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38 Cards in this Set
- Front
- Back
Low-cost producers typically sell |
a standard, no frills, product and place considerable emphasis on reaping scale or absolute cost advantages from all sources |
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If a firm can achieve and sustain overall cost leadership |
it will be an above-average performer in its industry provided it can command prices at or near the industry average |
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A cost leader must achieve |
parity or proximity in the basis of differentiation relative to its competitors to be an above-average performer, even though it relies on cost leadership for its competitive advantage |
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Differentiation strategy |
a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers; it selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs; premium price |
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Focus |
rests on the choice of a narrow competitive scope within an industry; selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others |
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Focus strategy variants |
cost focus; differentiation focus |
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Cost focus |
a firm seeks a cost advantage in its target segment; exploits differences in cost behavior |
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Differentiation focus |
a firm seeks differentiation in its target segment; exploits the special needs of buyers in certain segments |
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Stuck in the middle |
a firm that engages in each generic strategy but fails to achieve any of them |
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There are three conditions under which a firm can simultaneously achieve both cost leadership and differentiation |
competitors are stuck in the middle; cost is strongly affected by share in interrelationships; affirm pioneers a major innovation |
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Competitive advantage cannot be understood by looking at a firm as a whole |
it stems from many discrete activities a firm performs in designing, producing, marketing, delivering, and supporting its product |
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Differentiation can stem from |
similarly diverse factors including the procurement of high quality raw materials, a responsive order entry system or a superior product design |
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A firm's value chain is |
embedded in a larger steam of activities that I term the value system |
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Suppliers have value chains (upstream value) |
that create and deliver the purchased inputs in a firm's chain |
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Value |
is measured by total revenue, a reflection of the price a firm's product commands and the units it can sell |
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Value activities can be divided into two broad types |
primary activities and support activities |
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Primary activities |
the physical things created |
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Support activities |
are the nonphysical things like human resources and technology |
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Identifying value activities requires |
the isolation of activities that are technologically and strategically distinct. |
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Operations |
activities associated with transforming inputs into the final product form such as machining; packaging assembly and equipment maintenance |
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Outbound logistics |
activities associated with collecting, storing, and physically distributing the product to buyers, such as finished goods warehousing, materials handling, etc |
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Marketing and sales |
Activities associated with providing a means by which buyers can purchase the product and inducing them to do so |
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Service |
activities associated with providing service to enhance or maintain the value of the product |
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Procurement |
the function of purchasing inputs used in the firm's value chain not to the purchased inputs themselves |
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Technology development |
every value activity embodies technology be it know how, procedures or technology embodied in process equipment |
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Firm infrastructure |
consists of a number of activities including general management, planning, finance, accounting, legal, government affairs, and quality management |
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Linkages |
are relationships between the way one value activity is performed and the cost or performance of another |
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Linkages can lead to competitive advantage in two ways |
optimizing and coordination |
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Channel linkages are similar to supplier linkages |
channel has value chains through which a firm's product passes |
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Segment scope |
the product varieties produced and buyers served |
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Vertical scope |
the extent to which activities are performed in house instead of by independent firms. |
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Geographic scope |
the range of regions, countries, or groups of countries in which a firm competes with a coordinated strategy |
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Industry scope |
the range of related industries in which the firm competes with a coordinated strategy |
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Broad scope can allow |
a firm to exploit the benefits of performing more activities internally |
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Narrow scope can allow |
the tailoring of the chain to serve a particular target segment, geographic area or industry to achieve lower cost or to serve the target in a unique way |
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Coalitions |
are long term agreements among firms that go beyond normal market transactions but fall short of outright mergers |
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The value chain provides |
a systematic way to divide a firm into its discrete activities and thus can be used to examine how activities in a firm are and could be grouped |
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Why do companies exist |
they create value for their customers, and customers are unable to replicate those value propositions on their own |