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MGMT 101 Outline1 RM

Happen getting products into the hands of your

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happen, getting products into the hands of your customers Support Activities : how to actually get the necessary resources These are all activities that take place within a firm or who it deals with. Each box can be analyzed to lower costs or increase one’s Willingness to Pay (WTP). Each box contributes to the final margin. ROA is typically highest in the short run (one year horizon) when a pure differentiation or cost leadership strategy is taken.
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and advertising. Avoidance of marginal customer accounts (that don’t generate much profit) Differentiation can take many forms; each usually is intended to impact the WTP: Prestige or brand image, technology, innovation, features, customer service, dealer network Firms may differentiate along several dimensions at once Only profitable when price premiums of product exceed the extra costs of being unique Successful integration requires differentiation across the entire value chain; otherwise, customers become confused about why some products are low-cost and other’s aren’t (need a consistent perception of who you are as a company) Important aspect of differentiation is speed or quick response Focus is based on the choice of a narrow competitive scope within an industry : The 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 Two variants exist: Cost Focus and Differentiation Focus Each strategy improves your competitive position with respect to the Five Forces: 1. Overall Cost Leadership Protects a firm against rivalry from competitors Protects a firm against powerful buyers Provides more flexibility to cope with demands from major 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 2. Differentiation Creates higher entry barriers due to customer loyalty Provides higher margins that enable the firm to deal with supplier power Reduces buyer power because buyers lack suitable alternatives Reduces supplier power due to prestige associated with supplying to highly differentiated products Establishes customer loyalty and hence less threat from substitutes 3. Focus Creates barriers of either cost leadership or differentiation, or both Also used to select niches that are least vulnerable to substitutes or where competitors are weakest (ex. Life Insurance: target mostly healthy people, costs will be much lower) Industry Life-Cycle Stages : these impact which strategy you should use Introduction, Growth, Maturity, Decline Differentiation is typically seen in the early stages such as introduction and growth. Here, there are fewer segments, low/increasing competition, and high emphasis on product design.
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