BPL 5100 Quiz #2 Chapter 5, 6, 7 and McDonald's Case | Questions And Answers Latest
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Porter's Three Generic Strategies - 1. overall cost leadership
2. differentiation
3. focus
Overall cost leadership involves - -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, &
advertising
An overall low-cost position - - 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 - - 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 forms: (pqtifcd) - - Prestige or brand image
, - Quality
- Technology
- Innovation
- Features
- Customer service
- Dealer network
An overall differentiation strategy - -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 - - 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
A focus strategy is... - based on the choice of a ~narrow competitive scope~ within an industry
A focus strategy is 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 (cd) - 1. Cost focus
2. Differentiation focus
Cost focus - - creates a cost advantage in its target segment
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