45 Questions
Which of the following best defines competitive advantage?
Any characteristic of the firm that sets it apart from other competitors, giving it a relatively better position for competing and achieving higher profitability.
What are the basic requirements for competitive advantage?
Characteristics related to key success factors in the market, substantial, sustainable
According to Porter (1980), what are the generic competitive strategies?
Cost leadership, differentiation, focus
What are the characteristics of new or emerging industries?
High initial costs, slow growth in demand and high risk due to uncertainty
What is a common strategy for new or emerging industries according to the text?
Risk management and timing entry
What are the characteristics of mature industries according to the text?
Overcapacity, new competitors, difficulties to innovate, customers bargaining power
What is a common strategy for mature industries according to the text?
Redefining business scope through diversification and gaining a substantial competitive advantage
What are the characteristics of declining industries according to the text?
Large manufacturing overcapacity and aggressive price competition
What is a common strategy for declining industries according to the text?
Segmentation and quick divestment
What is the purpose of innovation strategy?
To commercialize inventions resulting from new knowledge
What are the types of innovation according to the text?
Product innovation + process innovation and incremental + radical
What is the primary difference between cost competitive advantage and differentiation competitive advantage?
Cost competitive advantage offers products or services at a lower cost, while differentiation competitive advantage offers unique products or services at a higher price.
What are some sources of cost advantage mentioned in the text?
learning effect and experience effect
Which of the following is identified as a barrier to differentiation competitive advantage?
High level of creativity and unique location
What is the strategic focus of 'no frills' and low price strategies?
Providing products or services at a lower cost
What are the risks associated with cost competitive advantage?
Investment in new equipment, imitation by competitors and quick changes
Which factor is mentioned as a source of differentiation competitive advantage?
Product, market and firm characteristics
What may be a risk of differentiation competitive advantage?
Price difference may be too high, imitation, no need for differentiation
What strategic focus do 'differentiation', 'focused differentiation', and 'hybrid' strategies have?
Adding value through uniqueness and quality
What kind of strategies are destined to fail according to the text?
Strategies with high price and low added value
Which of the following is NOT a basic requirement for competitive advantage according to the text?
Distinctive features that set the company apart
What is the primary focus of 'no frills' and low price strategies according to the text?
Cost leadership
What are the barriers to imitation associated with cost competitive advantage as mentioned in the text?
Difficulty to gain access to certain cost factors, impossibility of imitating sources of cost advantage
What are the characteristics of new or emerging industries according to the text?
High initial costs, slow growth in demand, and high risk due to uncertainty and instability
What are the characteristics of declining industries according to the text?
Large manufacturing overcapacity, absence of technological changes, and high average age of resources
What is the purpose of innovation strategy according to the text?
To commercialize inventions resulting from combinations of new or existing knowledge
What does the source of cost advantage called the learning effect mean?
Time to produce a unit goes down when the number of unit produced goes up
What are some conditions of barriers to limitation for cost advantage?
Price competence, standardised products, difficult to differentiate and customers high bargaining power
What are some conditions for barriers to imitation for differentiation?
Greater complexity and variety of products/services, customer needs and firm characteristics
What strategic focus do 'differentiation', 'focused differentiation', and 'hybrid' strategies have?
Added value and differentiation
What kind of strategies are destined to fail according to the text?
Price-based strategies that ignore perceived added value
What is the primary difference between cost competitive advantage and differentiation competitive advantage?
'Differentiation' and added value vs. similar products or services at a lower cost
What are the key elements of cost leadership?
Scale efficient plants, control of overheads and R&D, design for manufacture
What are some requirements for cost leadership?
Access to capital, frequent reports, cost control, specialisation, incentives
What are some key elements for differentiation?
Emphasis on branding, advertising, design, service and quality
What are the key requirements for differentiation
Marketing, product engineering, creativity, cross-functional coordination
What are the external factors for creating a competitive advantage?
Anticipate external changes: ability to detect changes, respond quickly and take advantage of opportunities
What are the internal factors for creating a competitive advantage?
R&C's: efficiency, quality, innovation, customer satisfaction
What factors ensure the sustainability of a CA?
Imitation barriers, competitors' imitation capability and industry dynamism
What is a cost advantage?
A firm can offer similar products or services than its competitors at a lower cost
Which can be sources of cost-competitive advantage?
EOS, cooperation
What is differentiation?
A firm offers a product or service that customers perceive as unique and are therefore willing to pay a higher price
Which are potential sources of differentiation?
Social responsibility, corporate culture, variety, product performance, after-sales service
What is the strategic clock idea?
customers buy a product or service in one firm or another according to - price and perceived added value
What is the life cycle and its objective?
Strategies for emerging, mature and declining strategies. To adapt competitive strategies based off the life cycle.
Study Notes
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Competitive advantage refers to factors that help a firm sustain a business edge over competitors.
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Two types of competitive advantage: cost competitive advantage and differentiation competitive advantage.
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Cost competitive advantage: a firm offers similar products or services as competitors but at a lower cost.
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Sources of cost advantage: cost savings from learning effect, economies of scale, production techniques, location, and bargaining power.
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Cost competitive advantage in large retail stores: significant economies of scale, use of standardized marketing technology, lower labor costs, high bargaining power with suppliers, cooperation agreements, and strategic location.
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Cost imitation barriers: difficulty in accessing certain cost factors, and impossibility of replicating sources of cost advantage.
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Cost competitive advantage risks: requires investments in new equipment, quick changes in markets or processes, and the possibility of imitation by competitors.
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Differentiation competitive advantage: a firm offers unique products or services, making customers willing to pay a higher price.
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Sources of differentiation: product characteristics (physical, performance, and intangibles), market characteristics (consumer tastes and needs, and product valuation), and firm characteristics (interaction with customers, ethics, and time response).
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Differentiation competitive advantage barriers: high level of creativity, complex interrelations of resources and capabilities, and unique location.
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Differentiation competitive advantage risks: price difference may be too high, customers may not need differentiation, and competitors may imitate or target specific market segments.
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Strategic clock: customers buy based on price and perceived added value; eight competitive strategies, divided into four strategic groups.
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Strategies focused on low prices: "no frills" and low price strategies.
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Strategies focused on differentiation added value: differentiation, focused differentiation, and hybrid strategies.
-
Strategies destined to fail: price-based strategies that ignore perceived added value.
-
Strategies for emerging, growth, mature, and declining industries: adaptive competitive strategies for different industry levels.
-
Competitive advantage refers to factors that help a firm sustain a business edge over competitors.
-
Two types of competitive advantage: cost competitive advantage and differentiation competitive advantage.
-
Cost competitive advantage: a firm offers similar products or services as competitors but at a lower cost.
-
Sources of cost advantage: cost savings from learning effect, economies of scale, production techniques, location, and bargaining power.
-
Cost competitive advantage in large retail stores: significant economies of scale, use of standardized marketing technology, lower labor costs, high bargaining power with suppliers, cooperation agreements, and strategic location.
-
Cost imitation barriers: difficulty in accessing certain cost factors, and impossibility of replicating sources of cost advantage.
-
Cost competitive advantage risks: requires investments in new equipment, quick changes in markets or processes, and the possibility of imitation by competitors.
-
Differentiation competitive advantage: a firm offers unique products or services, making customers willing to pay a higher price.
-
Sources of differentiation: product characteristics (physical, performance, and intangibles), market characteristics (consumer tastes and needs, and product valuation), and firm characteristics (interaction with customers, ethics, and time response).
-
Differentiation competitive advantage barriers: high level of creativity, complex interrelations of resources and capabilities, and unique location.
-
Differentiation competitive advantage risks: price difference may be too high, customers may not need differentiation, and competitors may imitate or target specific market segments.
-
Strategic clock: customers buy based on price and perceived added value; eight competitive strategies, divided into four strategic groups.
-
Strategies focused on low prices: "no frills" and low price strategies.
-
Strategies focused on differentiation added value: differentiation, focused differentiation, and hybrid strategies.
-
Strategies destined to fail: price-based strategies that ignore perceived added value.
-
Strategies for emerging, growth, mature, and declining industries: adaptive competitive strategies for different industry levels.
Test your knowledge of business strategy and competitive advantage with this quiz. Covering topics such as the nature and sources of competitive advantage, analysis of cost and differentiation competitive advantage, the strategic clock, life cycle strategies, and innovation strategies.
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