1. STATEGY AND COMPETITIVE ADVANTAGE
CHAPTER 5
STATEGY AND COMPETITIVE ADVANTAGE

2. 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?

3. 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

4. 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?

5. 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?

6. 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?

7. 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

8. 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?

9. 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?

10. 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?

11. 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.

12. 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.

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

14. 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?

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

16. 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?

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