BADM 449 - QUIZ #2 STUDY GUIDE QUESTIONS WELL ANSWERED LATEST UPDATE 2026

BADM 449 - QUIZ #2 STUDY GUIDE QUESTIONS WELL ANSWERED LATEST UPDATE 2026 business level strategy - Answers the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market -may involve a single product or group of similar products that use the same distribution channel -answer the who, what, why and how questions of competition Generic Business Strategies - Answers differentiation strategy and cost-leadership strategy generic because can be used by any organization Differentiation - Answers Generic business strategy that seeks to create higher value for customers than the value that competitors create -Delivering products or services with unique features while keeping costs at the same or similar levels, allowing the firm to charge higher prices to its customers mercedes benz Differentiation value drivers - Answers -product features -customer service -complements Value dirvesr - Answers Value drivers contribute to competitive advantage only if their increase in value creation exceeds the increase in costs Differentiation key drivers - Answers -product attributes: exploiting actual product -firm customer relationships: exploiting relationships with customer -firm linkages: exploiting relationships within the firm and/or relationships with other firms Cost-leadership strategy - Answers generic business strategy that seeks to create the same or similar value for customers at a lower cost -focus on simplification, standardization, and continual cost reductions in input acquisition, production, and distribution processes ex: southwest airlines, wal-mart Cost leadership cost drivers - Answers -economies of scale -economies of learning: increased individual skills, improved organizational routines -production techniques: process innovation -product design -input costs -capacity utilization -residual efficiency: motivation and organizational culture, managerial effctiveness economies of scale - Answers Exist during a period of time if the average total cost for a unit of production is lower at higher levels of output Learning curve - Answers Incremental production costs decline at a constant rate as production experience is gained Focus strategy - Answers Exploit capabilities which provide a competitive advantage in a narrow market segment, but which may not provide an industry-wide competitive advantage -serve needs of a particular market segment better than those firms which are trying to serve the entire industry Differentiation strategy risks - Answers -failing to increase buyers' willingness to pay higher prices -underestimating costs of differentiation -lower cost imiation -over fulfilling buyers' needs Low-cost leadership risks - Answers -standardization can increase risk of obsolescence and decrease ability to adapt to technological shifts in market or changing tastes -inferior quality -social, political, and economic risk of outsources Focus strategy risks - Answers -competitors enter an even narrower focus & outcompete the firm -may lose its advantage by attempting to grow and consequently attempt to meet the needs of too many customers -large firms with superior resources enter the market segment -needs of customers may change and/or become less differentiated integration strategy - Answers business-level strategy that successfully combines differentiation and cost-leadership activities value innovation - Answers simultaneously pursuing differentiation (V increase) and low cost (Cost decrease) "stuck in the middle" - Answers When firms fail to resolve strategic trade-offs between differentiation and cost They then succeed at neither business strategy, leading to a competitive disadvantage Basic principles I: value-based strategy - Answers -The amount of value that a firm can claim cannot exceed its added value under unrestricted bargaining -The key to a firm's achieving a positive added value is the existence of a favorable asymmetry between the firm and its competitors Basic principles II: 4 strategies - Answers Four "value-based" strategies: There are four routes to enjoying a favorable asymmetry between the focal firm and its competitors in terms of buyer willingness-to-pay and supplier opportunity cost Basic principles III: strategic fit - Answers Business strategy should be designed to match: Competitive forces in the industry -The firm's resources and capabilities Capabilities ≠ strategy Attractive market position ≠ strategy Basic principles IV: trade-offs - Answers Cost-quality frontier -tradeoff between cost and quality Testing the quality of a strategy - Answers Questions used to evaluate whether or not a firm's strategy is good Key evaluation criteria: 1. Does your strategy exploit your key resources? 2. Does your strategy fit with current industry conditions? 3. Will your differentiators be sustainable? 4. Are the elements of your strategy consistent and aligned with your strategic position? 5. Can your strategy be implemented? Innovation - Answers A novel and useful idea that is successfully implemented Industry life cycle - Answers The pattern of evolution it follows from inception through to its current state and possible future states -introduction -growth -shakeout -maturity -decline Introduction - Answers -core competency: R&D -capital tensive process -market size: small -growth: slow -barriers to entry: high -few firms active in market -competition can be intense Growth - Answers -demand increase rapidly as first-time buyers rush to enter the market -size of market expands -demand is strong -Standard business process are put in place -core competencies: shift toward manufacturing and marketing capabilities -competitive rivalry somewhat muted because market is growing fast -stake out strategic position not easily imitated by rivals Shakeout - Answers -Rate of growth slows -Demand approaches saturation levels -firms compete directly against one another for market share -only strongest competitors survive -rivalry intense -industry often consolidates as a result -manufacturing and process engineering capabilities to drive costs down Maturity - Answers -Industry structure morphs into an oligopoly with only a few large firms -Demand now consists of replacement or repeat purchases -Market reached its maximum size and industry growth likely to be zero or negative going forward -Competitive intensity increased because of decrease in market demand -Level of process innovation reaches its maximum, level of product innovation sinks to its minimum Decline - Answers size of market contracts further as demand falls rapidly 4 strategic options: -exit: by bankruptcy or liquidation -harvest: firm reduces investments in product support and allocations only a minimum of human and other resources -maintain: continuing to support marketing efforts at a given level -consolidate: by buying rivals, allows consolidating firms to stake out a strong position, possible approaching monpolistic market power Crossing the chasm - Answers many innovators do not successfully transition from one stage of the industry life cycle to the next Life cycle for products/services that need different customer behaviors Many innovators fail to get from early adopters to majority (15% to 50% of market) Early adopters - Answers The early adopters are excited by the possibilities of the product rather than the "cool technology" of technology enthusiast Early majority - Answers The critical early majority base purchasing decisions on practicality This group can generate a herding effect 4 types of innovation - Answers -incremental -radical -architectural -disruptive Incremental innovation - Answers -Builds on established knowledge -Steady improvement of a product or service -Often from incumbent firms Economic incentives: High entry barriers, Organizational inertia, Innovation ecosystem Radical Innovation - Answers An innovation that draws on novel methods or materials, is derived either from an entirely different knowledge base or from a recombination of the existing knowledge bases with a new stream of knowledge. -targets new markets and technology -often from new firms Architectural Innovation - Answers reconfigure known components to create new markets disruptive innovation - Answers Novel technologies serving existing markets from bottom up -protect against "stealth" attack Organizational inertia - Answers a firm's resistance to changes in the status quo innovation ecosystem - Answers a firm's embeddedness in a complex network of suppliers, buyers, and complementors, which requires interdependent strategic decision making How to respond to disruptive innovation - Answers - continue to innovate in order to stay ahead of the competition - guard against disruptive innovation by protecting the low end of the market - disrupt yourself rather than wait for others to disrupt you long tail - Answers a new approach to segmentation based on the idea that companies can make money by selling small amounts of items that only a few people want, provided they sell enough different items Pipeline business - Answers Linear transformation through the value chain -R&D, then design, then manufacture, then sell Platform business - Answers -Enables interaction between producers and consumers -Enable matches among users -Provides infrastructure and governance platform ecosystem - Answers a system of mutually dependent entities mediated by a stable core -owners, providers, consumers, producers Advantages of the Platform Business Model - Answers 1. platforms scale more efficiently than pipelines by eliminating gatekeepers 2. platforms unlock new sources of value creation and supply 3. platforms benefit from community feedback network effects - Answers The positive effect (externality) that one user of a product or service has on the value for that other user Four Actions Framework - Answers -creating new markets a new value curve -reduce, eliminate, create/add, raise Competency trap - Answers Firms that strive for competence within a given strategy sometimes are trapped in it and miss the opportunity for strategic change. Corporate Strategy - Answers A set of choices that a corporation makes to create value through configuration and coordination of its multimarket activities -Corporate strategy pertains to the corporation as a whole, whereas as competitive strategy pertains only to business units -Corporate strategy addresses choices about multimarket activities, while competitive strategy is a set of choices confined to a single market Why firms need to grow - Answers 1. increase profits 2. lower costs 3. increase market power 4. reduce risk 5. motivate management Three dimensions of corporate strategy - Answers 1. Vertical Integration 2. horizontal Diversification 3. Geographic Scope Horizontal diversification - Answers Simultaneous ownership of two or more units that utilize a similar set of tangible and intangible resources veritcal integration - Answers Simultaneous ownership of two or more units that utilize a similar set of tangible inputs for other units -typically refer to the producer of such outputs as upstream and the users as downstream geographic diversification - Answers corporate strategy in which a firm is active in several different countries transaction cost economics - Answers a theoretical framework in strategic management to explain and predict the boundaries of the firm, which is central to formulating a corporate strategy that is more likely to lead to competitive advantage Transaction costs - Answers all internal and external costs associated with an economic exchange, whether within a firm or in markets external transaction costs - Answers costs of searching for a firm or an individual with whom to contract, and then negotiating, monitoring, and enforcing the contract internal transaction costs - Answers costs pertaining to organizing an economic exchange within a hierarchy; also called administrative costs Make or Buy - Answers Deciding between internal production or external procurement of some item. If Costs in-house Costs market - Answers - vertically integrate - own production of inputs - or own output distribution channels If Costs market Costs in-house - Answers The firm should consider purchasing instead Vertical Integration - Answers the firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs Types of Vertical Integration - Answers backward vertical integration and forward vertical integration Backward vertical integration - Answers changes in an industry value chain that involve moving ownership of activities upstream to the originating (inputs) point of the value chain Forward vertical integration - Answers changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain Benefits of vertical integration - Answers -lowering costs -improving quality -facilitating scheduling and planning -facilitating investments in specialized assets -securing critical supplies and distribution channels Risks of Vertical Integration - Answers increasing costs reducing quality reducing flexibility increasing the potential for legal repercussions When dos vertical integration make sense? - Answers -When there are issues with raw materials -To enhance the customer experience -Eliminate annoyances and poor interfaces -Vertical market failure: when transactions are too risky or costly