Chapter 6

reconciled

A successful blue ocean strategy requires that trade-offs between differentiation and low cost be ____

scope of competition

Besides selecting an appropriate strategic position, managers must also define the _______--whether to pursue a specific market niche or go after the broader market

blue ocean strategy

Business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile inherent trade-offs, attempts to find a competitive advantage by creating a new competitive area, reconciling the trade-offs between the 2 generic business strategies

strategic trade-offs

Choices between a cost or value position. Such choices are necessary because higher value creation tends to generate higher cost.

economies of scale

Decreases in cost per unit as output increases. Allow firms to: 1) Spread their fixed costs over a larger output. 2) Employ specialized systems and equipment. 3) Take advantage of certain physical properties.

differentiation

Generic business strategy that seeks to create higher value for customers than the value that competitors create.

cost leadership

Generic business strategy that seeks to create the same or similar value for customers at a lower cost

strategy canvas

Graphical depiction of a company's relative performance vis-à-vis its competitors across the industry's key success factors

value curve

Horizontal connection of the points of each value on the strategy canvas that helps strategists diagnose and determine courses of action

diseconomies of scale

Increases in cost as output increases.

Minimum efficient scale

Output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.--where you want to be producing

cost leader

focuses its attention and resources on reducing the cost to manufacture a product or deliver a service in order to offer lower prices to its customers.

cost leadership strategy

if a firm has a broad competitive scope and a cost strategic position they should adopt a

differentiation strategy

if a firm has a broad competitive scope and a differentiation strategic position they should adopt a

focused differentiation strategy

if a firm has a narrow competitive scope and a differentiation strategic position they should adopt a

focused cost leadership strategy

if a firm has narrow competitive scope and a cost strategic position they should adopt a

scope of competition

the size--narrow of broad--of the market which a firm chooses to compete

value chain activities

A blue ocean strategy often is difficult because the two distinct strategic positions require internal _____ that are fundamentally different from one another

economic value, greater

A company that uses a differentiation strategy can achieve a competitive advantage as long as its ____ created is ____ than that of its competitors.

learning curve

Rate of improvement in performing a task is a function of time & Rate of change in average cost (in hours or dollars) is also a function of cumulative output.

focused cost leadership

Same as the cost-leadership strategy except with a narrow focus on the niche market.

economies of scope

Savings that come from producing two (or more) outputs at less cost than producing each output individually, despite using the same resources and technology.

cost drivers

Some of the unique ______ that managers can manipulate are the cost of input factors, economies of scale and learning- and experience-curve effect

generic business strategies

The 5 forces model helps managers use ________ to protect themselves against the industry forces that drive down profitability

cost, value

The goal of a cost-leadership strategy is to reduce the firm's ____ below that of its competitors while offering adequate ____

value

The goal of differentiation strategy is to increase the perceived ______ of goods and services so that customers will pay a higher price for additional features

business level strategy

The goal-directed actions managers take in their quest for competitive advantage when competing in a single product market, concerns the broad question, "how should we compete?"; determines a firm's position in its quest for competitive advantage when competing in a single industry or product market

experience curve

The inverse relationship between the total value-added costs of a product and the company experience in manufacturing and marketing it.

value innovation

The simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers; considered a cornerstone of blue ocean strategy; helps managers address the trade-offs between differentiation and cost leadership

raising

Under value innovation, increasing perceived buyer value is primarily achieved by ____ existing key success factors and by creating new elements that the industry has not yet offered

eliminating, reducing

Under value innovation, lowering a firm's costs is primarily achieved by _____ & _____ the taken-for-granted factors on which the firm's industry rivals compete

stuck in the middle

When firms fail to resolve strategic trade-offs between differentiation and cost, they end up ______. They then succeed at neither business strategy, leading to a competitive disadvantage

differentiation, cost leadership

_____ and ______ are distinct strategic positions

value drivers

add value to products and services, are responsive to customer preferences, can increase costs (add'l R&D is needed, innovation is needed, but customers are willing to pay a premium) ex: product features, customer service, complements

strategic positioning

requires that managers address strategic trade-offs that arise between value and cost, because higher value tends to go along with higher cost

focused differentiation

same as the differentiation strategy except with a narrow focus on the niche market.

cost, value

under cost-leadership strategy, the focus of competition is achieving the lowest possible ____ position, which allows the firm to offer a lower price than competitors while maintaining acceptable ____