Business Strategy Quiz

Business Strategy

• Business strategy is about choices concerning how a business positions itself against its competitors.
• It involves decisions about products, industries, and markets to pursue.
• Strategy methods include organic, acquisition or alliance approaches.

Introduction

• Competitive strategy focuses on how a company achieves its competitive advantage in a specific domain.
• It comprises costs, product/service features, and branding.
• Competitive advantage means creating value for consumers that exceeds the costs of production and surpasses rivals' offerings.

Two Features of Competitive Advantage

• To be competitive, an organization must guarantee consumers perceive sufficient value to justify purchasing the product or service over its competitors.
• Organizations must be able to create more value for their customers than their competitors to maintain a competitive advantage.
• In the absence of competitive advantage, strategies become vulnerable to rivals with superior products or lower prices.

Generic Competitive Strategies

• Generic strategies are different methods to compete. Examples are cost leadership, differentiation, and focus.
• Cost leadership aims at delivering the lowest possible cost to consumers.
• Differentiation involves offering unique features or qualities to consumers.
• Focus strategy targets a subset of consumers with specific needs.

Cost Leadership Strategy

• The goal is to achieve lowest cost among competitors in a specific industry/domain.

• Cost drivers include input costs, economies of scale, experience, and product/process design.

• Input costs (e.g. outsourcing to developing countries) are a critical factor.

• Economies of scale impact costs. Industries with high fixed costs can benefit from cost reductions.

• Accumulated experience within an organization leads to reduced production costs.

• Efficient designs/processes can minimize costs from the beginning.

• Organizations can reduce costs by strategically acquiring components, using low-cost online interactions, or considering a product's lifecycle costs.

• Key principles include maintaining the lowest cost position among competitors and ensuring that competitors with higher costs are vulnerable.

• Cost-leadership strategies need not compromise the quality expected by consumers.

• Cost leaders may opt for either parity with competitors or attempt to strategically match quality to remain competitive.

Differentiation Strategy

• Differentiating a product/service involves creating uniqueness valued by consumers enough to warrant a price premium.

• Relevant points of differentiation vary across and within markets.

• Diverse differentiation dimensions exist, enabling companies to target distinct customer segments. Examples can include retail stores (location, size, fashion), automotive design (safety, style).

• Differentiation approaches also consider customer relationships, customer service, marketing aspects, and product/service complements.

• Organizations can focus efforts on product attributes, relationships with customers, marketing and reputation, or product complements to develop a differentiated strategy.

• Higher prices often accompany differentiation strategies, but meticulous cost management is still crucial, especially in areas external to the unique elements.

Focus Strategy

• Narrowing the target market, focusing on serving specific customer segments, is the key aspect.

• Focus strategies can be further divided into two forms: cost focus and differentiation focus.

• The cost focus version strives for reduced costs while serving a particular consumer group.

• Differentiation focus helps to establish highly valued products/services for narrow segments.

• These strategic approaches help focusers to develop highly valued products/services and gain market recognition and customer loyalty.

• Success depends heavily on distinctly segmented needs, value chains, and viable economies.

Hybrid Strategy

• Hybrid strategy incorporates multiple generic strategies.
• Some companies initially adopt one strategy and later integrate others to improve their position against competitors
• Companies may choose to incorporate one or more business strategies with different structures to better serve their needs.
• Hybrid strategies can be employed in organizational or technological aspects, allowing flexibility in responding to competitive pressures.