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BPL 5100 Chapter 5 Exam | Questions And Answers Latest {} A+ Graded | 100% Verified
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BPL 5100 Chapter 5 Exam | Questions And Answers Latest {} A+ Graded | 100% Verified
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BPL 5100 Chapter 5 Exam | Questions And Answers Latest {2024- 2025} A+ Graded |100% Verified
Generic strategies - basic types of business-level strategies based on breadth of target market (industry
wide versus narrow market segment) and type of competitive advantage (low cost versus uniqueness)
4 types of generic strategies - overall cost leadership, broad differentiation, cost focus, and
differentiation focus
Overall cost leadership - a firm's generic strategy based on appeal to the industry wide market using a
competitive advantage based on low cost; creating a low-cost position relative to a firm's peer;
managing relationships throughout the entire value chain to lower costs (Ex. McDonalds caters to all
types of customers (children, teens, adults) for a low selling price and a low cost of production)
Overall cost leadership requires a tight set of interrelated tactics that include: - 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 in the firm's value
chain, such as R&D, service, sales force, and advertising
Experience curve - the decline in unit costs of production as cumulative output increases
Common factors of the experience curve developing include: - workers improving on what they do,
product designs being simplified as the product matures, and production processes being automated
and streamlined
Competitive parity - a firm's achievement of similarity, or being "on par," with competitors with respect
to low cost, differentiation, or other strategic product characteristic
Ex. of failure to obtain competitive parity - Tata developed Nano the cheapest car in the world, but the
product was missing basic features and had safety concerns. Even with the low price, consumers will not
buy a bad product
Overall Cost Leadership: Improving Competitive Position vis-a-vis the Five Forces - Overall cost
leadership protects a firm against rivalry from competitors, because lower costs allow a firm to earn
returns even if its competitors eroded their profits through intense rivalry; A low-cost position also
, protects firms against powerful buyers. Buyers can exert power to drive down prices only to the level of
the next most efficient producer; A low-cost position provides more flexibility to cope with demands
from powerful suppliers for input cost increases; The factors that lead to a low-cost position also provide
a substantial entry barriers position with respect to substitute products introduced by new and existing
competitors
Potential Pitfalls of Overall Cost Leadership Strategies - Too much focus on one or a few value-chain
activities; Increase in the cost of the inputs on which the advantage is based; A strategy that can be
imitated too easily; A lack of parity on differentiation; Reduced flexibility; Obsolescence of the basis of
cost advantage
Differentiation strategy - a firm's generic strategy based on creating differences in the firm's product or
service offering by creating something that is perceived industry wide as unique and valued by
customers; products and/or services that are unique and valued; emphasis on non-price attributes for
which customers will gladly pay a premium
Differentiation: Improving Competitive Position vis-a-vis the Five Forces - Differentiation provides
protection 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 result because of customer loyalty and the firm's ability to provide
uniqueness in its products and services; Differentiation provides higher margins that enable a firm to
deal with supplier power; Differentiation reduces buyer, because buyers lack comparable alternatives
and are therefore less price-sensitive; Differentiation enhances customer loyalty, thus reducing the
threat from substitutes
Potential Pitfalls of Differentiation Strategies - 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 that vary between buyers
and sellers
Focus strategy - a firm's generic strategy based on appeal to a narrow market segment within an
industry; narrow product lines, buyer segments, or targeted geographic markets; advantages obtained
either through differentiation or cost leadership
Cost focus strategy - a firm strives to create a cost advantage in its target segment; exploits differences
in cost behavior in some segments
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