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BUS 109_W09_Final Review

BUS 109_W09_Final Review - Final Review Ch.5 to 7*Ch.1 to...

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Final Review Ch.5 to 7 *Ch.1 to 4 (See Midterm Review)
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Chapter Five Know what are the FIVE generic strategies companies can choose to compete. (See Figure 5.1) 1) Low Cost Provider 2) A focused (or market niche) strategy 3) Best cost provider strategy 4) A broad differentiation strategy 5) A focused (or market niche) strategy Know what are the ways of achieving low cost strategies Cost-efficient Management of value chain activities Revamp value chain to curb or eliminate unnecessary activities Know what are the pitfalls of low cost strategies and where it works best Pitfalls: Overly aggressive in cutting price. Price cuts must be less than cost advantage. It should cover the lower margins for higher profits. Work best when: 1. Price competition is vigorous 2.Product is standardized or readily available from many suppliers 3.There are few ways to achieve differentiation that have value to buyers 4. Most buyers use product in same ways 5. Buyers incur low switching  costs 6. Buyers are large and have significant bargaining power 7.Industry newcomers use introductory low prices to attract buyers and build customer base
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Know what are the three results of a successful differentiation strategy. Command a premium price and/or Increase unit sales and/or Build brand loyalty Know some of the themes in a differentiation strategy. Unique taste/ Multiple features/ Wide selection and one-stop shopping/ Superior Service/ Spare parts availability/ Engineering design and performance/ Prestige/ Product reliability/ Quality manufacture/ Technological leadership/ Top-of-line image Know the routes in achieving differentiation. Incorporate product features/attributes that: 1. lower buyer’s overall costs of using product; 2. raise the performance a buyer gets out of the product; 3. enhance buyer satisfaction in non-economic or intangible ways; 4. Compete on the basis of superior capabilities Know why it is important to signal value Nature of differentiation is hard to quantify Buyers are making first-time purchases Repurchase is infrequent Buyers are unsophisticated Chapter Five (cont’d)
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Know what are the pitfalls of differentiation strategy Product features are easily copied Buyers see little value in unique product attributes Overspending will eroding profitability Over-differentiating product’s features will exceed buyers’ needs
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