Ch. 6: Differentiation, Cost Leadership, Blue Oceans

focused cost-leadership strategy

Same as the cost 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

ambidextrous organization

an organization able to balance and harness different activities in trade-off situations

integration strategy

business-level strategy which successfully combines differentiation and cost-leadership activities

strategic trade-offs

choices between a cost or value position

cost-leadership cost drivers

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

dis economies of scale

increases in cost per unit when output increases

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

differentiation value drivers

product features, customer service, complements

value and cost drivers integration strategy

quality, economies of scope, customization, innovation, ARC

productivity frontier

relationship that captures the result of performing best practices at any given time, the function is concave to capture the trade-off between value creation and production cost

economies of scope

savings that come form producing two or more outputs at less cost than producing each output individually, despite using the same resources and technology

differentiation strategy

seeks to create higher value fro customers than the value that competitors create, by delivering products or services with unique features while keeping costs at the same or similar levels

cost-leadership strategy

seeks to create the same or similar value for customers, enabling the firm to offer lower prices to its customers

mass customization

the manufacture of a large variety of customized products or services at a relatively low per unit cost

scope of competition

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

business-level strategy

The goal-directed actions managers take in their quest for competitive advantage when competing in a single product market