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GBA Test 2 Chapter 5 Whats the biggest difference between competitive strategies? Whether a companys market target is broad or narrow Whether the company is pursuing a competitive advantage linked to low costs or product differentiation How does a low-cost leader translate its low-cost advantage into superior profit performance? If: prices are cut by less than the size of the unit cost advantage Or: the added gains in unit sales are large enough to bring in a bigger total profit despite lower margins per unit sold What is a companys biggest vulnerability in employing a best-cost strategy? Getting squeezed between the strategies of firms using low-cost and high-end differentiation strategies (must offer customers significantly better product attributes in order to justify a price above what low-cost leaders are charging; likewise, it has to achieve lower costs in providing upscale features so that it can outcompete high-end differentiators on the basis of a significantly lower price) Chapter 6 What is a blue ocean strategy?-Seeks to gain a dramatic and durable competitive advantage by abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or distinctive market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand-Offers superior opportunities for profitability and growth Which rivals make the best targets for an offensive attack? Market leaders that are vulnerable o Unhappy buyers, inferior product line, weak competitive strategy with regard to low-cost leadership or differentiation, strong emotional commitment to aging technology the leader has pioneered, outdated plants and equipment, preoccupation with diversification into other industries, mediocre or declining profitability Ex: Toyota product recalls due to safety concerns presented others car companies with prime opportunity to attack vulnerable and distracted market leader o Challenger is able to revamp value chain or innovate to gain fresh cost-based or differentiation-based competitive advantage; to be successful, attacks on leaders dont have to make aggressor new leader, but strong runner-up Runner-up firms with weaknesses in areas where the challenger is strong o Runner-up firms especially attractive when challengers resources and capabilities are well suited to exploiting their weaknesses Struggling enterprises that are on the verge of going under o Challenging a hard-pressed rival in ways that further reduce its financial strength and competitive position can weaken its resolve and rush its exit from the market Small local and regional firms with limited capabilities o Because small firms have limited expertise, challengers with broader and/or deeper capabilities are well positioned to raid their biggest and best customersparticularly those who are growing rapidly, have increasingly sophisticated requirements and thinking about switching to a supplier with more full-service ... View Full Document

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