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Industry Attractiveness and Competitive Position Competitive Strategy
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The search for a favorable competitive position in an industry, the fundamental arena in which competition occurs. Central questions that underlie the choice of competitive strategy:
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Competitive Advantage Competitive Strategy
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Has considerable power to make an industry more or less attractive; not only responds to the environment, but also attempts to shape that environment in the firm’s favor. Grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s cost of creating it.
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Industry Structure Industry Structure
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The underlying economic and technical characteristics of an industry; relatively stable, but can change over time as an industry evolves. Determines who captures value – whether firms can capture the value they create for buyers or whether it’s competed away to others.
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Profits Industry Structure
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Determines who keeps what proportion of the value a product creates for buyers. A function of the balance between supply and demand; high if demand is greater than supply.
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Sustainable Competitive Advantage Competitive Position
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Determines whether a firm’s profitability is above or below the industry average. The fundamental basis of above-average performance in the long run.
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Parity Parity or Proximity
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What a cost leader must achieve on the bases of differentiation: The bases of differentiation allow a cost leader to translate its cost advantage directly into higher profits than competitors’.
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Parity or Proximity Proximity
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The price discount necessary to achieve an acceptable market share does not offset a cost leader’s cost advantage and hence the cost leader earns above-average returns. What a differentiator aims at relative to its competitors by reducing cost in all areas that do not affect differentiation:
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Focus Strategy Focus Strategy
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The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other Imply that the segments are poorly served by broadly- targeted competitors; dedicated to the segments exclusively.
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industry segments.
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Stuck in the Middle Segment Structural Attractiveness
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A necessary condition for focus strategies because some of the segments in an industry are much less profitable than others. A firm that engages in each generic strategy but fails to achieve any of them; posses no competitive advantage, leading to below- average performance.
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Cost is Strongly Affected by Share or Interrelationshi ps 1. Competitors are stuck in the middle 2. Cost is strongly affected by share or interrelationships 3. A firm pioneers a major innovation
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Three conditions under which a firm can simultaneously achieve both cost leadership and differentiation: If one firm can open up a big market share advantage, the cost advantages of share in some activities allow the firm to incur added costs elsewhere and still maintain net cost leadership.
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Risks of Cost Leadership Generic Strategy
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This note was uploaded on 09/08/2011 for the course MAN 4720 taught by Professor Staff during the Spring '08 term at University of Central Florida.

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Exam1 - FC(Book) - The flashcards are formatted for...

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