Chapter 6 BPL

Blue oceans (p. 231)-Untapped market space that is ripe for the creation of additional demand and the resulting opportunities for highly profitable growth.

Blue ocean strategy (p. 231)-Business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs.

Business-level strategy (p. 211)-The goal-directed actions managers take in their quest for competitive advantage when competing in a single product market.

Cost-leadership strategy (p. 213)-Generic business strategy that seeks to create the same or similar value for customers at a lower cost.

Differentiation strategy (p. 212)-Generic business strategy that seeks to create higher value for customers than the value that competitors create, with unique features but a similar level of costs to those of competing products. Firms can achieve a competitive advantage by ensuring that its economic value exceeds that of its competitor. Aims to  increase the price that consumers are willing to pay.an increase in value creation must exceed the increase in costs

Diseconomies of scale (p. 222)-Increases in cost per unit when output increases.

Economies of scale (p. 220)-Decreases in cost per unit as output increases.

Economies of scope (p. 216)-Savings that come from producing two (or more) outputs at less cost than producing each output individually, despite using the same resources and technology.

Focused cost-leadership strategy (p. 214)-Same as the cost-leadership strategy except with a narrow focus on a niche market.

Focused differentiation strategy (p. 214)-Same as the differentiation strategy except with a more narrow focus on a niche market.

Minimum efficient scale (MES) (p. 222)-Output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale.

Red oceans (p. 231)-The known market space of existing industries, where the rivalry among existing firms is cutthroat because the market space is crowded and competition is a zero-sum game.

Scope of competition (p. 213)-The size—narrow or broad—of the market in which a firm chooses to compete. Determines whether to pursue a specific narrow part of the market or to go after the broader market

Strategic trade-offs (p. 212)-Choices between a cost positioner value position. Such choices are necessary because higher value creation tends to generate higher cost.

Strategy canvas (p. 237)-Graphical depiction of a company’s relative performance vis-à-vis its competitors across the industry’s key success factors.

Stuck in the middle (p. 214)-Strategic position that is not clearly defined as low cost or differentiation; results from attempts to straddle different strategic positions and leads to inferior performance results.

Value curve (p. 237)-Horizontal connection of the points of each value on the strategy canvas that helps strategic leaders diagnose and determine courses of action.

Value innovation (p.The simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers; considered a cornerstone of blue ocean strategy.

 competitive advantage is based on the difference between the perceived value a firm is able to create for consumers (V), captured by how much consumers are willing to pay for a product or service, and the total cost (C) the firm incurs to create that value. The greater the economic value created (V − C), the greater is a firm’s potential for competitive advantage. To answer the business-level strategy question of how to compete, managers have two primary competitive levers at their disposal: value (V) and cost (C).

economic value created is defined by value minus cost

A firm’s business-level strategy determines its strategic position—its strategic profile based on value creation and cost—in a specific product market. A firm attempts to stake out a valuable and unique position that meets customer needs while simultaneously creating as large a gap as possible between the value the firm’s product creates and the cost required to produce it. Two important features that managers can adjust in an effort to improve the firm's strategic position are product features and customer service

Higher value creation tends to require higher cost. To achieve a desired strategic position, executives must make strategic trade-offs—choices between a cost position or value position. They must address the tension between value creation and the pressure to keep cost in check so as not to erode the firm’s economic value creation and profit margin.