Exam 4: Business Level Strategy

In general, firms can be most effective if they develop business-level strategies that will serve the needs of the "average customer."

Virtually anything can be a basis for a firm to create a differentiated product or service.

Case Scenario : Abrahamson's Jewelers. Through its sole location in an affluent suburb of San Francisco, Abrahamson's Jewelers has established a strong niche market in the upscale jewelry store segment. Abrahamson's was founded in 1871 and is currently owned and operated by John Wickersham, who bought the firm from its namesake founders in 1985. Wickersham joined the firm as a trainee out of high school, completed his gemology training, and several years later took ownership with the financial help of his parents. That debt has long been paid off and business has thrived. When he first acquired the business, Abrahamson's offered a full range of jewelry and gift items from watches to wedding sets to silverware to clocks. This broad range of products was mirrored by a broad price range-$10,000 Rolex watches were sold next to $50 Seiko watches. While some jewelry was custom designed and manufactured, most of the products were "case ready," meaning they were sourced from large jewelry and silver manufacturers from around the world. Over the last 15 years, Wickersham has narrowed the company's product offering considerably to focus only on high-end watches like Rolex and Piaget, custom jewelry, and estate jewelry. Wickersham stresses that this is an appropriate focus for his business since each of the products lends itself to relationship selling, and price rarely comes into the discussion. Despite the narrower offering moreover, Abrahamson's floor space has doubled, and clients are intensely loyal to the good taste, design skills, and personal service level provided by Mr. Wickersham. -(Refer to the above Case Scenario ) Would you recommend that Mr. Wickersham embark on an Internet sales strategy for his company?

Wholesome Pet Food has successfully specialized for 20 years in high-quality pet food made from all-natural ingredients and organically-raised lamb. This brand has a strong following and is recommended by veterinarians who practice in affluent neighborhoods. Wholesome's main supplier of lamb has announced that the price for lamb will be 15 percent higher next year.

The goal of business-level strategy is to earn above-average returns.

The benefit of a flexible manufacturing system is that

Case Scenario : Walt Disney Company. Walt Disney Company is famed for its creativity, strong global brand, and uncanny ability to take service and experience businesses to higher levels. In the early 1990s, then-CEO Michael Eisner looked to the fast-food industry as a way to draw additional attention to the Disney presence outside of its theme parks - its retail chain was highly successful and growing rapidly. A fast-food restaurant made sense from Eisner's perspective since Disney's theme parks had already mastered rapid, high-volume food preparation, and, despite somewhat undistinguished food and high prices (or perhaps because of), all its in-park restaurants were extremely profitable. From this inspiration, Mickey's Kitchen was launched. The first two locations were opened in California and in a suburb of Chicago, adjacent to existing Disney stores. Menu items included healthy, child-oriented fare like Jumbo Dumbo burgers and even a meatless Mickey Burger. Eisner thought that locating each restaurant next to existing Disney stores was sure to increase foot traffic through both venues. Less than two years later Disney closed down the California and Chicago stores and shuttered further expansion plans. Eisner cited overwhelming competition from McDonalds and general oversaturation in the fast-food industry as the primary reasons for closing down the failing Mickey's Kitchen. -(Refer to the above Case Scenario ) Based on your own knowledge of Disney and the information provided in the scenario, does Disney appear to create value in its businesses primarily through a cost-leadership or through a differentiation strategy?

The use of a differentiation strategy would be expected to be LEAST effective in which of the following markets?

According to the Chapter 4 Opening Case, Acer's strategy of running a business with lower costs is good when markets are not growing (as occurred during the global recession) but even better when markets are growing.

When the costs of supplies increase in an industry, the low-cost leader

When implementing a focus strategy, the firm seeks to

When a product's unique attributes provide value to customers, the firm is implementing

The Monteleone Company pays large fees to a highly-recognizable, prestigious individual to be the spokesperson for the company's products, luxury private jets. Monteleone is probably following the

Big Lots is able to compete against Wal-Mart with a cost leadership strategy because of its strengths in highly disciplined merchandise cost and inventory management system. This illustrates the

The generalized forms of value that goods and services provide are either lower cost with acceptable features or highly differentiated features with acceptable cost.

Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that

As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects of business strategy for the newer networks is ____ than the traditional networks.

Case Scenario : International Cow Packers. International Cow Packers (ICP) is a $12 billion meat processor (slaughter, processing, and packing). Founded in 1943, ICP has grown to become the largest beef and pork processor in the United States (revenues come 90% from beef and 10% from pork) and also has a growing export market to Japan. The company follows a focused cost-leadership strategy, delivering USDA-graded meats primarily to the institutional (schools, prisons, hospitals) and supermarket channels. ICP's entire value chain is organized to deliver volume product at the industry's lowest per-unit cost. Its supplier industries, primarily cattle and swine feedlots, have relatively little power since prices for these raw materials are determined in the commodity markets. While entry barriers to the industry are high due to high minimum start-up costs, industry rivalry is extremely intense - primarily due to the fact that three large companies (including ICP) control 80% of the market for processed meats. The threat of substitutes is high with an increasing trend for consumers to favor poultry and other non-beef proteins. Buyers are also powerful since supermarkets are relatively concentrated at a regional level and end-consumers have ample choices. -(Refer to the above Case Scenario ) Is ICP's focused low-cost strategy appropriate for its industry? Why?

Describe the advantages of integrating cost leadership and differentiation strategies.

All of the following are ways that a good or service can be differentiated EXCEPT