higher

Front 53

The function of the good displays status more than utility:

Back 53

Inconspicuous Comsumption

Front 54

____ cost strategies seem to work better for larger companies for such reason as, economies of scale:

Back 54

Low cost

Front 55

Firms using the ___ strategy intend to serve the needs of a narrow customer segment better than their needs can be met by the firm targeting its products to the broad market:

Back 55

-focus

Front 56

Competitive risks of focused strategy:

Back 56

A competitor may learn how to “outfocus” the focusing firm

A company serving the broad target market may decide that the target market being served by the focusing firm is attractive

The needs of the narrow target customer may change and become similar to those of the broad market

Front 57

Organizational structure specifies:

Back 57

formal reporting relationships, procedures, controls, and authority and decision-making processes

Front 58

Matching the right organizational structure with the ___ _____ enhances firm performance.

Back 58

chosen strategy

Front 59

Two types of business-level strategy organizational structures:

Back 59

Simple Structure

Functional Structure

Front 60

Advantages of simple structure:

Back 60

- inexpensive to maintain
- decision making very fast

Front 61

Disadvantages of simple structure:

Back 61

-information over-load

Front 62

Advantages of functional structure:

Back 62

- Gain task specialization

Front 63

Disadvantages of functional structure:

Back 63

- Not affective across functional departments

Front 64

A business-level strategy is based on a firm’s:

Back 64

SCA (strategic competitive advantage)

[The strategic process MUST entail ALL three parts - Formulation/Implementation/Evaluation]

Front 65

The firm must continuously evaluate its business level strategy and change it as needed to create more:

Back 65

value

Front 66

Firms implementing the cost leadership strategy use a ____ structure with highly centralized authority.

Back 66

Functional

Front 67

The functional structure used by firms implementing the differentiation strategy differs from the one used by firms implementing the cost leadership strategy

R&D and marketing functions are more important

Authority is decentralized in this structure so employees closest to the customer can decide how to appropriately differentiate the firm’s products

Back 67

Implementing the Differentiation Strategy

Front 68

An integrated cost leadership/differentiation strategy is difficult to implement

Decisions must be partly centralized and partly decentralized
Jobs are semi-specialized
Some formal rules and procedures are needed
Efficient processes maintain lower costs
The ability to change is also important in order to develop and maintain differentiated goods or services

Back 68

Implementing the Integrated Cost Leadership/Differentiation Strategy

Front 69

In a functional structure, Jobs are highly specialized and organized into ____ subgroups and highly _____ rules and procedures are established.

Back 69

homegenous
formalized

Front 70

The _____ function is emphasized in the functional structure to ensure that the firm’s product is being produced at low costs.

Back 70

operations

Front 71

When firms following a focus strategy have only a single product line and operate in a single geographic market, a ____ _____ is effective.

Back 71

Simple structure

Front 72

In larger, more complex firms with several product lines or geographic markets, a ___ ___ is more effective.

Back 72

functional structure

Front 73

A ____ strategy, centralized functional structure emphasizing efficiency is key:

Back 73

focused cost leadership

Front 74

A ____ strategy, functional decentralized structure encouraging cross functional interaction to create innovation is key:

Back 74

focused differentiation