Chapter 6 - part 1

strategic position

- a firm's strategic profile based on the difference between value creation and cost (V-C) - must consider value creation & cost

strategic trade-offs

- choices between a cost or value position. - managers must address the tension between value creation and the preassure to keep cost in check so as not t oerode the firm's economic value creation

economies of scale

- decreases in cost per unit as output increases - fixed cost stay the same how firms create economies of scale: 1) spread their fixed costs over a larger output 2) employ specialized systems and equipment 3) take advantage of certain physical properties

Economies of scope

- describe the savings that come from producing two (or more) outputs at less cost than producing each output individually, even though using the same resources and technology

Cost drivers for differentiating

1) product features - allows a firm to use premium pricing 2) customer service 3) complements - add value to a product or service when they are consumed in tandem with the focal product

Why does the learning curve go down when productivity is considered? 1) A large number of people can learn at the same time, leading to economies of scale. 2) As workers repeatedly engage in an activity, they become more efficient, driving down costs. 3) Learning cuts into the amount of time workers have, resulting in decreased productivity. 4) The challenge of learning is an uphill battle, leading to decreases in worker morale.

As workers repeatedly engage in an activity, they become more efficient, driving down costs.

Which capability is required to create superior product features? 1) sales 2) accounting 3) marketing 4) R&D

R&D

How to compete on a business level is defined by the variables value and cost. Together they define the ______. 1) the perceived economic value 2) potential economic value 3) the strategic fit 4) economic value created

economic value created

Tesla has an 80% learning curve, which means that ______. 1) 20% of workers will never fully learn their jobs 2) company efficiency has risen by 80% 3) per-unit cost drops 20% whenever output doubles 4) workers need to spend 80% of their time learning

per-unit cost drops 20% whenever output doubles

business level strategy

- details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market 1) who are the customer segments we will serve? 2) what customers' needs, wishes, and desires will we satisfy? 3) why do we want to satisfy them 4) how will we satisfy them?

( differentiation & cost leadership strategy) & ( scope of competition)

- focused differentiation strategy - Focus cost leadership strategy

diseconomies of scale

- increases in cost as output increase - can happen when a firm continues to grow. the complexity of managing and coordinating the production process raises the cost.

minimum effcient scale (MES)

- is the range of output needed to minimize the cost per unit as much as possible.

learning curve

- it takes less and less time to produce the same output as we learn how to be more efficient- learning by doing drives down cost -increases in cumulative output within the existing technology - differences in timing - learning effects occur over time as output accumulates - differences in complexity - effects from economies of scale can be quite significant, while learning effects are minimal

Which of the following are examples of ways that a large retailing firm can increase the perceived value of its offerings by focusing on customer service? (Check all that apply.) 1) offering a "no questions asked" return policy 2) offering an improved version of a product at the same price 3) by utilizing set scripts for customer service representatives to use with all customers 4) maintaining a domestic call center that is open 24 hours per day

- offering a "no questions asked" return policy - maintaining a domestic call center that is open 24 hours per day

cost of input factors

- raw materials, capital, labor, & IT services

differentiation strategy

- seeks to create higher value for customers than the value the competitors create, by delivering product or services with unique features while keeping costs at the same or similar levels, allowing the firm to charge higher prices to its customers - ensuring that its economic value exceeds that of its competitors

cost leadership strategy

- seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers

scope of competition

- weather to pursue a specific, narrow part of the market or go after the broader market

experience curve

-change the underlying technology - allows a firm to jump from one point to another point on the learning curve

Cost drivers for cost leadership

1) cost of input factors 2) economies of scale 3) learning-curve effects 4) experience-curve effects -