Podcast
Questions and Answers
Which factor can create significant hurdles for new entrants in a market?
Which factor can create significant hurdles for new entrants in a market?
- Low switching costs for customers
- Increased consumer awareness
- Minimal government regulations
- Access to distribution channels (correct)
What is not considered a switching cost for customers when changing suppliers?
What is not considered a switching cost for customers when changing suppliers?
- Gaining better product knowledge (correct)
- Costs of acquiring new ancillary equipment
- Psychological costs related to ending a relationship
- One-time costs incurred during the change
Which of the following can create cost disadvantages for new entrants?
Which of the following can create cost disadvantages for new entrants?
- Increased competition among existing companies
- Government subsidies for established firms (correct)
- Frequent changes in consumer preferences
- Proven business models
How can government policy affect the entry of new firms into an industry?
How can government policy affect the entry of new firms into an industry?
What type of costs might be incurred when a firm decides to switch suppliers?
What type of costs might be incurred when a firm decides to switch suppliers?
Which of the following is least likely to represent a cost disadvantage for new entrants?
Which of the following is least likely to represent a cost disadvantage for new entrants?
Why might switching costs be low for a consumer switching to a different soft drink brand?
Why might switching costs be low for a consumer switching to a different soft drink brand?
Which of the following factors would not generally reduce strategic barriers for new entrants?
Which of the following factors would not generally reduce strategic barriers for new entrants?
What is one of the primary reasons firms develop strategic alliances?
What is one of the primary reasons firms develop strategic alliances?
What percentage of alliances are reported to fail?
What percentage of alliances are reported to fail?
Which type of alliance involves firms sharing resources from different stages of the value chain?
Which type of alliance involves firms sharing resources from different stages of the value chain?
What is a key characteristic of horizontal complementary strategic alliances?
What is a key characteristic of horizontal complementary strategic alliances?
How do strategic alliances function as a competition response strategy?
How do strategic alliances function as a competition response strategy?
What is a significant issue that firms face in forming alliances?
What is a significant issue that firms face in forming alliances?
Which type of alliance specifically adapts to environmental changes?
Which type of alliance specifically adapts to environmental changes?
What is the estimated alliance termination rate?
What is the estimated alliance termination rate?
What is the primary purpose of forming strategic alliances?
What is the primary purpose of forming strategic alliances?
Why do firms use business-level strategic alliances in fast-cycle markets?
Why do firms use business-level strategic alliances in fast-cycle markets?
What distinguishes collusive strategies from strategic alliances?
What distinguishes collusive strategies from strategic alliances?
What type of collusion is characterized by direct negotiation between firms?
What type of collusion is characterized by direct negotiation between firms?
What is a potential risk associated with entering new product markets?
What is a potential risk associated with entering new product markets?
What type of business-level strategic alliance is thought to have the highest probability of creating competitive advantages?
What type of business-level strategic alliance is thought to have the highest probability of creating competitive advantages?
Which strategy involves collaboration with other companies to expand operations at the corporate level?
Which strategy involves collaboration with other companies to expand operations at the corporate level?
What potential challenge do firms face when choosing to explicitly collude?
What potential challenge do firms face when choosing to explicitly collude?
Which strategy is characterized by a high need for local responsiveness and a low need for global integration?
Which strategy is characterized by a high need for local responsiveness and a low need for global integration?
What is one of the four factors that determine national advantage as identified by Porter?
What is one of the four factors that determine national advantage as identified by Porter?
In a transnational strategy, a firm seeks to achieve which of the following?
In a transnational strategy, a firm seeks to achieve which of the following?
What happens to the value created by capabilities developed in domestic markets as a firm's geographic diversity increases?
What happens to the value created by capabilities developed in domestic markets as a firm's geographic diversity increases?
An international corporate-level strategy is primarily concerned with which aspect of a firm’s operations?
An international corporate-level strategy is primarily concerned with which aspect of a firm’s operations?
Which of the following best describes the aggregation aspect of the AAA Strategy?
Which of the following best describes the aggregation aspect of the AAA Strategy?
Which strategy allows the firm’s home office to dictate the strategies that business units should utilize in each region?
Which strategy allows the firm’s home office to dictate the strategies that business units should utilize in each region?
What characteristic defines the firm strategy, structure, and rivalry factor in Porter's framework?
What characteristic defines the firm strategy, structure, and rivalry factor in Porter's framework?
What is a primary feature of the cost leadership functional structure?
What is a primary feature of the cost leadership functional structure?
Which aspect is least emphasized in a differentiation strategy?
Which aspect is least emphasized in a differentiation strategy?
What challenge do firms face when implementing an integrated cost leadership/differentiation strategy?
What challenge do firms face when implementing an integrated cost leadership/differentiation strategy?
What culture is encouraged by firms utilizing the differentiation strategy?
What culture is encouraged by firms utilizing the differentiation strategy?
In which type of organizational structure are jobs typically not highly specialized?
In which type of organizational structure are jobs typically not highly specialized?
Which of the following strategies primarily focuses on creating value through unique product features?
Which of the following strategies primarily focuses on creating value through unique product features?
What type of reporting relationships are common in a differentiation strategy?
What type of reporting relationships are common in a differentiation strategy?
Which of the following is NOT a characteristic of the cost leadership strategy?
Which of the following is NOT a characteristic of the cost leadership strategy?
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Study Notes
Capital and Market Entry
- Physical facilities and capital are essential for inventories, marketing, and key business functions.
- New industries may require significant capital for market entry, even if opportunities appear attractive.
Switching Costs
- One-time costs incurred when customers switch to a different supplier include buying new equipment and retraining employees.
- Psychological costs may arise from ending prior relationships with suppliers.
- Low switching costs can exist for consumers switching brands, such as soft drinks.
Access to Distribution Channels
- Established firms learn efficient distribution over time, creating switching costs for distributors.
- Strong access to distribution channels serves as a significant barrier for new entrants, particularly in consumer nondurable goods.
Cost Disadvantages
- Established competitors may possess cost advantages that new entrants cannot replicate, such as proprietary technology or access to raw materials.
- Examples include favorable locations and government subsidies that lead to competitive disparities.
Government Policy
- Government regulations on licenses and permits can influence industry entry (e.g. liquor retailing, banking).
- Government actions significantly impact the opportunities available to new entrants.
Strategic Alliances and Their Challenges
- 30% to 70% of strategic alliances fail, with a termination rate exceeding 50%.
- Companies form alliances primarily to create value or to access resources they can't obtain independently.
Business-Level Cooperative Strategies
- Strategies involve resource sharing to establish competitive advantages in product markets.
- Two main types of complementary strategic alliances:
- Vertical (across different value chain stages)
- Horizontal (within the same value chain stages)
Competition Response Strategy
- Strategic alliances can be used to counteract competitors' actions.
- Primarily focused on strategic actions rather than tactical responses.
Uncertainty-Reducing Strategy
- Alliances reduce risk and uncertainty in volatile markets and when entering new product markets.
- R&D alliances and collaborations with firms in emerging markets are common for risk mitigation.
Competition-Reducing Strategy
- Collusive strategies, which are often illegal, involve agreements between firms to limit competition.
- Two types: explicit (direct negotiations) and tacit collusion.
Assessing Business-Level Strategies
- Business-level cooperative strategies help develop competitive advantages and improve product market positions.
- Vertical complementary alliances often show the highest success rates.
Corporate Level Cooperation Strategy
- Collaboration among firms is used to expand operations and leverage established capabilities for international market success.
- Geographic diversification diminishes the effectiveness of domestic core competencies over time.
Factors Determining National Advantage
- Porter identifies key determinants: production factors, demand conditions, firm strategy structure and rivalry, and related industries.
International Corporate Level Strategy
- Focuses on firms operating in multiple industries across various countries.
- Multidomestic strategy allows decentralization, tailoring products to local markets.
- Global strategy centralizes decision-making with a focus on global integration.
- Transnational strategy aims for efficiency and local responsiveness.
AAA Strategy
- Adaptation involves modifying products for local markets.
- Aggregation focuses on achieving operational efficiencies and maintaining low costs via centralized decision-making.
Differentiation Strategy
- Firms using differentiation seek to provide unique products perceived as valuable by customers.
- Emphasizes creativity and flexibility in product development and marketing over manufacturing R&D.
Integrated Cost Leadership/Differentiation Strategy
- Balances low-cost products with reasonable differentiation.
- Challenges arise from emphasizing varying activities associated with both strategies.
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