18 Questions
In order to pursue cost leadership, companies have to produce the product or service at the ______ costs in the market
lowest
Cost leadership can be reached by achieving low purchasing costs which allow companies to exert ______ on suppliers
pressure
Economies of scale help in cost leadership as the more a product is produced, the more the product or service ______
improves
Experience plays a key role in cost leadership as organizations get better at anticipating market fluctuations and reacting to them through accumulated ______
experience
By analyzing accumulated experience, companies can optimize internal processes and save ______
costs
One successful implementation of the cost/price leadership strategy is seen in the case study of the retailer ______
ALDI
ALDI focuses on cost/price leadership strategy by negotiating low ______ costs
transportation
One advantage of a differentiation strategy is creating a unique market position with high ______ margins
profit
ALDI optimizes internal processes by striving to simplify and ______ them
optimize
Instead of forecasting, ALDI runs its business based on current ______
data
A differentiation strategy requires offering something ______ to customers
unique
Southwest Airlines excels due to its service attitude and ______
punctuality
According to Michael Porter, strategy is the creation of a unique and valuable position, involving a different set of ______.
activities
Michael Porter emphasizes developing a competitive advantage based on one clear, distinctive ______.
feature
Henry Mintzberg defines strategy as 'a pattern in a stream of ______.'
decisions
A competitive advantage provides the organization with a better position in the market compared to its ______.
competitors
An explicit strategy that is too rigid ties organizations psychologically to their pre-defined ______.
goals
It is necessary to keep a corporate strategy flexible and open to ______.
changes
Study Notes
Cost Leadership Strategy
- To pursue cost leadership, companies must produce products or services at the lowest costs in the market.
- Low purchasing costs enable companies to exert pressure on suppliers.
- Economies of scale help in cost leadership as the more a product is produced, the lower the cost per unit.
- Experience plays a key role in cost leadership as organizations get better at anticipating market fluctuations and reacting to them through accumulated knowledge.
- Analyzing accumulated experience helps companies optimize internal processes and save costs.
ALDI's Cost/Price Leadership Strategy
- ALDI focuses on cost/price leadership strategy by negotiating low logistics costs.
- ALDI optimizes internal processes by striving to simplify and standardize them.
- Instead of forecasting, ALDI runs its business based on current sales data.
Differentiation Strategy
- A differentiation strategy requires offering something unique to customers.
- Southwest Airlines excels due to its service attitude and high employee morale.
Strategy Definitions
- According to Michael Porter, strategy is the creation of a unique and valuable position, involving a different set of activities.
- Michael Porter emphasizes developing a competitive advantage based on one clear, distinctive strategy.
- Henry Mintzberg defines strategy as 'a pattern in a stream of actions.'
- A competitive advantage provides the organization with a better position in the market compared to its competitors.
- An explicit strategy that is too rigid ties organizations psychologically to their pre-defined plans.
- It is necessary to keep a corporate strategy flexible and open to adjustments.
Test your knowledge on Porter's generic strategies such as cost leadership, differentiation, and focus. Learn about how organizations set strategic goals and pursue strategic advantages according to Porter's classification.
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