Chapter 6

question

Business Strategy

answer

How to compete for advantage within a given industry
(Who, What, Why, and how)

question

competitive advantage

answer

an advantage over competitors gained by:
offering greater customer value
having lower prices
providing more benefits that justify higher prices

question

Firm Effects

answer

Internal functioning of the firm
(value vs. cost positions relative to its competitors)

question

Industry Effects

answer

Effects of the forces operating in the industry

question

Strategic position

answer

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

question

Competitive advantage when?

answer

Greater value or lower cost

question

Value Gap

answer

The difference between the value generated by a firm and the costs incurred in the process of generating it

question

strategic trade-offs

answer

Choices between a cost or value position.
(higher value = higher cost)

question

2 goals of business strategy

answer

1) perform completely different activities than rivals,
2) perform similar activities as the rivals, but differently

question

Porter's 4 Generic Strategies

answer

Differentiation (Lamborghini)
Cost-leadership (Walmart & Timex)
Focused differentiation (Rolex)
Focused cost-leadership. (Local Grocery Store)

question

Value drivers

answer

increase the value and quality of their products/services

question

4 types of value drivers

answer

Product features, customization, customer service, complements

question

Most important value driver

answer

product features

question

Cost Drivers

answer

factors that reduce or minimize the costs involved in conducting business

question

Input Factors

answer

materials/resources, labor or money obtained at a low cost (De Beers tight control of raw materials)

question

Economies of scale (Cost Driver)

answer

reduction in per-unit cost due to the increase in output
(Spread fixed costs like rent)

question

Learning Curves

answer

it takes less and less time to produce the same output as firms learn to be more efficient.

question

Experience Curves

answer

combining economies of scale and learning
(Made possible by "process innovation")

question

Diseconomies of scale

answer

increases in cost per unit when output increases

question

Minimum efficient scale

answer

maximum advantage accruing to a firm through increase in output

question

Relationship between cost and output?

answer

U Shaped
Economies / Minimum efficient scale / Disecomies

question

Integration strategy

answer

it integrates the aspects of differentiation and cost-leadership

question

4 primary drivers of integration

answer

Quality
Economies of scope
Innovation
Structure, Culture, & Routines

question

Economies of Scope

answer

using the same process/material/ingredients in multiple ways so that the cost of production is reduced

1 of 24

question

Business Strategy

answer

How to compete for advantage within a given industry
(Who, What, Why, and how)

question

competitive advantage

answer

an advantage over competitors gained by:
offering greater customer value
having lower prices
providing more benefits that justify higher prices

question

Firm Effects

answer

Internal functioning of the firm
(value vs. cost positions relative to its competitors)

question

Industry Effects

answer

Effects of the forces operating in the industry

question

Strategic position

answer

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

question

Competitive advantage when?

answer

Greater value or lower cost

question

Value Gap

answer

The difference between the value generated by a firm and the costs incurred in the process of generating it

question

strategic trade-offs

answer

Choices between a cost or value position.
(higher value = higher cost)

question

2 goals of business strategy

answer

1) perform completely different activities than rivals,
2) perform similar activities as the rivals, but differently

question

Porter's 4 Generic Strategies

answer

Differentiation (Lamborghini)
Cost-leadership (Walmart & Timex)
Focused differentiation (Rolex)
Focused cost-leadership. (Local Grocery Store)

question

Value drivers

answer

increase the value and quality of their products/services

question

4 types of value drivers

answer

Product features, customization, customer service, complements

question

Most important value driver

answer

product features

question

Cost Drivers

answer

factors that reduce or minimize the costs involved in conducting business

question

Input Factors

answer

materials/resources, labor or money obtained at a low cost (De Beers tight control of raw materials)

question

Economies of scale (Cost Driver)

answer

reduction in per-unit cost due to the increase in output
(Spread fixed costs like rent)

question

Learning Curves

answer

it takes less and less time to produce the same output as firms learn to be more efficient.

question

Experience Curves

answer

combining economies of scale and learning
(Made possible by "process innovation")

question

Diseconomies of scale

answer

increases in cost per unit when output increases

question

Minimum efficient scale

answer

maximum advantage accruing to a firm through increase in output

question

Relationship between cost and output?

answer

U Shaped
Economies / Minimum efficient scale / Disecomies

question

Integration strategy

answer

it integrates the aspects of differentiation and cost-leadership

question

4 primary drivers of integration

answer

Quality
Economies of scope
Innovation
Structure, Culture, & Routines

question

Economies of Scope

answer

using the same process/material/ingredients in multiple ways so that the cost of production is reduced

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Chapter 6

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