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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to low-cost leadership or differentiation, strong emotional commitment to aging technology the leader has pioneered, outdated plants and equipment, preoccupation with diversification into other industries, mediocre or declining profitability Ex: Toyota product recalls due to safety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 ... View Full Document

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