Small Business Management Ch 7

Parallel competition

An imitative business that competes locally with others in the same industry

Innovative strategy

An overall strategic approach in which a firm seeks to do something that is very different from what others in the industry are doing

Imitative strategy

An overall strategic approach in which the entrepreneur does more or less what others are already doing

cost strategy

a generic strategy aimed at mass markets in which a firm offers a combination of cost benefits that appeals to the customer

Mass market

large portions of the population

Strategy

-The ideas and actions that explain how a firm will make its profit -Good Strategy leads to greater chances for survival and higher profits for small businesses -Fit to the particulars of your business and the resources you can bring to it

Five initial key decisions

1. As owner, what do you expect out of the business 2. what is your product or service idea (and its industry) 3. For your product or service, how innovative or imitative will you be 4. Scale: Who do you plan to sell to-everyone or targeted markets 5. Scope: Where do you plan to sell-locally, regionally, nationally, globally

Perceptual map

A graphic display which positions products, services, brands, or companies according to their scores of important strategic dimensions.

Decline stage

A life cycle stage in which sales and profits of the firm begin a falling trend.

Benefits

Characteristics of a product or service that the target customer would consider worthwhile Value benefit, cost benefit -the best way to identify desirable benefits is through potential customers

Customers & Benefits: the Second step of Strategic Planning

Corporate customers loyal customers local customers passionate customers

Degree of similarity

The extent to which a product or service is like another

Industry

The general name for the line of product or service being sold, or the firms in that line of business -Key is selecting an industry that offers good potential for making a profit -Also needs to offer attractive opportunities to work with a minimum of risk and competition

Magic Number

The pots-tax income the entrepreneur personal seeks from the business

Pure Inovation

The process of creating new products or services which results in a previously unseen product or service -also called blue ocean strategy

Maturity stage

The third life cycle stage, marked by a stabilization of demand, with firms in the industry moving to stabilize or improve profits through cost strategies.

Niche market

a narrowly defined segment of the population that is likely to share interests or concerns

Industry analysis (IA)

a research process that provides the entrepreneur with key information about the industry, such as its current situation and trends

Differentiation strategy

a type of generic strategy aimed at clarifying how one product is unlike another in a mass market

Boom

a type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time

Shake-out

a type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry

Supply chain

a way to think about the line of distribution of a product form its start as material outside the target firm, to its handling in the target firm, to its handling by seller, with placement into the hands of customers

Competitor

all the firms also selling that product or service

Growth stage

an industry life cycle stage in which customer purchases increase at a dramatic rate

Entry wedge

an opportunity that makes it possible for a new business to gain a foothold in a market -supply shortages, unutilized resources, customer contracting, second sourcing, market relinquishment, favored purchasing, government rules

Market

business term for the population of customers for your product or service

Industry dynamic

changes in competition, sales and profits in an industry over time

Supra-strategies

classic benefit combinations which are designed to work where there are many small businesses in an industry, along with a few larger firms

Strategic actions

competitive responses requiring a major commitment of resources

tactical actions

competitive responses with low resource requirements

Gross profit

funds left over after deducting the cost of goods sold

Scope

geographic range covered by the market local to global -Knowing your market scope helps deciding where to focus sales and advertising efforts -knowing your target market gives you a way to know which competition to worry about most, namely those within your market scope

Retrenchment

organizational life cycle stage in which established firm must find new approaches to improve the business and its chances for survival

Scale

size of the market

Value proposition

small business owners' unique selling points (also known as benefits) that customers can expect from your goods or services, including benefits that differentiate your offering for those of the competition

Net profit

the amount of money left after operating expenses are deducted from the business

Profit before taxes

the amount of profit earned by a business before calculating the amount of income tax owed

Introduction stage

the life cycle stage in which the product or service is being invented and initially develped

Competitive advantage

the particular way a firm implement customer benefits that keeps the firm ahead of the other firms in the industry

Competitive advantage

the particular way a firm implements customer benefits that keeps the firm ahead of other firms in the industry

Generic strategies

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

Incremental innovation

An overall strategic approach in which a firm patterns itself on other firms, with the exception of one or tow key areas

focus strategy

a generic strategy that targets a portion of the market, called a segment or niche