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business level strategy
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the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market
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strategic trade-offs
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Choices between a cost or value position. Such choices are necessary because higher value creation tends to generate higher cost.
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differentiation strategy
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generic business strategy that seeks to create higher value for customers than the value that competitors create
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cost-leadership strategy
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generic business strategy that seeks to create the same or similar value for customers at a lower cost
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scope of competition
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the size - narrow or broad - of the market in which a firm chooses to compete
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economies of scope
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savings that come from producing two (or more) outputs at less cost than producing each output individually, despite using the same resources and technology
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Value Drivers
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product features, customer service, complements
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Cost Drivers
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cost of input factors, economies of scale, learning-curve effects, experience-curve effects
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Economies of Scale
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decreases in cost per unit as output increases
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Economies of scale allow firms to
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-spread their fixed costs over a larger output
-employ specialized systems and equipment
-take advantage of certain physical properties
-employ specialized systems and equipment
-take advantage of certain physical properties
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minimum efficient scale (MES)
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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
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diseconomies of scale
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increases in cost per unit when output increases
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Learning Curve
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as plants produce more, they gain experience in the best production methods, which reduce their costs per unit and time
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Blue Ocean Strategy
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Business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs.
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Value Innovation
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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
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Value Innovation - Lower Costs
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1. Eliminate: Which of the factors that the industry takes for granted should be eliminated?
2. Reduce: Which of the factors should be reduced well below the industry's standard?
2. Reduce: Which of the factors should be reduced well below the industry's standard?
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Value Innovation - Increase Perceived Consumer Benefits
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1. Raise. Which of the factors should be raised well above the industry's standard.
2. Create. Which factors should be created that the industry has never offered?
2. Create. Which factors should be created that the industry has never offered?
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Stuck in the Middle
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leads to inferior performance and resulting competitive disadvantage
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value curve
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horizontal connection of the points of each value on the strategy canvas that helps strategists diagnose and determine courses of action
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strategy canvas
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graphical depiction of a company's relative performance vis-a-vis its competitors across the industry's key success factors
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