Term
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Definition
| A business-level strategy is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets |
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Term
| Central Role of Customers |
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Definition
In selecting a business-level strategy, the firm must determine:
- Who it will serve
- What needs those target customers have that it will satisfy
- How those needs will be satisfied
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Term
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Definition
| Market segmentation is a process used to cluster people with similar needs into individual and identifiable groups |
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Term
Basis for Customer Segmentation
Consumer Markets |
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Definition
Demographic (age, income, gender)
Socioeconomic (social class, stage in family life cycle)
Geographic (culture, region or country differences)
Psychological (lifestyle, personality)
Consumption Patters (heavy, moderate, light users)
Perceptual factors (benefit segmentation)
Brand loyalty patterns |
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Term
Basis for Cosoomer Segmentation
Industrial Markets |
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Definition
- End use segments - NAIC code
- Product segments - technology differences / product economics
- Geographic segments - country boundaries / regional differences
- Common buying factor segments - cut across product / market and geographic segments
- Customer size segments
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Term
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Definition
The cost leadership strategy is an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest relative cost, relative to that of the competitors
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Term
| How do you obtain a Cost Advantage |
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Definition
- Determine and Control Cost Drivers
- Reconfigure teh Value Chain as needed
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Term
Cost Leadership Strategy - 5 Forces
Rivalry with Existing Competitors |
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Definition
| Competitors avoid price wars with cost leaders, creating higher profits for the entire industry |
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Term
Cost Leadership Strategy - 5 Forces
Power of Buyers (Customers) |
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Definition
| Buyers' power can be mitigated by driving prices far below competitors and cause exit and shift power back to firm |
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Term
Cost Leadership Strategy - 5 Forces
Power of Suppliers |
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Definition
| Suppliers' power can be mitigated by being able to absorb cost increases due to low cost position and being able to make very large purchases, reducing chance of supplier using power |
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Term
Cost Leadership Strategy - 5 Forces
Threat of New Entrants |
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Definition
| Can frighten off new entrants due to their need to enter on a large scale in order to be cost competitive, and the time it takes to move down the learning curve |
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Term
Cost Leadership Strategy - 5 Forces
Threat of Substitute Products |
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Definition
| Well positioned products relative to substitutes because brand loyalty to a differentiated product tends to reduce customers' testing of new products or switching brands |
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Term
Major risks of Cost Leadership
Business Level Strategy |
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Definition
- dramatic technology change could take away your advantage
- competitors may learn how to imitate value chain
- focus on efficiency could cause Cost Leader to overlook changes in customer preferences
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Term
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Definition
| A differentiated strategy is an integrated set of actions designed by a firm to product or deliver goods or services that customers perceive as being different in ways that are important to them |
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Term
| How to obtain a Differentiation Advantage |
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Definition
- lower buyers costs
- raise performance of product or service
- Create sustainability through:
- customer perception of uniqueness
- customer reluctance to switch to non-unique product
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Term
Differentiation Strategy and the Five Forces
Rivalry Among Competitors |
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Definition
| Can defend against competition because brand loyalty to differentiated product offsets price competition |
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Term
Differentiation Strategy and the Five Forces
Power of Buyers |
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Definition
| Can mitigate buyer power because well differentiated products reduce customer sensitivity to price increases |
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Term
Differentiation Strategy and the Five Forces
Power of Suppliers |
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Definition
| Can mitigate supplier's power by absorbing price increases due to higher margins, and passing along higher supplier prices because buyers are loyal to differentiated brand |
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Term
Differentiation Strategy and the Five Forces
Threat of New Entrants |
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Definition
| Can defend against new entrants because new products must surpass proven products, or new products must be at least equal to performance of proven products, but offered at lower prices |
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Term
Differentiation Strategy and the Five Forces
Threat of Substitute Products |
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Definition
| Well positioned relative to substitutes because brand loyalty to a differentiated product tends to reduce customers' testing of new products or switching brands |
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Term
| Major Risks of a Differentiation Business-level strategy |
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Definition
- Customers decides that differentiation between the differentiators product and the cost leaders price is too large
- A firm's means of differentiation may cease to provide value for which customers are willing to pay
- The means of uniqueness may no longer be valued
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Term
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Definition
| Focus Strategies are an integrated set of actions designed to produce or deliver goods or services that serve the needs of a particular competitive segment |
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Term
Focused Business-level Strategies
Opportunities may exist because: |
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Definition
- firms may lack resources to compete industry wide
- large firms may overlook small niches
- the firm may be able to serve a narrow market segment more effectively than industry wide competitors
- focus can allow you to direct resources to certain value chain activities to build competitive advantage
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Term
Focused Business-level strategies have
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Definition
- differentiated features with low cost products
- minimize R&D costs by copying innovators
- focused differentiators may thrive by selecting a small market that is undeserved by large players
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Term
Major Risks involved with a Focused Differentiation business-level strategy
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Definition
- firm may be out focused by competitors
- large competitor may set its sights on your niche market
- preferences of niche market may change to match those of broad market
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Term
Integrated Low Cost / Differentiation
Firms using an integrated strategy may: |
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Definition
- adapt more quickly
- learn new skills and technologies
- leverage core competencies while competing against its rivals
- may utilize Flexible Manufacturing Systems to create differentiated products at low costs
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Term
| Flexible Manufacturing Systems |
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Definition
Information networks
Total Quality Management Systems (TQM) |
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Term
| Total Quality Management - TQM |
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Definition
- meeting customer expectations while striving to exceed them
- focusing on work activities to drive out waste
- focus on continuous improvement
- develop the flexibility to spot opportunities to simultaneously increase differentiation and / or drive out costs
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