BADM 449 EXAM 2 STUDY GUIDE
Corporate Strategy - Answers -Where to compete. Determining the scope of business
Business Strategy - Answers -How to compete. Winning in the given business
Functional Strategy - Answers -How to implement business strategy
What is Business Strategy? - Answers -The goal-directed (coherent) actions managers
take in their quest for competitive advantage when competing in a single product market
Four questions that managers must answer - Answers -•Who: which customer
segments will we serve?
•What: customer needs, wishes, and desires will we satisfy?
•Why: do we want to satisfy them?
•How: will we satisfy our customers' needs?
Strategic trade-offs - Answers -•Choices between a cost or value position
•Higher value creation → higher cost
Cost Leadership Strategy - Answers -Seeks to create similar value than competitors
Products or services delivered at lower cost
Cost Drivers - Answers --Costs of input factors
-economies of scale
-Learning curve effect
-experience curve effects
Learning-curve effects - Answers -•Learning (repeated actions) drives down costs
•The steeper the learning curve, the more learning has taken place
Experience-curve effects - Answers -•Introduction of new technology or process
innovation
Shift from a 90% learning curve to a 80% learning curve
Differentiation Strategy - Answers --Seeks to maintain similar costs than competitors
-Unique products or services creating higher value
-Typically (not necessarily) charges higher prices
Value drivers - Answers --Product features
-Customer service
-Complements
Blue Ocean Strategy - Answers -successfully combines differentiation and cost-
leadership activities using value innovation
, Value innovation - lower costs - Answers --Eliminate. Which of the factors that the
industry takes for granted should be eliminated?
-Reduce. Which of the factors should be reduced well below the industry's standard?
Value innovation - increase perceived consumer benefits: - Answers --Raise. Which of
the actors should be raised well above the industry's standard?
-Create. Which factors should be created than the industry has never offered?
What is Innovation? - Answers -Innovation is the successful introduction of a new
product, process, or business model.
innovation and invention - Answers -Innovation = Invention + Commercialization
Three criteria of a successful innovation - Answers -Product, process, business model
Innovation process - Answers --ideas
-invention
-innovation
-imitation
Disruptive innovation - Answers -New technologies attacking existing markets
Competitive Consequences of Innovation - Answers -1. Bounded Rationality
2. Competence-Destroying
Entrepreneurship - Answers -process by which change agents (entrepreneurs)
undertake economic risk to innovate
Entrepreneur traits: - Answers --The need for achievement
-Locus of control
-Risk-taking propensity
-Forecasting
-Negotiating
Industry Life Cycle - Answers -Introduction, growth, shakeout, maturity, and decline
Introduction Stage - Answers -Core competency: R&D
Strategic objective: market acceptance & future growth
Emphasis: uniqueness & performance
Capital-intensive
Trying new ideas
Producing small quantities
Initial market size: small
Growth: slow
Barriers to entry: high
Corporate Strategy - Answers -Where to compete. Determining the scope of business
Business Strategy - Answers -How to compete. Winning in the given business
Functional Strategy - Answers -How to implement business strategy
What is Business Strategy? - Answers -The goal-directed (coherent) actions managers
take in their quest for competitive advantage when competing in a single product market
Four questions that managers must answer - Answers -•Who: which customer
segments will we serve?
•What: customer needs, wishes, and desires will we satisfy?
•Why: do we want to satisfy them?
•How: will we satisfy our customers' needs?
Strategic trade-offs - Answers -•Choices between a cost or value position
•Higher value creation → higher cost
Cost Leadership Strategy - Answers -Seeks to create similar value than competitors
Products or services delivered at lower cost
Cost Drivers - Answers --Costs of input factors
-economies of scale
-Learning curve effect
-experience curve effects
Learning-curve effects - Answers -•Learning (repeated actions) drives down costs
•The steeper the learning curve, the more learning has taken place
Experience-curve effects - Answers -•Introduction of new technology or process
innovation
Shift from a 90% learning curve to a 80% learning curve
Differentiation Strategy - Answers --Seeks to maintain similar costs than competitors
-Unique products or services creating higher value
-Typically (not necessarily) charges higher prices
Value drivers - Answers --Product features
-Customer service
-Complements
Blue Ocean Strategy - Answers -successfully combines differentiation and cost-
leadership activities using value innovation
, Value innovation - lower costs - Answers --Eliminate. Which of the factors that the
industry takes for granted should be eliminated?
-Reduce. Which of the factors should be reduced well below the industry's standard?
Value innovation - increase perceived consumer benefits: - Answers --Raise. Which of
the actors should be raised well above the industry's standard?
-Create. Which factors should be created than the industry has never offered?
What is Innovation? - Answers -Innovation is the successful introduction of a new
product, process, or business model.
innovation and invention - Answers -Innovation = Invention + Commercialization
Three criteria of a successful innovation - Answers -Product, process, business model
Innovation process - Answers --ideas
-invention
-innovation
-imitation
Disruptive innovation - Answers -New technologies attacking existing markets
Competitive Consequences of Innovation - Answers -1. Bounded Rationality
2. Competence-Destroying
Entrepreneurship - Answers -process by which change agents (entrepreneurs)
undertake economic risk to innovate
Entrepreneur traits: - Answers --The need for achievement
-Locus of control
-Risk-taking propensity
-Forecasting
-Negotiating
Industry Life Cycle - Answers -Introduction, growth, shakeout, maturity, and decline
Introduction Stage - Answers -Core competency: R&D
Strategic objective: market acceptance & future growth
Emphasis: uniqueness & performance
Capital-intensive
Trying new ideas
Producing small quantities
Initial market size: small
Growth: slow
Barriers to entry: high
