mgt 3830 ch5

overall cost leadership strategy

A firms generic strategy based on appeal to the industry wide market using a competitive advantage based on low cost

business level strategy

A strategy designed for a firm or a division of a firm that competes within a single business

combination strategies

Firms' integration of various strategies to provide multiple types of value to customers

differentiation strategy

Creating differences in the firms product or service offering by creating something that is perceived industry wide as unique and valued by customers

Potential Pitfalls of Focus Strategies

- Cost advantages may erode within the narrow segment - Even product and service offerings that are highly focused are subject to competition from new entrants and from imitation - Focusers can become too focused to satisfy buyer needs

Strategies in the Growth Stage

- Create branded differentiated products - Stimulate selective demand - Provide financial resources to support value-chain activities

Strategies in the Maturity Stage

- Create efficient manufacturing operations - Lower costs as customers become price-sensitive - Adopt reverse or breakaway positioning

Pitfalls of Combination Strategies

- Firms that fail to attain both overall low-cost & differentiation strategies may end up with neither and become "stuck in the middle" - Firms can also underestimate the challenges & expenses associated with coordinating value-creating activities in the extended value chain - Firms can also miscalculate sources of revenue and profit pools in the firm's industry

potential pitfalls of overall cost leadership

- Too much focus on one or a few value-chain activities - Increase in the cost of the inputs on which the advantage is based - A strategy that can be imitated too easily - A lack of parity on differentiation - Reduced flexibility - Obsolescence of the basis of cost advantage

Strategies in the Introduction Stage

-Develop product and get users to try it -Generate exposure so product becomes "standard"

Strategies in the Decline Stage

-Maintaining -Harvesting -Exiting the market -Consolidation

Potential Pitfalls of Differentiation Strategies

-Uniqueness that is not valuable -Too much differentiation -Too high a price premium -Differentiation that is easily imitated -Dilution of brand identification through product line extensions -Perceptions of differentiation may vary between buyers and sellers

Turnaround Strategies

-asset and cost surgery -selective product and market pruning -piecemeal productivity improvements

forms of differentiation

Prestige or brand image Technology Innovation Features Customer service Dealer network

focus strategy

Tends to focus on a particular market niche. Two types cost advantage and differentiation based focused strategies

focus strategy: cost leadership

When a company focuses on a niche market and uses the cost to attract customers. best example is goodwill and other not-for-profit organizations. Goodwill receives clothes as donations and is able to sell to lower income customers very cheap clothes

Reverse Positioning

a break in industry tendency to continuously augment products, characteristic of the product life cycle, by offering products with fewer product attributes and lower prices

breakaway positioning

a break in industry tendency to incrementally improve products along specific dimensions, characteristic of the product life cycle, by offering products that are still in the industry but that are perceived by customers as being different

competitive parity

a firm's achievement of similarity, or being "on par," with competitors with respect to low cost, differentiation, or other strategic product characteristic.

consolidation strategy

a firm's acquiring or merging with other firms in an industry in order to enhance market power and gain valuable assets

harvesting strategy

a strategy of wringing as much profit as possible out of a business in the short to medium term by reducing costs

mass customization

a strategy that uses technology to deliver customized services on a mass basis

Selective product and market pruning

discontinue Products that are losing money or are only marginally profitable. Focus on core profitable areas

profit pool

entails the total profits earned in an industry at all points along the value chain

Piecemeal productivity improvements

improving business processes by reengineering them, benchmarking specific activities against industry leaders, encouraging employee input to identify excess costs, increasing capacity utilization, and improving employee productivity lead to a significant overall gain

does low cost and low value work?

no, just because your product is cheap doesn't mean people will buy it if it is a piece of crap

experience curve

the drop in the average per-unit production cost that comes with accumulated production experience

Industry Life Cycle

the stages of introduction, growth, maturity, and decline that typically occur over the life of an industry

Generic Strategies

three widely applicable classic strategies for businesses of all types- differentiation, cost, and focus

Asset and cost surgery

try to aggressively cut administrative expenses and inventories and speed up collection of receivables, costs can also be reduced by outsourcing production of various inputs for which market prices may be cheaper than in-house production

focus strategy: differentiation

when a company focuses on a niche market and uses differentiation of their products. Best example is from the textbook with Aston Martin's hyper car. Focused on millionaires who want the best performing track cars