Chapter 4 Business Level Strategy

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Fermina D.

Austria

Chapter 4 Business Level Strategy

Business-level strategy is an integrated and coordinated set of commitments and actions firms uses to
gain a competitive advantage by exploiting core competencies in specific product markets.

Cost leadership strategy is an integrated set of actions taken to produce goods/services with features
that are acceptable to customers at the lowest cost relative to the competitors.

Differentiation strategy is an integrated set of actions taken to produce goods/services (at an acceptable
cost) that customers perceive as being different in ways that are to them.

Focus strategy is an integrated set of actions taken to produce goods/services that serve the needs of a
particular competitive segment.

Integrated cost leadership/ differentiation involves engaging in primary value of chain activities and
support functions that allow a firm to simultaneously pursue low cost and differentiation.

Strategy a plan of action to achieved the goals of a business.

Market segmentation determines how the organization divides its customers into smaller groups.

Total quality management (TQM) is a managerial process that emphasizes an organization’s


commitment to the customer and to continuous improvement of all processes through problem-solving
approaches based on empowerment of employees.

Chapter 5 Competitive rivalry and competitive dynamics

Competitors are firms operating in the same market offering similar products and targeting similar
customers.

Competitive rivalry is the on-going set of competitive actions and competitive responses that occur
among firms as they maneuver for an advantageous market position.

Competitive behaviour is the set of competitive actions and responses a firm takes to build or defend its
competitive advantages and to improve its market position.

Competitive dynamics refer to all competitive behaviours- that is, the total set of actions and responses
taken by all firms competing within the market.

Competitive action is a strategic or tactical action the firm takes to build or defend its competitive
advantages or improve its market position.

Competitive response is a strategic or tactical action the firm takes to counter the effects of a
competitor’s competitive action.
First mover is a firm that takes an initial competitive action in order to build or defend its competitive
advantages or to improve its market position.

Fast cycle markets are markets in which the firm’s capabilities that contribute to competitive advantages
are mot shielded from imitation and where imitation is often rapid and inexpensive.

Late-mover is a firm that responds to a competitive action a significant amount or time after the first
mover action and the second mover’s response.

Multi market competition occurs when firms compete against each other in several product or
geographic markets.

Market commonality is concerned with the number of markets with which the firm and a competitor are
jointly involved and the degree of importance of the individual markets to each.

Quality exists when the firm’s goods or services meet or exceed customers’ expectations.

Resource similarity is the extent to which the firm’s tangible and intangible resources are comparable to
a competitor’s in terms of both type of amount.

Strategic action or strategic response is a market-based move that involves a significant commitment of
organizational resources and is difficult to implement and reverse.

Second mover is a firm that responds to the first mover’s competitive action, typically through imitation.

Slow-cycle markets are markets in which the firm’s competitive advantages are shielded from imitation,
commonly for long periods of time, and where imitation is costly.

Standard cycle markets are markets in which the firm’s advantages are partially shielded from imitation
and imitation is moderately costly.

Tactical action or a tactical response is a market-based move that is taken to fine-tune strategy. It
involves fewer resources and is relatively easy to implement and reverse.

Chapter 6 Corporate Level Strategy

Corporate-level strategy specifies actions a firm takes to gain a competitive advantage by selecting and
managing a group of different businesses competing in different product markets.

Economies of scope are cost savings a firm creates by successfully sharing resources and capabilities or
transferring one or more corporate-level core competencies that were developed in one of its
businesses to another of its businesses.

Corporate-level core competencies are complex sets of resources and capabilities that link different
businesses, primarily through managerial and technological knowledge, experience, and expertise.
Market power exists when a firm is able to sell its products above the existing competitive level or to
reduce the costs of its primary and support activities below the competitive level, or both.

Multipoint competition exists when two or more diversified firms simultaneously compete in the same
product areas or geographical markets.

Vertical integration exists when a company produces its own inputs (backward integration) or owns its
own source of output distribution (forward integration).

Financial economies are cost savings realized through improved allocations of financial resources based
on investments inside or outside the firm.

Synergy exists when the value created by business units working together exceeds the value that those
same units create working independently.

Chapter 7 Merger and Acquisition Strategies

Merger is a strategy through which two firms agree to integrate their operations on a relatively coequal
basis.

Acquisition is a strategy through which one firm buys a controlling, or 100percent, interest in another
firm with the intent of making the acquired firm a subsidiary business within its portfolio.

Restructuring is a strategy through which a firm changes its set of businesses or its financial structure.

Takeover is a special type of acquisition where the target firm does not solicit the acquiring firm’s bid;
thus, takeovers are unfriendly acquisitions.

Chapter 8 International Strategy

International strategy is a strategy through which the firm sells its goods or services outside its domestic
market.

Multidomestic strategy is an international strategy in which strategic and operating decisions are
decentralized to the strategic business units in individual countries or regions for the purpose of
allowing each unit the opportunity to tailor products to the local market.

Global strategy is an international strategy in which a firm’s home office determines the strategies that
business units are to use in each country or region.

Transnational strategy is an international strategy through which the firm seeks to achieve both global
efficiency and local responsiveness.

Greenfield venture is an entry mode through which a firm invests directly in another country or market
by establishing a new wholly owned subsidiary.
International diversification strategy is a strategy through which a firm expands the sales of its goods or
services across the borders of global regions an countries into a potentially large number of geographic

locations or markets.

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