Exam 4: Business-Level Strategy

The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because

A business-level strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage in specific product markets.

Describe how a differentiation strategy can help a firm earn above-average returns.

Case Scenario 1: International Cow Packers. International Cow Packers (ICP)is a $12 billion meat processor (slaughter, processing, and packing). Founded in v1943, ICP has grown to become the largest beef and pork processor in the United States (revenues come 90 percent from beef and 10 percent 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 start­up costs, industry rivalry is extremely intense-primarily due to the fact that three large companies (including ICP)control 80 percent 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 Case Scenario 1). Is ICP's focused low-cost strategy appropriate for its industry? Why?

Amazon has built capabilities around Internet technology and e-commerce to facilitate information exchanges with its customers in a cost effective manner. This represents which of the three service dimension?

Research suggests that having a competitive advantage in than it does in the differentiation strategy.

All of the following describe strategies EXCEPT

When firms use core competencies to implement value-creating strategies they are answering the "______" question.

Case Scenario 2: 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 2 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 Case Scenario 2). Why do you think that Mickey's Kitchen failed?

Describe the risks of a differentiation strategy.

Every firm uses all levels of strategy: corporate,acquisition and restructuring,international and cooperative.

Changing consumer needs is illustrated by Starbucks' allowing consumers to have an experience rather than just a cup of coffee and to design their own drinks.

The integration of a cost leadership and a differentiation strategy

A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for grooming. The best technique for this firm to learn this information would be to use

Chelsea Milling Company makes Jiffy packaged baking mixes. It was established in 1930. It has never spent one cent on advertising,which is one reason it is able to pursue a(n)______ strategy.

Religious beliefs are an example of customer segmentation by factors.

The value-creating activities associated with the cost leadership strategy and differentiation strategy are the same.

Which of the following is TRUE?

Walmart's change in strategy to attract more upscale customers will likely succeed because cost leaders are good at differentiating.

Zara has pioneered "cheap chic" in clothing apparel. Zara offers current and desirable fashion goods at relatively low prices. To implement the strategy,Zara uses sophisticated designers and effective means of managing costs. These are all characteristics of which business level strategy?