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Unformatted text preview: CHAPTER 2: STRATEGIC ANALYSIS AND STRATEGIC COST MANAGEMENT QUESTIONS 2-1 The two types of competitive strategy (per Michael Porter, as explained in the chapter) are cost leadership and differentiation. Cost leadership is the competitive strategy in which the firm succeeds by producing at the lowest cost in the industry. Differentiation is the competitive strategy in which a firm succeeds by developing and maintaining a unique value for the product, as perceived by consumers. 2-2 Many possible examples would be correct here. Examples offered in the chapter include Wal-Mart, Texas Instruments, Du Pont, and Compaq. 2-3 Many possible examples would be correct here. Examples offered in the chapter include Tiffany, Bentley and Mercedes automobiles, Rolex, and Maytag. 2-4 The three strategic resources are linked as follows. First the firm determines a strategic competitive position, and then uses the value chain to provide a more detailed understanding of the strategic position, by activity. Finally, the balanced scorecard is used to facilitate the implementation of that strategy and to provide a means for continual feedback to the strategic positioning resource, for desired changes in the overall strategy. 2-5 The process of identifying a competitive advantage has three steps: Step One: Obtain a strategic analysis of the firm using SWOT analysis. SWOT analysis is a systematic procedure for identifying a firm's critical success factors -- its internal s trengths and w eaknesses, and its external o pportunities and t hreats. Step Two: Develop relevant and reliable measures for the critical success factors identified in the first step. Step Three: Develop a strategic cost information system for supporting the firms overall strategy and for reporting critical success factors to appropriate managers. 2-6 Getting stuck in the middle refers to the situation a firm finds itself in which it is not able to make significant progress on both of the two competitive-advantage strategies and as a result is not able to compete effectively or to sustain a competitive advantage. This often happens when a successfully differentiated firm attempts to diversify outside its area of expertise where it can compete effectively. Another common way for a company...
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