05 BUS 444 Chap 5

parity on the basis of differentiation permits a

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Unformatted text preview: 0 Overall Cost Leadership (Cont.) • Parity on the basis of differentiation Permits a cost leader to translate cost advantages directly into higher profits than competitors Allows firm to earn above-average profits 5-11 Comparing Experience Curve Effects See Strategy Spotlite 5.1 – Page 162 5-12 Improving Competitive Position vis‐à‐vis the Five Forces An overall low-cost position • Protects a firm against rivalry from competitors • Protects a firm against powerful buyers • Provides more flexibility to cope with demands from powerful suppliers for input cost increases • Provides substantial entry barriers from economies of scale and cost advantages • Puts the firm in a favorable position with respect to substitute products 5-13 Pitfalls of Overall Cost Leadership Strategies • 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 5-14 Differentiation • Prestige or brand image • Technology • Innovation • Features • Customer service • Dealer network 5-15 Differentiation • Firms may differentiate along several dimensions at once • Successful differentiation requires integration with all parts of a firm’s value chain • An important aspect of differentiation is spe...
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This note was uploaded on 03/05/2014 for the course BUS 444 taught by Professor Lynn during the Spring '11 term at Keuka.

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