4860 Ch. 6 study guide

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Economies of scale

decreases in cost per unit as output increases

the most important cost drivers are...

experience curve effects learning curve effects economies of scale cost of input factors

industry and firm effects

how a firms competitive advantage is defined

manufacturing robots and enterprise resource planning software

larger output allows firms to invest in more specialized systems such as...

economies of scope

reducing overall production costs by finding multiple uses for its components and facilities

product features complements customer service

the 3 most important value drivers that managers can use to create a competitive advantage

protection against an increase in input prices

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

differentiation and cost leadership

the business strategy Jet Blue pursues in order to gain a competitive advantage

bring down

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

minimum efficient scale

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

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

the relationship between fixed costs and economies of scale

narrow or broad

the scope of competition is considered....

cost leadership strategy

the strategy that involves getting the lowest costs in industry and acceptable value

cost and value

2 variables mangers primarily use to manipulate in order to answer the question "how should we compete?"

labor capital IT services Raw Materials

4 input factors

1. which product factors to eliminate 2. which product factors to raise above the industry standard 3. which product factors to reduce below the industry standard 4. which new product factors to create

4 questions mangers must answer when pursuing value innovation

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

a firm pursuing a blue ocean strategy can increase its profits by implementing two pricing options

control costs

an important requirement for increasing economic value creation under a differentiation strategy

red ocean strategy

Products in the affordable "business-casual" clothing market have largely become commoditized, and most retailers have begun to compete mainly on price rather than product features. In this environment, it is impossible for one retailer to gain market share without losing it. What strategy is this an example of?

value innovation

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

strategic trade-off

a situation that requires choosing between a cost or value positions

cutting costs and increasing value at the same time

a struggling retailer seeking to implement a blue ocean strategy is likely to experience this difficulty

compliments

a tablet manufacturer that includes a free stylus with every purchase is using __________ to enhance users' experience and increase the perceived value of its tablets

input factors

an auto manufacturer that has access to cheaper labor and raw materials than its rivals will have a competitive advantage regarding lower cost of....

the most important value drivers that mangers can use to create a competitive advantage are....

compliments, product features, and customer service

cost-leadership and differentiation

two basic business level strategies

product features and customer service

two important features that managers can adjust in an effort to improve the firms strategic position

cube-square rule

this rule makes it harder for smaller stores to compete with larger retailers

diseconomies of scale

when a firm increases output and it results in an increase in costs

cost leadership strategy

when the goal is to achieve costs below those of competitors while maintaining similar value.

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

why do many firms fail to successfully implement an integration strategy?


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