MSM 6650 Chapter 6

What drives the learning curve effect?

increases in cumulative output within the existing technology

Experience-curve effects based on process innovation allow a firm to...

leapfrog to a steeper learning curve, thereby driving down its per-unit costs

The concept of an ___________ attempts to combine both learning effects and process improvements

learning curve

An experience curve attempts to capture both - network effects and diseconomies of scale. - time compression diseconomies and mass customizations. - learning effects and process improvements. - economies of scope and network effects.

learning effects and process improvements.

Learning by doing allows a firm to...

lower its per-unit costs by moving down a given learning curve

Raoul is starting a new cosmetic company. His focus is on what he believes is a game changing lipstick. He wants to lipstick to be accessible to everyone, but the manufacturing costs are higher than he had anticipated. if Raoul wants to acheive his desired stategic position, he will need to ______________

make strategic trade offs

Tesla has an 80% learning curve, which means that _________.

per-unit cost drops 20% whenever output doubles

Why does the learning curve go down when productivity is considered?

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

Diseconomies of scalre often appear when a firm

becomes too large and complect to manage efficiently

A graphical depiction of a firm's relative performance across its industry's factors of competition is known as a

value curve

The percieved value that a compnay creates for consumers less the company's costs to create the value equals _________

the economic value created

A company with a cost-leadership strategy faces significant difficulties when _____________

the focus of compitition shifts from price to non-price attributes.

Different value drivers contribute to competitive advantage if ____________

the increase in percieved value exceeds the corresponding cost increase.

Red oceans are

the known market space for existing industries. In red oceans the rivalry among existing firms is cut-throat because the market space is crowded and competition is a zero-sum game

if two firms produce very similar products at the same rate of output, and firm A is able to achieve lower per-unit cost that firm B by taking advantage of a new manufactoring technology, firm A is benefiting from

an experience-curve effect based on process innovation.

a __________ strategy may fail when the focus of the competition shifts to price rather than unique product featurs

differentiation

Unique features and attributes that differentiate a porduct from competitors offerings allow the firm to

charge premium pricing

The Example of Marriott offering a line of different hotels catering to different types of travelers is and example of

how a firm can compete by offering more percieved value at a similar price.

All of the following are tools primarily used to achieve cost-leadership except - controlling the cost of inputs. - leveraging economies of scale. - offering products at a premium price. - learning by doing.

offering products at a premium price.

A differentiation strategy is typically associated with ________ pricing

premium

What must strategic leaders keep in mind if they are going to achieve successful strategic positioning?

to achieve strategic positioning, firms must make important trade offs

Learning Curves

First documented in aircraft manufacturing as the US ramped up production in the 1930s, prior to its entry into WWII -Go down as it takes less and less time to produce the same output -By moving further down a given learning curve than competitors, a firm can gain competitive advantage

As JetBlue grew, which of the following occured during the years following 2007?

It suffered a competitive disadvantage.

Strategic Position

A strategic profile based on value creation and cost that's in a specific product market -A firm attempts to stake out a valuable and unique position that meets customer needs while simultaneously creating as large a gap as possible between the value the firm's product creates and the cost required to produce it

Why do many firms fail to successfully implemet a blue ocean strategy?

Because they end up being "stuck in the middle" unable to increase value and lower cost at the same time.

A_________ Outlines the steps a manager will take to acchieve competitive advantage in a single product market.

Business level Strategy

A company's goal-directed plans regarding how to compete for advantage is known as the firm's ____________

Business-level strategy

Value drivers known as__________ add value to a product or service when they are consumed in tandem with the focal prduct.

Complements

Bundling of products and services that are consumed in tandem to create value is an example of ______________

Components

Broad Competitive Scope & Strategic Position on Cost:

Cost Leadership

The goal of a _________ strategy is to acheive costs below those of competitors while maintaining similar value. A firm with this strategy could or could not acheive differentation parity.

Cost Leadership

A firm that offers a liberal return policy and free shipping on goods ordered online hopes to increase its perceived value by focusing on _____________

Customer service

Which value driver would be the focus of a company that sells products that are similar in cost and features to competing products and that provides a 60-day guarantee with no questions asked?

Customer service

Broad Competitive Scope & Strategic Position on Differentiation:

Differentiation

A firm that increases it output of a given product and experiences a simultaneous decrese in per unit costs is taking advantage of __________

Economies of Scale

A firm that hopes to achieve a competitive advantage by maintaining an effeicent supply chaing and taking advantage of economies of scael and a well trained staff is focusing on ___________

cost drivers

Which of the following are pricing options offered by a blue ocean strategy ?

1. The firm can charge a lower price that differentiators. 2. The firm can charge a higher price than the cost leaders.

A successful blue ocean strategy requires strategists to reconcile the trade offs between

differentiation and cost-leadership

When a blue ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not - value drivers but cost drivers. - cost drivers but value drivers. - complements but substitutes. - substitutes but complements.

substitutes but complements.

The Benefits of a cost-leadership strategy regarding the threat of entry in an industry includes ____________

the protection against entry due to economies of scale

The horizontal connection of the points of each value on the strategy canvas is known as _____________

the value curve

Business-level strategy broad question is

"How should we compete"

Minimum Efficient Scale

(MES) 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

Which of the following accurately describes the relationship between value and cost that would suggest that firm A has created a competitive advantage over firm B?

(V-C)A > (V-C)B

Economies of Scale

Decreases in cost per unit as output increases -Allows firms to: --Spread their fixed costs over a larger output --Employ specialized systems and equipment --Take advantage of certain physical properties

How to compete on a busines slevel is defined by the variables value and cost. Together they define the __________

Economic value created

Narrow Competitive Scope & Strategic Position on Cost:

Focused Cost Leadership

A firms strategic position is determined by the relationship of which two variables

Value creation and cost

Although a differentiation strategy is generally associated with premium pricing, managers have an important second pricing option:

When a firm is able to offer a differentiated product or service and can control its cost at the same time, it is able to gain market share from other firms in the industry by charging a similar price but offering more perceived value.

In addition to having the lowest cost, a low-cost leader is likely to have ____________

a large market share

A differentation strategy can be threatened when ___________

a product becomes commoditized, and the focus of the competition shifts to price.

By using a differentiation strategy, a firm aims to ___________

add unique features that will increase the percieved value of a product.

Value Innovation

aligning innovation with total perceived consumer benefits, price and cost implementing a blue ocean strategy requires making competition irrelevant and creating a new market space

Which capability is required to create superior product features?

R&D

Scope of Competition

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

The competitive advantage is based on the difference between

- Value - Cost

Which are considered the two generic business-level strategies?

- differentiation - cost leadership

The most important Cost Drivers that managers can manipulate to keep their costs low are:

-Cost of input factors -Economies of scale -Learning-curve effects -Experience-curve effects

Learning effects differ from economies of scale as shown:

-Differences in timing: learning effects occur over time as output accumulates, while economies of scale are captured at one point in time when output increases. Although learning can decline or flatten, there are no diseconomies to learning. -Differences in complexity: In some production processes, effects from economies of scale can be quite significant, while learning effects are minimal. In contrast, in some professions, learning effects can be substantial, while economies of scale are minimal ---Managers need to understand such differences to calibrate their business-level strategy. If a firm's cost advantage is due to economies of scale, a manager should worry less about employee turnover and more about drops in product runs.

To formulate an appropriate Business-Level Strategy, managers must answer the who, what, why, and how questions of competition:

-Who- which customer segments will we serve? -What customer needs, wishes, and desires will we satisfy? -Why do we want to satisfy them? -How will we satisfy our customers' needs?

Which of the following are components of a cost-leadership strategy?

1. Acceptable Value 2. Lowest costs in the industry.

A firm pursuing a blue ocean strategy can increase its profit margins by implementing which of the following pricing options?

1. Charge a higher price than the cost leader. 2. Charge a lower price than the differentiator.

The most important cost drivers are __________

1. Cost of inputs 2. Experience curve effects 3. Economies of scarel 4. learning curve effects

Which of the following are considered the two generic business-level strategies

1. Cost-Leadership 2. Differentiation

Larger outputs allows firms to invest in more specialized systems such as _________

1. manufacturing robots 2. Enterprise resource planning software

Process Innovation

A new method or technology to produce an existing product -Initiates a new and steeper curve

Complements

Add value to a product or service when they are consumed in tandem

Which of the following situations would justify the use of manugacturing robots by a producer of packaged foods?

An increase in demand from the market

Blue Ocean Strategy

Business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs -Blue oceans represents untapped market space, the creation of additional demand, and the resulting opportunities for highly profitable growth -Allows a firm to offer a differentiated product or service at low costs

Cost-Leadership Strategy

Generic business strategy that seeks to create the same or similar value for customers at a lower cost -Goal is to reduce the firm's cost below that of its competitors while offering adequate value -The Cost Leader, as the name implies, 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 -The cost leader attempts to optimize all of its value chain activities to achieve a low-cost position -A cost leader can achieve a competitive advantage as long as its economic value created (V-C) is greater than that of its competitors

Managers must make strategic trade-offs involving choices between cost and value because ______________

Higher Value tends to require higher costs.

High-end pen manufacturer Mont Blanc pursues a differentiation strategy with a(n) _________ scope of competition, pursuing only those who need or want an expesinve writing instrument.

Narrow

Whereas the firm's strategic position can be considered either differentiated or cost-focused, the scope of competition is considered _________

Narrow or Broad

Cost of Input Factors

One of the most basic advantages a firm can have over its rivals is access to lower-cost input factors such as - raw materials, - capital, - labor, and - IT services

Focused Cost-Leadership Strategy

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

Focused Differentiation Strategy

Same as the differentiation strategy except with a narrow focus on a 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.

A firm's business-level strategy determines its _____ _____

Strategic Position

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 -A cornerstone of Blue Ocean Strategy -Instead of attempting to out-compete your rivals by offering better features or lower costs, successful value innovation makes competition irrelevant by providing a leap in value creation, thereby opening new and uncontested market spaces -Requires that a firm's strategic moves lower its costs and at the same time increase the perceived value for buyers. Lowering a firm's cost is primarily achieved by eliminating and reducing the taken-for-granted factors that the firm's rivals in their industry compete on. -Perceived buyer value is increased by raising existing key success factors and by creating new elements that the industry has not offered previously.

Experience Curve

The underlying technology changes while holding cumulative output constant

Downtown Coffee Roasters is a premium cafe that is reputed for its superior customer service. The coffee shop also serves gourmet food to its customers, which allows it to charge a premium price. Budget Beans, in contrast, is a chain of coffee shops that charges the lowest price in the industry due to its self-service policy. However, Perky's Coffee Inc. has found a balance between these two strategic groups by using automated ordering to free up its employees to work as master baristas and bakers, thus focusing on creating excellent products. It charges a price slightly above that of Budget Beans. In this scenario, Perky's Coffee is following a - liquidation strategy. - product diversification strategy. - market penetration strategy. - blue ocean strategy.

blue ocean strategy.

The minimum efficient scale indicates the level of output needed to ________ the cost per unit as much as possible.

bring down

If costs are equal, when a firm has a higher value gap than its competitor, it can be inferred that the firm - can charge a premium price for its products and services. - has achieved a competitive parity in its chosen industry. - has lost its competitive advantage to its competitor. - can adopt a cost-leadership strategy.

can charge a premium price for its products and services.

When pursuing a differentation strategy, a firm can acheive a competitive advantage by _________

ensuring that its economic value exceeds that of its competitors.

In the _____, firms change the underlying technology while holding cumulative output constant. - learning curve - experience curve - minimum efficient scale - maximum efficient scale

experience curve

The concept of an ________ attempts to combine both learning effects and process improvements.

experience curve

The cube-square rule make it_________ for smaller stores to compete with larger retailers.

harder

Dr. Shetty is able to drive down the cost of complex medical procedures from $100,000 to $2,000 not by doing one big thing, but rather by doing a thousand small things. This approach focuses on driving down the cost of healthcare through - value of input factors. - cost of input factors. - process innovation. - product innovation.

process innovation.

The beneficial effect of a differentiation strategy on the power of suppliers in an industry is ____________

protection against an increase in input prices.

A manufacturer of electronic components can use its manufacturing machines to produce many different components such as, semiconductors, sensors, and capacitors. in this case, the firm benefits from an economy of ___________, reducing overall production cost by finding multiple uses for its components and facilities.

scope

Economies of scale present an opportunity to increase profits because as the number of units within the relevant range increases, fixed costs ______.

stay the same

In the learning curve, the_________ the learning curve, the more learning takes place

steeper

A company's strategic profile based on value creation and cost in a specefic product market is the company's __________

strategic position

Choosing a business-level strategy helps to define a firm's ________ in a given product market

strategic position

One way that a company can try to avoid problems resulting from diseconomies of scale is to ________.

structure the company into smaller units

To initiate a strategic move that allows a firm to open a new and uncontested market space through value innovation, managers must answer the four key questions when formulating a Blue Ocean Business Strategy:

-Eliminate. Which of the factors that the industry takes for granted should be eliminated? -Reduce. Which of the factors should be reduced well below the industry's standard? -Raise. Which of the factors should be raised well above the industry's standard? -Create. Which factors should be created that the industry has never offered.

Managers can adjust a number of different levers to improve a firm's strategic position. These levers either increase perceived value or decrease costs. The most salient value drivers that managers have at their disposal are:

-Product features -Customer service -Complements

Narrow Competitive Scope & Strategic Position on Differentiation:

Focused Differentiation

Differentiation Strategy

Generic business strategy that seeks to create high value for customers than the value that competitors create -Goal is to add unique features that will increase the perceived value of goods and services in the minds of consumers so they are willing to pay a higher price -A firm following this strategy aims to achieve in the minds of consumers a level of value creation that its competitors cannot easily match -Company using this strategy can achieve a competitive advantage as long as its economic value created (V-C) is greater than that of its competitors

Business-Level Strategy

The goal-directed actions managers take in their quest for competitive advantage when competing in a single product market -May involve a single product or a group of similar products that use the same distribution channel -Concerns the question: "How should we compete?"

The horizontal connection of the points of each value on the strategy canvas is know as _________

The value curve

Contour Autos competes against the global leaders in the automobile industry by developing and selling acceptable quality vehicles at a lower price. This has been possible due to the company's large-scale production that reduces its manufacturing expenses. Which of the following generic business strategies is Contour Autos applying in this scenario? - differentiation strategy - product diversification strategy - cost-leadership strategy - liquidation strategy

cost-leadership strategy

According to the ______ rule, increasing the surface area (size) of a storage unit or retail facility results in a disproportionate increase in volume (space).

cube square

A struggling retailer seeking to implement a blue ocean strategy is likely to experience difficulty with ______.

cutting costs and increasing value at the same time

Firms pursuing a cost-leadership strategy seek to - create higher value for customers and offer premium pricing. - keep their cost structures at the same or similar levels as that of the competitors. - deliver products or services at a lower cost than competitors. - gain competitive advantage by reducing the value gap.

deliver products or services at a lower cost than competitors.

A cost leader can achieve a competitive advantage by ________.

reducing costs below those of competitors while maintaining a similar value

A firm that follows the differentiation strategy is protected from the threat of new entrants primarily due to its - diseconomies of scale. - reputation for quality. - low pricing. - low cost per unit.

reputation for quality.

what is the relationship between fixed costs and economies of scale?

the amount of fixed costs allocated to each unit of output decreases as output increases

Cost Leader

-Protected from other competitors because of having the lowest cost -They are fairly well isolated from threats of powerful suppliers to increase input prices, because they're more able to absorb price increases through accepting lower profit margins -Can absorb price reductions more easily when demanded by powerful buyers

A successful differentiation strategy is likely to be based on:

-Unique or specialized features of the product -An effective marketing campaign -Intangible resources such as a reputation for innovation, quality, and customer service

Two important features that managers can adjust in an effort to improve the firms strategic position are ________

1. Customer Service 2. Product Features

A Blue Ocean Strategy can be quite difficult to translate into reality:

-Differentiation and cost leadership are distinct strategic positions that require important trade-offs -Difficult to implement because it requires the reconciliation of fundamentally different strategic positions- differentiation and low cost- which in turn require distinct internal value chain activities so the firm can increase value and lower cost at the same time -Consequence of a strategy gone bad- the firm ends up being stuck in the middle, meaning the firm has neither a clear differentiation nor a clear cost-leadership profile. Being stuck in the middle leads to inferior performance and a resulting competitive disadvantage

When a Blue Ocean Strategy is successfully implemented it allows two pricing strategies:

-The firm can charge a higher price than the cost leader, reflecting its higher value creation and thus generating greater profit margins -The firm can lower its price below that of the differentiator because of it's lower-cost structure. If the firm offers lower prices than the differentiator, it can gain market share and make up the loss in margin through increased sales

In terms of busines strategy, blue oceans represents which of the following?

1. Increased Demand 2. Untapped market space.

In a focused differentiated strategy, the competitive scope is __________ than in a traditional differentiation strategy.

narrower

As differentiation and cost leadership are distinct strategic positions that require important trade-offs, it is - easy to build an ambidextrous organization. - best for firms to avoid pursuing a generic business-level strategy. - quite difficult to translate a blue ocean strategy into reality. - easy to increase value and lower cost at the same time.

quite difficult to translate a blue ocean strategy into reality.

The most significan challenge JetBlue faced in implementing its business strategy was ___________

reconciling the trade-offs between cutting costs and providing superior service.

When pursuing value innovation, managers must answer questions focused on which of the following?

1. Increasing Percieved Consumer Benefits. 2. Lowering Costs.

Which of the following statements about a strong value curve are true?

1. It has focus. 2. It has divergence.

In order for a firm to successfully implement a business-level strategy, it must limit the impact of ________

1. Its own internal weaknesses. 2. External threats

Which of the following are examples of ways that a large retailing firm can increase the percieved value of its offering by focusing on customer service?

1. Maintaining a domestic call center that is open 24 hours per day. 2. Offering a "no questions asked" return policy

In terms of competitive positioning, erosion of margins is risk for which of the following competitive forces?

1. Power of Suppliers 2. Power of of Buyers 3 Threat of Entry

Which of the following are significant threats to a firm pursuing a cost-leadership stratgety

1. Replacement by innovative substitutes 2. Competitors adopting similar business stratagies 3. value falling below the aceptable threshold.

Product Features

By adjusting this, managers can increase the perceived value of the product or service offering -Adding unique product attributes allows firms to turn commodity products into differentiated products commanding a premium price

Strategic Trade-Offs

Choices between a cost or value position. -Such choices are necessary because higher value creation tends to generate higher cost -Managers must address the tension between value creation and the pressure to keep cost in check as to not erode the firm's economic value creation and profit margin

A business strategy is more likely to lead to a competitive advantage if: a firm has a... it allows firms to...

Clear strategic profile -Either as a differentiator or a low-cost leader Either perform similar activities differently or perform different activities than their rivals that result in creating more value or offering similar products or services at lower cost

A firm that pursues a differentiation strategy will often find that the added expense of offering new or unique product features offsets the increase in percieved value, and profit margins begin to erode. This underscore the importance of ________ control for firms pursuing a differentiation strategy.

Cost

While Influx Electronics Inc. incurs $350 to manufacture a laptop, its competitor, Hearthstone Electronics Inc., incurs $300. However, laptops of both the companies have been able to create the same value among customers. From the given scenario, it can be inferred that - Influx Electronics has a competitive advantage over Hearthstone Electronics. - Influx Electronics is a cost leader when compared to Hearthstone Electronics. - Hearthstone Electronics and Influx Electronics share a differentiation parity. - Hearthstone Electronics can charge a higher price for its laptops.

Hearthstone Electronics and Influx Electronics share a differentiation parity.

Value Curve

Horizontal connection of the points of each value on the strategy canvas that helps strategists diagnose and determine courses of action -Strong curve has focus and divergence, and it can even provide a kind of tagline as to what strategy is being undertaken or should be undertaken -Curve that zigzags across the strategy canvas indicates a lack of effectiveness in its strategic profile

Positive adjustments in product features, customer service, and complements may enable managers to ____________.

Improve the firsm stategic position.

Diseconomies of Scale

Increases in cost per unit when output increases -As firms get too big, the complexity of managing and coordinating raises the cost, negating any benefits to scale -Large firms tend to become overly bureaucratic, with too many layers of hierarchy, they grow inflexible and slow in decision making

A firm's competitive advantage is determined jointly by __________ Industry effects and firm effects.

Industry

To formulate an effective business strategy, managers need to keep in mind that competitive advantage is determined jointly by _____ and _____ effects

Industry; Firm -Industry Effects: 5 Forces Model, Complements, Strategic Groups -Firm Effects: Value position and cost position relative to competitors, business strategies: Cost leadership, differentiation, blue ocean

_____ _____ are critical to driving down a firm's cost and strengthening a cost-leadership position

Scale Economies -Although managers need to increase output to operate at a minimum efficient scale, they also need to be watchful not to drive scale beyond Q2, where they would encounter diseconomies -Monitoring the firm's cost structure closely over different output ranges allows managers to fine-tune operations and benefit from economies of scale

There are several cost drivers that can be managed in order to establish a low-cost leadership advantage. One of the primary cost drivers is - adding unique features that turn standard commodities into differentiated products. - combining experience-based learning and process innovation to move onto a steeper learning curve. - creating personalized customer service in order to minimize price sensitivity among customers. - shifting to small-scale production processes in order to create highly customized products.

combining experience-based learning and process innovation to move onto a steeper learning curve.

A tablet manufacturer that includes a free stylus with every purchase is using ________ to enhance users' experiences and increase the percieved value of its tablet.

complements

The viability of a differentiation strategy is severely undermined when the - difference between perceived value and costs is significant. - focus of competition shifts to value-creating features rather than price. - differential appeal is based more on intangible resources than tangible resources. - differentiated products become commoditized throughout the industry.

differentiated products become commoditized throughout the industry.

There exist important trade-offs between value creation and low cost because value creation and cost tend to be - negatively correlated. - positively correlated. - independent of each other. - inversely related.

positively correlated.

The two factors upon which a successful business strategy is built are __________

1. The firms internal strengths 2. External opportunities in the market.

Which two of the following variables can managers primarily manipulate in order to answer the question, "How should we Compete?".

1. Value 2. Cost

To formulate an appropriate business-level strategy, managers must answer the "who-what-why-and-how" questions of competition. Which of the following would be the appropriate questions to answer?

1. What customer need will we satisfy 2. How will we satisfy our cusatomers needs 3. which customer segments will we serve

Which of the following statements accurately brings out the difference between economies of scale and learning effects? - While there are no diseconomies to scale, there are diseconomies to learning. - Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased. - Firms experience economies of scale when output increases, and they experience learning effects when output decreases. - Economies of scale reduce cost per unit, whereas learning effects increase cost per unit.

Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased.

When attempting to increase the perceived value of the firm's product or service offerings, managers must remember that the different value drivers contribute to competitive advantage only if...

Their increase in value creation exceeds the increase in costs

Which of the following best defines economies of scope?

They are the savings that come that come from producing two or more outputs at less cost than producing each output individually.

Differentiation Strategy and Cost-Leadership Strategy are called generic strategies because...

They can be used by any organization- manufacturing or service, large or small, for-profit or nonprofit, public or private, domestic or foreign- in the quest for competitive advantage, independent of industry context

In a focused differentiation strategy, a firm seeks to - offer low-priced products and services with a narrow focus on a niche market. - create higher customer value than the competitors in different segments of a mass market. - deliver products or services with unique features to a specific, narrow part of the market. - focus on reducing the value gap to differentiate itself from the competitors.

deliver products or services with unique features to a specific, narrow part of the market.

A blue ocean strategy typically allows a firm to - provide unique product or service features at a premium price. - add product features that raise costs without raising the perceived value. - reduce the value gap created by their products. - offer a differentiated product or service at low cost.

offer a differentiated product or service at low cost.

A producer of consumers headphones that successfully differentiates its products with a patented noise-cancelling technology and celebrity endorsements will enjoy which of the following benefits?

1. Less intense competition from imitators. 2. The ability to charge a premium price.

Strategy Canvas

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

Best Mobile and Turbo Tech Inc. are two competitors in the mobile phone market. The cost incurred by each company to manufacture smartphones is $200 per unit. Although both the companies sell their smartphones at the same price, Turbo Tech has a larger market share in the laptop industry. What does this imply? - Turbo Tech has a cost advantage over Best Mobile. - Best Mobile has a competitive advantage over Turbo Tech. - Turbo Tech has been able to offer more perceived value than Best Mobile. - Best Mobile has created a higher value gap than Turbo Tech.

Turbo Tech has been able to offer more perceived value than Best Mobile.

A firm that manages to avoid competition entirely by offering a product or service that creates an uncontested market space is engaging in ___________

value innovation

The success of each different business-level strategy (cost-leadership, differentiation, and focused variations thereof) depends on context and relies on two factors:

-How well the strategy leverages the firm's internal strengths while mitigating its weaknesses -How well it helps the firm exploit external opportunities while avoided external threats

Although a Cost-Leadership Strategy provides some protection against the 5 Forces, it also carries some risks:

-If a new entrant with new and relevant expertise enters the market, the low-cost leader's margins may erode due to loss in market share while it attempts to learn new capabilities -The risk of replacement is particularly pertinent if a potent substitute emerges due to an innovation -Powerful suppliers and buyers may be able to reduce margins so much that the low-cost leader could have difficulty covering the cost of capital and lose the potential for a competitive advantage -Over time, competitors can beat the low-cost leader by implementing the same business strategy, but more effectively

An auto manfacturer that has access to cheaper labor and raw materials than its rivals will have a competitive advantage regarding lower cost of _________ factors.

Input

GiftBasket.com has successfully created a higher perceived value in the e-commerce industry, though it offers the same products at slightly higher prices than the competitors. This has been mainly attributed to the company's easy-to-navigate website, simple return procedures, fast delivery, and cash on delivery option. Thus, the value driver for GiftBasket.com is its - lower value gap. - superior customer service. - economies of scale. - availability of complements.

superior customer service.

In terms of productivity, which of the following is true of learning curves?

they go down