Business Level Strategy

Flashcards covering key concepts of business-level strategy, including definitions, types (Cost Leadership, Differentiation, Focus), advantages, disadvantages, and evaluation criteria, based on the provided lecture notes.

What is a strategy in the context of business management?

A deliberate course of action that managers take to match the organisation’s strengths with opportunities that arise in the business environment.

At how many levels are strategic decisions typically made?

Three levels.

What are the three levels of strategy?

Corporate level, Business level, and Operational or Functional level strategies.

What does a corporate-level strategy determine?

The overall scale and scope of the organisation, concerned with determining within which industries and markets to compete.

What is another common name for business-level strategies, and what do they focus on?

Competitive strategies or battle plans; they focus on achieving a competitive advantage within the industry.

How do operational-level strategies manifest themselves?

In the 7 functional areas of the business.

What four factors influence an organisation's strategic choice?

The strategic direction of the organisation, the internal and external environments, the nature of competition, and the impact on stakeholders.

What broad classification of business-level strategies is similar to Michael Porter's generic strategies?

Strategies depicted in four quadrants where the cost/price component is contrasted against the perceived quality/value of the product.

According to Michael Porter, what are the three primary generic business-level strategies?

Overall cost leadership, Differentiation, and Focus.

What are the characteristics of a market where a Cost Leadership/Low Cost Provider Strategy can be successful?

The market is large, price sensitive, and open to a notch below top quality products.

What does a Best Value Strategy aim to achieve?

Similar perceived product quality at a lower cost than competitors.

How can cost reduction be achieved in the Best Value Strategy?

Through economies of scale, owning specialised machinery (e.g., fuel-efficient aircraft), or maintaining lower overhead costs.

What drives competitive advantage in a Differentiation Strategy?

The uniqueness of the product or service, which is something valued by customers.

What is the distinction between 'broad' and 'focused' strategies?

Broad means competing in the whole market, while focused means competing in only a niche (a small portion) of the market.

What type of strategy does an organisation follow if it directs its competitive efforts to a specific niche in the marketplace?

A Focus strategy.

What is the main goal for organisations choosing a Cost Leadership strategy?

To build and sustain their competitive advantage by reducing its costs, or keeping its costs lower than those of their competitors, while offering a product or service customers want.

What is a potential disadvantage of an Overall Cost Leadership strategy if cost reduction becomes the sole focus?

The organisation may produce low quality products that no one wants to buy, losing the potential advantages of the strategy.

How does a Cost Leadership strategy provide an advantage against powerful suppliers?

The cost leader's lower costs mean it's less affected by input price increases, and large purchase quantities increase its bargaining power.

What are some disadvantages of a Cost Leadership Strategy?

Competitors may find ways to produce at lower costs, methods can be easily imitated, and the organisation may lose sight of changes in customers' tastes.

What are the key success factors for a Differentiation Strategy?

Clear identification of customers, understanding what customers value, clear identification of competitors, and the extent of ease of imitation.

What is an advantage of a Differentiation Strategy regarding brand loyalty and potential entrants?

Customers develop brand loyalty, which creates a barrier to entry for potential competitors.

What are some disadvantages of a Differentiation Strategy?

Threat of imitation by competitors, importance of differentiation diminishing as customers become more price sensitive, and the fear of charging a price higher than the market will accept.

When is a Focus strategy particularly attractive?

When the target market niche is big enough to be profitable and offers good growth potential, and when industry leaders do not see a presence in that niche as crucial to their own success.

How does a Focus strategy offer protection to an organisation in terms of rivals?

It provides a product or service they cannot, thus giving the focuser power over its buyers.

What is a major disadvantage of Focus Strategies related to production costs?

Since a focuser produces in small volumes, its production costs often exceed those of a low-cost organisation.

What is a 'Low Cost Focus' strategy?

Concentrating on a narrow buyer segment and attempting to out-compete competitors by having lower costs to serve those niche customers at a lower price.

What does a 'Best Value Focus' strategy aim to achieve?

To concentrate on a narrow buyer segment and offer niche customers customised attributes that meet their requirements better than competitors' products.

What are the key criteria strategic decision makers use when evaluating strategic options?

Appropriateness, Feasibility, Desirability, Consistency, Validity, and Attractiveness to stakeholders.

What is the purpose of the SWOT matrix in strategy evaluation?

It guides the organisation as to its viable strategic options by analysing Strengths, Weaknesses, Opportunities, and Threats but does not indicate which option to choose.

What does Quadrant 1 (SO Strategic options) of the SWOT matrix represent?

Strengths & Opportunities, considered the most attractive area in which to operate.

What does a decision tree offer in strategy evaluation?

A graphical representation of various strategic options available, used to estimate outcomes and progressively eliminate options based on requirements.

What is scenario analysis in strategic management?

A useful tool that explores 'what if' questions for their impact on the strategy under consideration.

What does 'Feasibility' ask about a proposed strategy?

If the organisation is capable of carrying out the proposed strategies, considering whether it can achieve objectives, be implemented effectively/efficiently, and if resources are available.

What does 'Desirability' relate to in strategy evaluation?

Assessing the ability of the strategy to produce results in the short or long term, in light of organisational needs and priorities, including inherent risks like competitor retaliation or overstretching resources.

What does 'Consistency' mean when evaluating a strategic option?

Whether the strategy option is in accordance with the strategic intent and overall objectives of the organisation.

Why is 'Attractiveness to stakeholders' an important criterion for evaluating strategies?

Organisations aim for long-term sustainability, so they must consider if a strategy is appealing to those whose needs must be satisfied and its overall impact on stakeholders.