MG 630 Final Exam (Chapter 7-12)
with verified solutions
Business Unit
________________ is an organizational entity with its own mission, set
of competitors and industry. 3-4 business units mean 3-4 industries.
Competitive Advantage
______________ is a state whereby a business successful strategy
cannot easily be duplicated by competitors. (Goal of the business
unit - to sustain this)
Generic Strategies
A simple categorization of competitive strategies available to
businesses.
Strategic Group
Businesses employing the same generic strategy
1) low cost with focus 2) low cost without focus 3) differentiation
with focus 4) differentiation without focus.
What are the four typologies originally included in Michael Porter's
generic strategy?
Low Cost (cost leadership) without focus
1) Produce basic, no-frills products and services for a mass market
of price-sensitive customers
2) Often (but not always) build market share through low prices
3) Low initial investment and low operating costs
4) Often outsource to reduce costs
5) Vulnerable to price competition.
These points above represent what type of strategy in Michael
Porters generic typology?
Focus low cost strategy
,1) Emphasizes low costs while serving a narrow segment of the
market, producing no-frills products or services for price-sensitive
customers in a market niche.
2) Compete only in a niche where cost advantages relative to large
competitors can be enjoyed
3) Vulnerable to price competition
4) Example: Aldi minimizes costs and offers low prices, targeting
low-income consumers
These points above represent what type of strategy in Michael
Porters generic typology?
Differentiation strategy without focus
1) Produce & market to the entire industry products or services that
are readily distinguished from those of their competitors.
2) Emphasize scientific breakthroughs, technology, and flexibility
3) Differentiation can be based on the product's physical
characteristics or other factors such as quality, marketing, or
service.
4) Examples include specialty clothing retailers
These points above represent what type of strategy in Michael
Porters generic typology?
Focus differentiation strategy
1) Produce & market highly differentiated products or services for
the specialized needs of a market niche.
2) Customers in a niche might be willing to pay higher prices for
specialized products or services.
These points above represent what type of strategy in Michael
Porters generic typology?
Emphasize both low cost and differentiation
What is low cost differentiation strategy without focus?
Combination Strategy Debate
according to porter, low cost & differentiation are not compatible in
the long run, as efforts to differentiate generally increase a
business' relative cost position. Others argue that the two can be
compatible, although combining strategies is usually more difficult
to accomplish.
, 1) Commitment to Quality
2) Differentiation on the Basis of Low Costs
3) Process Innovations
4) Product Innovations
5) Value Innovations
What are the 5 ways business can pursue a Low-Cost-Differentiation
Strategy?
#1 Commitment to Quality
Commitment to quality not only improves outputs but also reduces
costs involved in scrap, warranty, and service after the sale.
Building quality into a product can reduce the costs of rework,
scrap, & servicing the product after the sale; the business benefits
from increased customer satisfaction & repeat sales, which can
improve economies of scale
#2 Differentiation on the Basis of Low Costs
Many businesses that achieve low-cost positions also lower their
prices because many of their competitors may not be able to afford
to match their price level
#3 Process innovations
Process innovations increase the efficiency of operations &
distribution
Although these improvements are normally thought of as lowering
costs, they can also enhance product or service differentiation
#4 Product innovations
Product innovations are typically presumed to enhance
differentiation but can also lower costs
Example: adding filters to cigarettes not only helped differentiate
one brand from another, but it also reduced production costs.
#5 Value Innovations
Modify products, services, & activities in order to maximize the
value delivered to customers.
Differentiate products & services only when associated cost hikes
can be justified by increases in overall value & by pursuing cost
reductions that result in minimal (if any) reductions in value
Produce highly differentiated products or services for the
specialized needs of a select group of customers while keeping
with verified solutions
Business Unit
________________ is an organizational entity with its own mission, set
of competitors and industry. 3-4 business units mean 3-4 industries.
Competitive Advantage
______________ is a state whereby a business successful strategy
cannot easily be duplicated by competitors. (Goal of the business
unit - to sustain this)
Generic Strategies
A simple categorization of competitive strategies available to
businesses.
Strategic Group
Businesses employing the same generic strategy
1) low cost with focus 2) low cost without focus 3) differentiation
with focus 4) differentiation without focus.
What are the four typologies originally included in Michael Porter's
generic strategy?
Low Cost (cost leadership) without focus
1) Produce basic, no-frills products and services for a mass market
of price-sensitive customers
2) Often (but not always) build market share through low prices
3) Low initial investment and low operating costs
4) Often outsource to reduce costs
5) Vulnerable to price competition.
These points above represent what type of strategy in Michael
Porters generic typology?
Focus low cost strategy
,1) Emphasizes low costs while serving a narrow segment of the
market, producing no-frills products or services for price-sensitive
customers in a market niche.
2) Compete only in a niche where cost advantages relative to large
competitors can be enjoyed
3) Vulnerable to price competition
4) Example: Aldi minimizes costs and offers low prices, targeting
low-income consumers
These points above represent what type of strategy in Michael
Porters generic typology?
Differentiation strategy without focus
1) Produce & market to the entire industry products or services that
are readily distinguished from those of their competitors.
2) Emphasize scientific breakthroughs, technology, and flexibility
3) Differentiation can be based on the product's physical
characteristics or other factors such as quality, marketing, or
service.
4) Examples include specialty clothing retailers
These points above represent what type of strategy in Michael
Porters generic typology?
Focus differentiation strategy
1) Produce & market highly differentiated products or services for
the specialized needs of a market niche.
2) Customers in a niche might be willing to pay higher prices for
specialized products or services.
These points above represent what type of strategy in Michael
Porters generic typology?
Emphasize both low cost and differentiation
What is low cost differentiation strategy without focus?
Combination Strategy Debate
according to porter, low cost & differentiation are not compatible in
the long run, as efforts to differentiate generally increase a
business' relative cost position. Others argue that the two can be
compatible, although combining strategies is usually more difficult
to accomplish.
, 1) Commitment to Quality
2) Differentiation on the Basis of Low Costs
3) Process Innovations
4) Product Innovations
5) Value Innovations
What are the 5 ways business can pursue a Low-Cost-Differentiation
Strategy?
#1 Commitment to Quality
Commitment to quality not only improves outputs but also reduces
costs involved in scrap, warranty, and service after the sale.
Building quality into a product can reduce the costs of rework,
scrap, & servicing the product after the sale; the business benefits
from increased customer satisfaction & repeat sales, which can
improve economies of scale
#2 Differentiation on the Basis of Low Costs
Many businesses that achieve low-cost positions also lower their
prices because many of their competitors may not be able to afford
to match their price level
#3 Process innovations
Process innovations increase the efficiency of operations &
distribution
Although these improvements are normally thought of as lowering
costs, they can also enhance product or service differentiation
#4 Product innovations
Product innovations are typically presumed to enhance
differentiation but can also lower costs
Example: adding filters to cigarettes not only helped differentiate
one brand from another, but it also reduced production costs.
#5 Value Innovations
Modify products, services, & activities in order to maximize the
value delivered to customers.
Differentiate products & services only when associated cost hikes
can be justified by increases in overall value & by pursuing cost
reductions that result in minimal (if any) reductions in value
Produce highly differentiated products or services for the
specialized needs of a select group of customers while keeping
