Video Notes: Business Level Strategy and Porter's Generic Strategies

Vocabulary flashcards covering key concepts from the lecture on business level strategy, Porter’s generic strategies, and related concepts like value chains, business models, and market segmentation.

Business level strategy

Integrated, coordinated commitments and actions to gain a competitive advantage in a specific product market by exploiting the firm’s core competencies and resources.

Competitive advantage

The ability of a firm to perform better than rivals, resulting in above-average returns.

Value proposition

The bundle of benefits a firm offers to satisfy customer needs and create value; central to a successful strategy.

Porter’s generic strategies

The main ways a firm can achieve competitive advantage in a product market: cost leadership, differentiation, focus cost leadership, focus differentiation (plus the hybrid integrated option).

Cost leadership

Becoming the lowest-cost producer in the market while offering an acceptable (not necessarily premium) product; leverages efficiency, economies of scale, and standardized products.

Differentiation

Offering unique product features or services that customers perceive as valuable and are willing to pay a premium for.

Focus cost leadership

A cost leadership strategy applied to a narrow market segment, achieving the lowest costs within that segment.

Focus differentiation

A differentiation strategy aimed at a narrow market segment, delivering unique value to that specific group.

Integrated cost leadership and differentiation

A hybrid strategy attempting to be both low-cost and differentiated; challenging to sustain; sometimes exemplified by Target.

Economies of scale

Cost advantages gained by producing in high volume, reducing per-unit costs.

Value chain

Sequence of activities (inbound logistics, operations, outbound logistics, etc.) used to create and deliver a product; opportunities exist to improve efficiency.

Process innovation

Improvements in how a product is produced or delivered to reduce costs or increase efficiency.

Product innovation

Improvements or new features in the product itself to create differentiation.

Market segmentation

Dividing a market into groups of customers with similar needs to target a specific group.

Broad market

A large, diverse customer base; strategies like cost leadership and differentiation target broad segments.

Narrow (focused) market

A smaller, specific customer segment targeted by focus strategies.

Competitive risk of cost leadership

Risks include technological change, shifting customer needs, or rivals imitating cost advantages; high volumes required to maintain scale.

Competitive risk of differentiation

Risks include customers not valuing the differentiating features, imitation by competitors, or price/value misalignment.

Stuck in the middle

When a firm fails to pursue a clear cost leadership or differentiation position, leading to weaker performance.

Business model

A framework describing how a firm creates, delivers, and captures value; differs from the concrete strategy path.

Franchise model

A business model where a firm licenses its brand and operating system to others for a fee and ongoing royalties.

Freemium model

A model offering a basic service for free while charging for premium features or access.

Subscription model

A model with recurring revenue (e.g., monthly/annual) rather than one-off purchases, providing predictable income.

Digital platform model

A model that enables independent interactions between users (peers) via an online platform and monetizes those interactions.

R&D emphasis in differentiation

Heavy investment in research and development to create new features, designs, and improved products that justify premium pricing.