05 BUS 444 Chap 5

Customer loyalty provides higher margins that enable

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Unformatted text preview: ed or quick response 5-16 Differentiation: Improving Competitive Position • Creates higher entry barriers due to customer loyalty • Provides higher margins that enable the firm to deal with supplier power • Establishes customer loyalty and hence less threat from substitutes 5-17 Potential Pitfalls of Differentiation Strategies • Uniqueness that is not valuable • Too much differentiation • Too high a price premium • Differentiation that is easily imitated 5-18 QUESTION High product differentiation is generally accompanied by A. Higher market share B. Decreased emphasis on competition based on price C. Higher profit margins and lower costs D. Significant economies of scale 5-19 QUESTION High product differentiation is generally accompanied by A. Higher market share B. Decreased emphasis on competition based on price C. Higher profit margins and lower costs D. Significant economies of scale 5-20 Focus • Focus is based on the choice of a narrow competitive scope within an industry Firm selects a segment or group of segments (niche) and tailors its strategy to serve them Firm achieves competitive advantages by dedicating itself to these segments exclusively 5-21 Focus • Cost focus firm strives to create a cost advantage in its target segment • Differentiation focus firm seeks to differentiate in its target market 5-22 Focus: Improving Competitive Position • Focus Creates barriers of eith...
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