CBA 469 CHAPTER 6 EXAM STUDY
GUIDE
What Is Business Level Strategy? - ANSWER Goal-directed actions:
•To achieve competitive advantage
•In a single product market
"How should we compete?"
•Who: which customer segments?
•What: customer needs will we satisfy?
•Why: do we want to satisfy them?
•How: will we satisfy our customers' needs?
Strategic Position - ANSWER Profile based on value creation and cost
•In a specific product market
A valuable and unique position, which:
•Meets customer needs
•At the highest possible product value
•For the lowest possible product cost
Strategic Trade-Offs - ANSWER Choices between a cost OR value position
Tension between:
•Value creation and
•Pressure to keep cost in check
Purpose to maximize the firm's:
•Economic value creation
•Profit margin
Generic Business Strategies - ANSWER Differentiation
, •Seeks to create higher value vs. competitors
•Offers unique features
•Charges higher prices
Cost Leadership
•Seeks to create similar value vs. competitors
•Charges lower prices
Focused Business Strategies - ANSWER Narrower competitive scope
Focused Differentiation
•Ex: Mont Blanc: exquisite pens at several hundred dollars
Focused Cost Leadership
•Ex: BIC: disposable pens and lighters at low cost
Differentiation Strategy - ANSWER Unique features that increase value
•Consumers pay a higher price
The focus of competition:
•Unique product features
•Service
•New product launches
•Marketing and promotion
Competitive advantage achieved when:
•Value - Cost > competitors
Economies of Scale and Scope - ANSWER Economies of Scale
•Decreases in cost per unit
•Achieved as output increases
Economies of Scope
•Producing two outputs at less cost
•Shares resources or technology
Three Drivers That Increase Perceived Value - ANSWER Product features
GUIDE
What Is Business Level Strategy? - ANSWER Goal-directed actions:
•To achieve competitive advantage
•In a single product market
"How should we compete?"
•Who: which customer segments?
•What: customer needs will we satisfy?
•Why: do we want to satisfy them?
•How: will we satisfy our customers' needs?
Strategic Position - ANSWER Profile based on value creation and cost
•In a specific product market
A valuable and unique position, which:
•Meets customer needs
•At the highest possible product value
•For the lowest possible product cost
Strategic Trade-Offs - ANSWER Choices between a cost OR value position
Tension between:
•Value creation and
•Pressure to keep cost in check
Purpose to maximize the firm's:
•Economic value creation
•Profit margin
Generic Business Strategies - ANSWER Differentiation
, •Seeks to create higher value vs. competitors
•Offers unique features
•Charges higher prices
Cost Leadership
•Seeks to create similar value vs. competitors
•Charges lower prices
Focused Business Strategies - ANSWER Narrower competitive scope
Focused Differentiation
•Ex: Mont Blanc: exquisite pens at several hundred dollars
Focused Cost Leadership
•Ex: BIC: disposable pens and lighters at low cost
Differentiation Strategy - ANSWER Unique features that increase value
•Consumers pay a higher price
The focus of competition:
•Unique product features
•Service
•New product launches
•Marketing and promotion
Competitive advantage achieved when:
•Value - Cost > competitors
Economies of Scale and Scope - ANSWER Economies of Scale
•Decreases in cost per unit
•Achieved as output increases
Economies of Scope
•Producing two outputs at less cost
•Shares resources or technology
Three Drivers That Increase Perceived Value - ANSWER Product features
