STATEGY AND COMPETITIVE ADVANTAGE CHAPTER 5 STATEGY AND COMPETITIVE ADVANTAGE

Business Level Strategy What are the five Generic Business Level Strategies? Are the generic business level strategies only useful in certain industries? According to the generic strategies model, what are the two factors that determine the source of competitive advantage? According to the generic strategies model, what does it mean to have a Focused generic strategy?

Figure 5.1: The Five Generic Competitive Strategies Market Target Type of Advantage Sought Overall Low-Cost Provider Strategy Broad Differentiation Focused Low-Cost Best-Cost Lower Cost Range of Buyers Narrow Buyer Segment or Niche

Cost Leadership Strategy Under a cost leadership strategy are the products offered standardized or customized? The features of products offered True False by firms using a cost leadership strategy are essential. Firms using a cost leadership strategy believe that their competitive advantage is that they offer customers products with the ______ _______. Are there risks associated with a cost leadership strategy?

Cost Leadership Strategy Firms pursuing a cost leadership strategy: Do not need scale facilities. True False Should simplify processes True False Primarily focus on the value True False chain activities of Sales, R&D, and Service. What are some things a that Nucor (pg. 154) did to lower costs in its value chain?

Three Key Questions How can an activity be performed differently or even eliminated? How can a group of linked value activities be regrouped or reordered? How might coalitions with other firms lower or eliminate costs? What might you do to make Giuseppe more cost competitive? Daimler?

Benefits of Successful Differentiation A product / service with unique and appealing attributes allows a firm to Command a premium price and/or Increase unit sales and/or Build brand loyalty = Competitive Advantage

Differentiation Business Level Strategy A differentiation strategy requires True False that product offerings have unique features. The product offerings of firms True False pursuing a differentiation strategy are typically higher price. What companies in the cases we read so far followed a differentiation strategy? What attributes made the products differentiated?

Differentiation Business Level Strategy Firms pursuing a differentiation True False strategy need to be concerned about innovation. strategy do not need to be concerned about customer service. A broad product line is True False considered to be one of the possible characteristics of a differentiation strategy. Are there some risks of a differentiation strategy?

Industry Conditions and Low Cost or Differentiation Strategy Which strategy is best in an industry or segment with price sensitive consumers? Which strategy is preferred when the industry has many different buyer segments? Which strategy is best when the industry has buyers that use the product in the same ways? When an industry has high brand loyalty then which strategy is preferred?

Focused Business Level Strategy What is a niche? A niche strategy has to focus on True False being low cost and differentiated. Firms chose a focused strategy True False because narrow segments are being poorly served. Industry-wide competitors usually True False can serve the special needs of narrow segments.

Focused Business Level Strategy Firms using a focused strategy are True False not at risk of being out-focused. Large competitors are not concerned True False with the niche market. Niche market preferences do not True False change.

Generic Business Level Strategies Source of Competitive Advantage Cost Uniqueness Broad Target Market Best Cost Provider Breadth of Competitive Scope Narrow Target Market

Best Cost Provider What does a firm try to accomplish with a best-cost strategy? How does a best cost strategy and a low-cost strategy differ? When does a best-cost strategy out-compete both a low-cost provider and a differentiator? What are the risks of a best-cost strategy?

Cooperative Strategies What are some forms of cooperative agreements? Why do firms have cooperative agreements? What are some reasons that alliances fail?

Vertical Integration and Outsourcing What is the benefit of backward integration to a firm? What does industry backward integration mean for potential new entrants? What are the benefits for forward integration for a What are some of the disadvantages of vertical integration? What is outsourcing?

Outsourcing What is outsourcing? Why do firms decide to outsource? What are the disadvantages of outsourcing?