Chapter 6: Business Strategy: Differentiation, Cost Leadership, and Blue Oceans – Terms & Concepts

question

business-level strategy

answer

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

question

strategic trade-offs

answer

choices between a cost or value position. Such choices are necessary because higher value creation tends to generate higher cost

question

differentiation strategy

answer

generic business strategy that seeks to create higher value for customers than the value that competitors create, while containing costs

question

cost-leadership strategy

answer

generic business strategy that seeks to create the same or similar value for customers at a lower cost

question

scope of competition

answer

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

question

focused cost-leadership strategy

answer

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

question

focused differentiation strategy

answer

same as the differentiation strategy except with a narrow focus on a niche market

question

economies of scope

answer

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

question

economies of scale

answer

decreases in cost per unit as output increases

question

minimum efficient scale (MES)

answer

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

question

diseconomies of scale

answer

increases in cost per unit when output increases

question

blue ocean strategy

answer

business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs

question

value innovation

answer

the simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers; considered a cornerstone of blue ocean strategy

question

value curve

answer

horizontal connection of the points of each value on the strategy canvas that helps strategists diagnose and determine courses of action

question

strategy canvas

answer

graphical depiction of a company's relative performance with its competitors across the industry's key success factors

question

strategic position is...

answer

a firm's strategic profile based on the difference between value creation and cost (V-C)

question

the most salient value drivers that managers have at their disposal are...

answer

product features, customer service, and complements

question

economies of scale allow firms to...

answer

1) spread their fixed costs over a larger output
2) employ specialized systems and equipment
3) take advantage of certain physical properties

question

learning effects differ from economies of scale because...

answer

there are differences in timing and complexity

question

value innovation focuses on...

answer

lowering costs and increasing perceived consumer benefits

1 of 20

question

business-level strategy

answer

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

question

strategic trade-offs

answer

choices between a cost or value position. Such choices are necessary because higher value creation tends to generate higher cost

question

differentiation strategy

answer

generic business strategy that seeks to create higher value for customers than the value that competitors create, while containing costs

question

cost-leadership strategy

answer

generic business strategy that seeks to create the same or similar value for customers at a lower cost

question

scope of competition

answer

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

question

focused cost-leadership strategy

answer

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

question

focused differentiation strategy

answer

same as the differentiation strategy except with a narrow focus on a niche market

question

economies of scope

answer

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

question

economies of scale

answer

decreases in cost per unit as output increases

question

minimum efficient scale (MES)

answer

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

question

diseconomies of scale

answer

increases in cost per unit when output increases

question

blue ocean strategy

answer

business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs

question

value innovation

answer

the simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers; considered a cornerstone of blue ocean strategy

question

value curve

answer

horizontal connection of the points of each value on the strategy canvas that helps strategists diagnose and determine courses of action

question

strategy canvas

answer

graphical depiction of a company's relative performance with its competitors across the industry's key success factors

question

strategic position is...

answer

a firm's strategic profile based on the difference between value creation and cost (V-C)

question

the most salient value drivers that managers have at their disposal are...

answer

product features, customer service, and complements

question

economies of scale allow firms to...

answer

1) spread their fixed costs over a larger output
2) employ specialized systems and equipment
3) take advantage of certain physical properties

question

learning effects differ from economies of scale because...

answer

there are differences in timing and complexity

question

value innovation focuses on...

answer

lowering costs and increasing perceived consumer benefits

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Chapter 6: Business Strategy: Differentiation, Cost Leadership, and Blue Oceans – Terms & Concepts

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