401 Chapter 5 notes

401 Chapter 5 notes - GB 401 Chapter 5: Business Level...

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GB 401 Chapter 5: Business Level Strategy 1) Overall Cost Leadership: a firm’s generic strategy based on appeal to the industrywide market using a competitive advantage based on low cost Cost Leadership Tactics: Aggressive construction of efficient-scale facilities Vigorous pursuit of cost reductions from experience Tight cost and overhead control Avoidance of marginal customer accounts Cost minimization in all activities in the firm’s value chain such as R&D, service, sales force, and advertising Competitive Parity: a firm’s achievement of similarity or being “on par” with competitors with respect to low cost, differentiation, or other strategic product characteristic Pitfalls of Cost Leadership Strategy Too much focus on one or a few value-chain activities All rivals share a common input or raw material The strategy is imitated too easily A lack of parity on differentiation Erosion of cost advantages when the pricing information available to customers increases 2) Differentiation strategy: a firm’s generic strategy based on creating differences in the firm’s product or service offering by creating something that is perceived industry-wide as unique and valued by customers. Pitfalls of Differentiation Strategy Uniqueness that is not valuable Too much differentiation
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Too high a price premium Differentiation that is easily imitated Dilution of brand identification through product-line extensions Perceptions of differentiation may vary between buyers and sellers 3) Focus Strategy: A firm’s generic strategy based on appeal to a narrow market segment within an industry. Potential pitfalls of Focus Strategy
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401 Chapter 5 notes - GB 401 Chapter 5: Business Level...

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