GBA Test 2
What’s the biggest difference between competitive strategies?
Whether a company’s 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
What is a company’s 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)
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
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differentiation, strong emotional commitment to aging technology the leader has pioneered, outdated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
Ex: Toyota product recalls due to safety concerns presented others car companies with prime
opportunity to attack vulnerable and distracted market leader
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 don’t have to make aggressor new leader, but
Runner-up firms with weaknesses in areas where the challenger is strong
Runner-up firms especially attractive when challenger’s resources and capabilities are well suited to
exploiting their weaknesses
Struggling enterprises that are on the verge of going under
Challenging a hard-pressed rival in ways that further reduce its financial strength and competitive
position can weaken its resolve and rush its exit from the market
Small local and regional firms with limited capabilities
Because small firms have limited expertise, challengers with broader and/or deeper capabilities are well
positioned to raid their biggest and best customers—particularly those who are growing rapidly, have
increasingly sophisticated requirements and thinking about switching to a supplier with more full-service