BPL 5100 Quiz 2 Exam Questions
Marking Scheme Current Update
How to overcome the five forces and achieve competitive advantage? - Answer -
Porter's three generic strategies
Overall Cost leadership involes - Answer -- 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 research and
development, service, sales force, and advertising
Overall Low-cost position strengths - Answer -- protects a firm against rivalry from
competitors
- protects the firm against powerful buyers
- provides more flexibility to cope with demands from powerful suppliers who want to
increase input costs
- provides substantial entry barriers due to economies of scale and cost advantages
- puts the firm in a favorable position with respect to substitute products
Pitfalls of Cost Leadership - Answer -- Too much focus on one or a few value chain
activities.
- Increase in the cost of the inputs on which the advantage is based
- The strategy is imitated too easily
- A lack of parity on differentiation
- Reduced flexibility
- Obsolescence of the basis of a cost advantage
Differentiation Strategy can take many forms: - Answer -- prestige or brand image
- quality
- technology
- innovation
- features
- customer service
- dealer network
An overall differentiation strategy - Answer -- 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
- Establishes customer loyalty and hence less threat from substitutes
Pitfalls of Differentiation - Answer -- 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
Focus Strategy - Answer -based on the choice of a narrow competitive scope within an
industry
- a firm selects a segment or group of segments (or niche) and tailors its strategy to
serve them
- a firm achieves competitive advantages by dedicating itself to these segments
exclusively
A focus strategy has two variants: - Answer -1. Cost Focus
2. Differentiation Focus
Cost Focus - Answer -- creates a cost advantage in its target segment
- exploits differences in cost behavior
Differentiation Focus - Answer -- differentiates itself in its target market
- exploits the special needs of buyer
Overall Focus Strategy - Answer -- creates higher entry barriers due to cost leadership
or differentiation or both
- can provide higher margins that enable the firm to deal with supplier power
- reduces buyer power because the firm provides specialized products or services
- focused niches less vulnerable to substitutes
Pitfalls of Focus - Answer -- Erosion of cost advantages within the narrow segment
- Highly focused products and services are still subject to competition from new entrants
& from imitation
- Focusers can become too focused to satisfy buyer needs
Combination Strategies - Answer -firms' integrations of various strategies to provide
multiple types of value to customers
Low Cost and Differentiation Combination Strategy - Answer -- makes it difficult for
competitors to duplicate or imitate strategy
- the goal of combination strategy is to provide unique value in an efficient manner
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller StuviaGradeA. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.99. You're not tied to anything after your purchase.
