UARK SEVI 30103 EXAM 2 QUESTIONS WITH
VERIFIED ACCURATE ANSWERS
Business Level Strategy - Answers - A strategy designed for a firm or a division of a firm
that competes within a single business.
-Derived from execs making decisions about whether their source of C.A. is based on
price or differentiation, and whether their scope of operations targets a broad or narrow
market.
Key Questions to be answered in a Business level strategy? - Answers - -What is our
value proposition?
-Where will we compete?
-How will we win against key competitors?
-What capabilities are needed to achieve success?
Key activities to achieve competitive advantage- Overall Cost Leadership: - Answers - -
aggressive construction of efficient-scale facilities
-Vigorous pursuit of cost reductions from experience
-Tight cost and overhead control
-avoidance of marginal customer accounts
-cost minimization in all activities of the firm's value chain
Potential pitfalls of Overall Cost Leadership strategies: - Answers - -too much focus on
one or few value-chain activities
-increase in the cost of inputs on which the advantage is based
-a strategy that can imitated too easily
-a lack of parity in differentiation
-reduced flexibility
-obsolescence on the basis of cost advantage
Potential Pitfalls of Differentiation Strategies - Answers - -Uniqueness that is not
valuable
-Too much differentiation
-Too high a price premium
-Differentiation that is easily imitated
-Dilution of brand identification through product line extensions
-Perceptions of differentiation may vary between buyers and sellers
Potential Pitfalls of Focus Strategies - Answers - - Cost advantages may erode within
the narrow segment
- Even product and service offerings that are highly focused are subject to competition
from new entrants and from imitation
- Focusers can become too focused to satisfy buyer needs
, Overall Cost Leadership: Improving Competitive Position vis-a-vis the Five Forces -
Answers - -Protects against rivalry because lower costs allow a firm to earn returns
even if its competitors eroded their profits through intense rivalry.
-Protects against powerful buyers. Buyers can exert power to drive down prices only to
the level of the next most efficient producer.
-Provides more flexibility to cope with demands from powerful suppliers for input cost
increases.
-Provide substantial entry barriers with respect to substitute products introduced by new
and existing competitors.
Differentiation: Improving Competitive Position vis-a-vis the Five Forces - Answers - -
Protects against rivalry since brand loyalty lowers customer sensitivity to price and
raises customer switching costs.
-By increasing a firm's margins, differentiation also avoids the need for a low-cost
position.
-Higher entry barriers because of customer loyalty and the firm's ability to provide
uniqueness.
-Provides higher margins that enable a firm to deal with supplier power.
-Reduces buyer power because buyers lack comparable alternatives and are therefore
less price sensitive.
-Supplier power is decreased because there is a certain amount of prestige associated
with being the supplier to a producer of highly differentiated products/services.
-Enhances customer loyalty, thus reducing threats from substitutes.
Focus: Improving Competitive Position vis-a-vis the Five Forces - Answers - -Focus
requires that a firm have either a low-cost position with its strategic target, high
differentiation, or both. These positions provide defenses against each competitive
force.
-Focus is also used to select niches that are least vulnerable to substitutes or where
competitors are weakest.
(Experience Curve) For a range of products, as cumulative experience doubles.... -
Answers - Cost and labor hours needed to produce a unit of product decline by 10-30%
Why does the experience curve happen and how can it be a foundation for cost
advantage? - Answers - -Workers get better at what they do, product designs are
simplified as the product matures, and production processes are automated and
streamlined.
-Experience curve gains will be the foundation for a cost advantage only if the firm
knows the source of the cost reduction and can keep these gains proprietary.
A business that strive for a low-cost advantage must.... - Answers - Attain an absolute
cost advantage relative to its rivals. this is done by:
-offering a no-frills product to a broad target market using standardization to benefit from
economies of scale and experience.
VERIFIED ACCURATE ANSWERS
Business Level Strategy - Answers - A strategy designed for a firm or a division of a firm
that competes within a single business.
-Derived from execs making decisions about whether their source of C.A. is based on
price or differentiation, and whether their scope of operations targets a broad or narrow
market.
Key Questions to be answered in a Business level strategy? - Answers - -What is our
value proposition?
-Where will we compete?
-How will we win against key competitors?
-What capabilities are needed to achieve success?
Key activities to achieve competitive advantage- Overall Cost Leadership: - Answers - -
aggressive construction of efficient-scale facilities
-Vigorous pursuit of cost reductions from experience
-Tight cost and overhead control
-avoidance of marginal customer accounts
-cost minimization in all activities of the firm's value chain
Potential pitfalls of Overall Cost Leadership strategies: - Answers - -too much focus on
one or few value-chain activities
-increase in the cost of inputs on which the advantage is based
-a strategy that can imitated too easily
-a lack of parity in differentiation
-reduced flexibility
-obsolescence on the basis of cost advantage
Potential Pitfalls of Differentiation Strategies - Answers - -Uniqueness that is not
valuable
-Too much differentiation
-Too high a price premium
-Differentiation that is easily imitated
-Dilution of brand identification through product line extensions
-Perceptions of differentiation may vary between buyers and sellers
Potential Pitfalls of Focus Strategies - Answers - - Cost advantages may erode within
the narrow segment
- Even product and service offerings that are highly focused are subject to competition
from new entrants and from imitation
- Focusers can become too focused to satisfy buyer needs
, Overall Cost Leadership: Improving Competitive Position vis-a-vis the Five Forces -
Answers - -Protects against rivalry because lower costs allow a firm to earn returns
even if its competitors eroded their profits through intense rivalry.
-Protects against powerful buyers. Buyers can exert power to drive down prices only to
the level of the next most efficient producer.
-Provides more flexibility to cope with demands from powerful suppliers for input cost
increases.
-Provide substantial entry barriers with respect to substitute products introduced by new
and existing competitors.
Differentiation: Improving Competitive Position vis-a-vis the Five Forces - Answers - -
Protects against rivalry since brand loyalty lowers customer sensitivity to price and
raises customer switching costs.
-By increasing a firm's margins, differentiation also avoids the need for a low-cost
position.
-Higher entry barriers because of customer loyalty and the firm's ability to provide
uniqueness.
-Provides higher margins that enable a firm to deal with supplier power.
-Reduces buyer power because buyers lack comparable alternatives and are therefore
less price sensitive.
-Supplier power is decreased because there is a certain amount of prestige associated
with being the supplier to a producer of highly differentiated products/services.
-Enhances customer loyalty, thus reducing threats from substitutes.
Focus: Improving Competitive Position vis-a-vis the Five Forces - Answers - -Focus
requires that a firm have either a low-cost position with its strategic target, high
differentiation, or both. These positions provide defenses against each competitive
force.
-Focus is also used to select niches that are least vulnerable to substitutes or where
competitors are weakest.
(Experience Curve) For a range of products, as cumulative experience doubles.... -
Answers - Cost and labor hours needed to produce a unit of product decline by 10-30%
Why does the experience curve happen and how can it be a foundation for cost
advantage? - Answers - -Workers get better at what they do, product designs are
simplified as the product matures, and production processes are automated and
streamlined.
-Experience curve gains will be the foundation for a cost advantage only if the firm
knows the source of the cost reduction and can keep these gains proprietary.
A business that strive for a low-cost advantage must.... - Answers - Attain an absolute
cost advantage relative to its rivals. this is done by:
-offering a no-frills product to a broad target market using standardization to benefit from
economies of scale and experience.
