Business Strategy Exam 2

What are the key components of a differentiation strategy?

- Offering unique features - Communicating the value of these features to potential customers.

Within the diamond model, the concept of what refers to the size and nature of a firm's domestic customer base?

Demand Conditions

What is generally the easiest mode for organizations to go international?

Exporting

Explain market penetration.

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What are some limitations of generic strategies?

Companies that are following a particular generic strategy tend to share certain features. Thus, it is important to keep in mind that a company may not match every characteristic that its generic strategy entails.

A company that attempts to convince customers to pay a premium price for its good or services by providing unique and desirable features, is following what kind of strategy?

Differentiation strategy

What is it called when businesses grow into new areas with the purpose of creating value using excess resources?

Diversification

Acquisitions are considered to be what type of growth?

Inorganic

What are two ways footholds can benefit companies?

1. Ability to gain market share for future product entry. 2. "Feel out" the market before committing to it.

What are the three factors that determine the likelihood of a competitor response?

1. Awareness 2. Motivation 3. Capability

What are the four generic business level strategies?

1. Cost leadership 2. Differentiation 3. Focused Cost leadership 4. Focused differentiation

What are examples of the four generic business level strategies

1. Cost leadership = Walmart 2. Focused Cost Leadership = dollar general 3. Differentiation = Nordstrom 4. Focused Differentiation = Anthropologie.

What are the ways a company can respond to disruptive innovations?

1. Ignore 2. Engage in a counterattack using different goods and/or services. 3. Match the new innovation

What are the four types of cooperative moves?

1. Joint Venture 2. Strategic Alliance 3. Colocation 4. Co-opetition

What are the 4 types of business units represented in the BCG matrix?

1. Stars 2. Cash Cows 3. Question marks 4. Dogs

What is a foothold?

A small position that a company intentionally establishes within a market in which it does not yet compete.

McDonald's is considering expanding into Japan; however, there is a bias against fast food in the Japanese market. To avoid this bias, McDonald's buys a Japanese restaurant and manages it like a McDonald's. This strategy is employed to minimize ______________.

Barriers to entry

Companies that charge relatively low prices and offer substantial differentiation are following what type of strategy?

Best-cost strategy

What is the goal of vertical integration?

Buyers & Suppliers

What should drive the decision to employ a low-cost or differentiation strategy?

Core competencies

A company that offers products or services with acceptable quality and features to a broad set of customers at a low price, is practicing what?

Cost Leadership

Bricolage does what/

Creates new markets by using whatever materials and resources happen to be available as the inputs into a creative process.

An organization with a particular focus on innovation and a large R&D budget is likely to employ what kind of strategy?

Differentiation

What do many cost leaders rely on?

Economies of scale - this means that the costs of offering goods & services decreases as a company is able to sell more items.

What is first mover advantage?

Exists when making the initial move into a market allows a company to establish a dominant position that other companies struggle to overcome.

Frontier airlines focuses on ultra low-cost fares by servicing a smaller market segment than their broad market competitors. This is an example of what business level strategy?

Focused cost leadership.

What is the difference between focused and general strategies?

Focused strategies simply select a particular niche to pursue compared to a larger, general market.

Give an example of related diversification

Honda's ability to sell engines for automobiles, personal watercraft, motorcycles, and other applications.

Buying companies that compete in a similar market, have a similar strategy, or produce a similar product is considered what type of integration?

Horizontal

What is competitive rivalry focused on?

Initial actions and reactions of firms as they maneuver for an advantageous market share.

What is a blue ocean strategy?

Involves creating a new, untapped market rather than competing with rivals in an existing market.

What is it called when a firm grants another company the right to create/manufacture a company's product in exchange for a fee?

Licensing

What is a potential risk associated with cooperative relationships among firms?

Loss of operational control, loss of IP or valuable secrets, and being taken advantage of by partners.

What type of strategy is more focused on efficiency than unique value?

Low cost, cost leader

What are fighting brands?

Lower-end brands that companies release to prevent knockout blows to their corporation. - An example would be how Ford has different ranges of vehicles under different names.

How is a best-cost strategy executed appropriately?

Maintaining low costs even though creating unique features and communicating to customers about those features are costly. - Can also adopt a business model where the fixed costs and overhead are very low relative to the costs that competitors are absorbing.

In terms of corporate level strategy, how diverse should a corporation's portfolio of strategic business units be in general?

Moderately diverse

How can disruptive innovations change industries?

New, fresh ideas that can cripple competitors' approaches to doing business. - think Apple and FinTechs

What is a disruptive innovation?

One that conflicts with, and threatens to replace, traditional approaches to competing within an industry.

What are the pros & cons of being a first mover?

Pro = can establish competitive edge within market and place a large hurdle for competitors. Con = inherently risky as you are the first on the scene.

What are some pros & cons of focused strategies?

Pros = Higher prices can be charged, greater expertise of product/service offered. Cons = Limited demand, highly competitive

What are some pros & cons of a differentiation strategy?

Pros = ability to obtain premium prices, strong margins, buyer loyalty. Cons = customers may not be willing to pay extra for the brand's unique features, customers prefer cheaper alternatives, or customers are able to find competitors imitating the preferred features.

What are some pros & cons of cost leadership strategies?

Pros = withstanding price competition, discouraging new entrants, and attracting a large market share. Cons = need to maintain a high sales volume, minimizing time for advertising, market research, and R&D.

A company that doesn't offer features that are unique enough to convince customers to buy its offerings and its prices are too high to effectively compete based on price is practicing what type of strategy?

Stuck in the middle

What is Price sensitivity?

The extent to which a price increase makes a buyer less likely to purchase an item.

How is mutual forbearance beneficial for companies engaged in multipoint competition?

They are able to lose less by competing in different markets than being aggressive within the same markets.

What is the central purpose of corporate level strategy?

To create more value as a whole unit than the organizations would be worth separate or under other ownership.

Explain what Mutual Forbearance is.

When two organizations choose to avoid competing with one another in specific markets with the hope of minimizing direct competition and price wars across multiple markets.

What is a generic strategy?

a general way of positioning a firm within an industry Comprised of a company's competitive advantage and scope of operations.