Five Generic Competitive Strategies Overview

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What does a firm's competitive strategy primarily focus on?

Maximizing shareholder value

Investing in new technologies

Positioning the company in the marketplace (correct)

Expanding the workforce

Which factor is NOT used to distinguish one strategy from another according to the text?

Competitive advantage being pursued

Strength of the company's brand image (correct)

Broad or narrow market target

Link to low costs or product differentiation

What does a broad, low-cost strategy aim to achieve?

Underpricing rivals with lower overall costs (correct)

Attracting niche buyers with premium pricing

Higher overall costs than rivals

Maximizing profit margins

Which aspect of a company's resources and capabilities is crucial for gaining a competitive advantage?

Most important resources and capabilities Signup and view all the answers

What should a company evaluate to determine its competitive strength relative to key rivals?

Whether it is stronger or weaker than key rivals Signup and view all the answers

In pursuing a broad, low-cost strategy, what does the company aim to attract with its lower costs?

A broad spectrum of buyers Signup and view all the answers

What does capturing all available economies of scale mean?

The more you produce, the lower the unit cost. Signup and view all the answers

What is the key concept behind operating facilities at full or near-full capacity?

Efficiency increases as facilities approach maximum capacity. Signup and view all the answers

How does improving supply chain efficiency contribute to cost reduction?

By getting ingredients and supplies quickly and inexpensively. Signup and view all the answers

What is the purpose of substituting lower-cost inputs without sacrificing quality?

To find cheaper ingredients without compromising quality. Signup and view all the answers

How does a company benefit from using online systems and sophisticated software?

It achieves operating efficiencies by streamlining processes. Signup and view all the answers

What does employing advanced production technology aim to achieve?

Discover more effective ways to produce goods. Signup and view all the answers

Why is signaling value important in product differentiation?

When the differentiation is based on intangible features that are subjective and hard to quantify. Signup and view all the answers

Why is signaling value especially important for first-time purchases of new products?

Customers are unsure about their experience with a new product. Signup and view all the answers

In what situation might buyers be considered unsophisticated according to the text?

When they lack knowledge and experience in purchasing a specific type of product. Signup and view all the answers

Which factor makes signaling value important for products with invisible and intangible differentiation?

Subjectivity and difficulty in quantifying the intangible features by buyers Signup and view all the answers

How can signaling value influence customer behavior in regard to trying a new product?

By highlighting the intangible benefits and reducing uncertainty for customers. Signup and view all the answers

Why do products with invisible differentiating features require signaling value according to the text?

Because customers may have varying opinions on the value of these features. Signup and view all the answers

What is a common pitfall to avoid in pursuing a low-cost strategy?

Engaging in aggressive price cutting without increasing unit sales Signup and view all the answers

In the context of differentiation strategies, what approach should a company take to create a distinctive product offering?

Study buyer needs and willingness to pay for unique features Signup and view all the answers

What defines buyers who are price-sensitive or have the power to bargain down prices?

They prioritize getting the cheapest deal Signup and view all the answers

Why is it hard for companies to make their products seem special or better than others?

There are limited ways to differentiate industry products Signup and view all the answers

What is a risk of relying on a cost advantage that is not sustainable?

Rival firms can copy or overcome the advantage Signup and view all the answers

How can companies effectively differentiate their products in the market?

By studying buyer needs and incorporating appealing features Signup and view all the answers

What type of differentiation strategy involves creating substantial switching costs that lock in buyers?

Patent-protected product innovation Signup and view all the answers

In what market circumstances does a differentiation strategy work best?

When customer needs and preferences are diverse Signup and view all the answers

What aspect makes differentiation difficult for rivals to duplicate or imitate?

Company reputation Signup and view all the answers

Which circumstance is favorable for a differentiation strategy according to the text?

Rapid change in the product's technology and features Signup and view all the answers

What type of differentiation involves long-standing relationships with buyers?