ch 4-notes

def differentiation

products and services have a higher cost but provide a greater range of activities and or higher quality

def integrated cost leadership and differentiation strategy

strives to provide customers with relatively low cost products that also have valued differentiated features. a company using this strategy will ultimately go toward one or the other strategy. "they get stuck in the middle"

def broad scope

the company meets industry wide needs and a large potential market

def market segmentation

the process of clustering people with similar needs into individual and identifiable groups

def counterfeiting

when companies attempt to display differentiated features at reduces prices through a "knockoff" product (threat of substitute products increased, bargaining power of buyers increase)

2 types of market segementation

1. consumer markets 2. industry markets

2 types of competitive advantages

1. cost 2. differentiation

4 types of business level strategies

1. cost leadership strategy 2. differentiation strategy 3. focused strategy 4. integrated cost leadership and differentiation strategy

threats to differentiation strategy

1. experience 2. imitation 3. counterfeiting

*****All organizations must use their __ to satisfy the __ of what their ____

*****all organizations must use their core competencies (how) to satisfy the needs (what) of their target group of customers (who)

def differentiation strategy

1. firm's with this strategy produces non standardized products for customers who value the differentiated features more than they value low costs 2. it uses narrow scope 3. research and development team focuses on product improvement and marketing

5 facts about cost leadership strategy (potential new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, rivalry with existing competitors)

1. potential new entrants- ever improving levels of efficiency increases profits and it serves as a significant barrier to a potential new competitor 2. bargaining power of suppliers- the low cost provider is able to help keep prices from suppliers low for the entire industry 3. bargaining power of buyers: powerful buyers can force the firm to lower prices even more but if they have to exit the industry the buyer has to deal with higher prices from the next low cost provider 4. threat of substitute products- can reduce prices even more when confronted with a substitute product 5. rivals are hesitant on the basis of cost with the low cost provider

def cost competitive advantage

attempting to pursue low cost position

business level strategy

an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantages by exploiting core competencies in specific product markets

def experience

can reduce customer loyalty because the differentiated features are no longer worth the premium costs (changes bargaining power of buyers)

Each business level strategy helps a company establish and exploit a particular ___ and type of __

competitive advantage, scope

def imitation

imitation of some of the differentiated features by other companies can reduce customer loyalty (changes existing power of competition, bargaining power of buyers)

greatest threat to the low cost provider

is innovation. which may make established cost lowering practices and technologies obsolete

def focused strategy

is when a firm tries to out focus the competition in either costs or differentiated features in a specific market segment of an industry

def narrow scope

meets the need of specific or focused group

3 market segments we can focus on

1. a particular buyer group 2. specific geographic area 3. different segment of a product line

2 types of competitive scope

1. broad scope 2. narrow scope

5 facts about differentiation strategy (potential new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, rivalry with existing competitors)

1. potential new entrants- customer loyalty is a huge barrier to a potential new entrant 2. bargaining power of suppliers- like the firm's products suppliers provide high quality resources at higher prices- they don't have the power 3. bargaining power of buyers- the uniqueness of the differentiated products makes customers less price sensitive, therefore the company with the differentiated strategy has the power 4. threat of substitute products- brand name goods customer loyalty and unique differentiated products are barriers to products substitutes, the company with the differentiated strategy has the power 5. rivalry with existing competitors- firm's with a differentiating strategy typically produce loyal customers

def cost leadership strategy

1. sell standardized goods or services with acceptable quality to the industry's most typical customer 2. inbound logistics and outbound logistics account for a significant portion of the total cost to produce and distribute goods and services

3 determinants of business level strategy

1. who (who will be served/ determine customers) 2. what (what consumer needs will be satisfied, directly related to the product we produce) 3. how (how will these needs be satisfied/ focus on what core competencies we have to satisfy the problems)