Analyzing the administrative cost of diversification:
Negotiation costs with suppliers and distributers
Firms can use economies of scope and r
Economic of scope and revenue enhancement
Leveraging core competencies:
o Firms can use economies of scope and revenue enhancement by sharing their
experience, the way they do things, skills, expertise and strategies with each other.
This should be done i
Business Level Strategy
Firms want to have more than average return, so they need a better way to compete. Why do
some firms make more profit than others?
In this chapter we study the following:
Types of competitive advantage and sustainability
Product Life Cycle
Maturity stage: the stage that the demand for the product begin to slow down and marginal
competitors exit the market. Competition increases (even though we have less competitors?
Best strategy for this stage: is to do:
Corporate strategy involves:
What business should we compete in?
How can we compete in that business?
Creating value by:
Diversifications: Intel & Microsoft, Exxon and Mobil
Mergers (how about Mercedes Bens and Chrysler?)
o Making the d
Implementing Low Cost Strategy
Some keys to implement the low cost strategy are the following:
Experience curve: from BCG group in 1968
Product change time: example :of NASCAR
Marginal customers: avoid them (why?) but must pick up the demand by others
The Focus Strategy
o Focus is a strategy that focuses on a narrow market or narrow product or both.
o It can be achieved by low cost leadership or differentiation or a combination of
o It requires companies to h
The Differentiation Strategy
This strategy is achieved by creating a different product or services than other firms.
o A product/service that is perceived different and worthy to customers.
Usually firms achieve this differentiat
The Internet Affecting Strategies
How does internet affect the 3 competitive strategies?
o Overall cost leadership:
o Advantage: internet makes it easy to cut cost
o Disadvantage: internet causes the strategy to be easily imitated
Recognizing the Firms Intellectual Capital
Managers must recognize the human capital because the companys value is not just
related to the physical assets.
Example: Vincent Van Gogh and Pablo Picasso
1.Van Goghs primary connection was through his brother