Exam 7: The Sources and Dimensions of Competitive Advantage

The principal distinction between segmentation and differentiation is that segmentation is a strategic choice by a firm while differentiation is a feature of market structure.

To understand customer' willingness to pay for differentiation, it is important to know what motivates customers, and the criteria they apply when choosing among competing products.

If a firm is more profitable than its rivals, this invariably means that it possesses a competitive advantage.

Most business model innovation involves novel approaches to creating and/or capturing value within an industry.

The cost reductions that firms derive from moving down their experience curves are mainly the result of learning which increases the productivity of labor.

The difference between "search goods" and "experience goods" depends upon whether customers can ascertain the product's true attributes: on inspection or only after consuming the product

The potential for spreading fixed costs over a greater volume of output means that unit cost continues to decline even after full capacity utilization has been reached.

In highly concentrated industries such as passenger jet aircraft, microprocessors, construction equipment, and video game consoles, the scale economies in production are more important than scake economies in product developmnet.

According to Porter, cost leadership and differentiation are:

Competitive advantage without purposeful activity by a firm-it may arise through it being favored by an external change.

There are two primary sources of competitive advantage: cost advantage and differentiation advantage.

The examples of Ikea and Southwest Airlines demonstrate:

One reason that the value chain analysis is a valuable tool for cost analysis is that cost drivers tend to be very different between the different activities of the firm.

Causal ambiguity is a type of isolating mechanism.

Cost and differentiation strategies are similar in terms of their potential to confer sustainable competitive advantage.

Tangible differentiation comprises observable product features such as shape, color, size, and style; it does not include performance dimensions such of the product - for instance its reliability and durability.

Conceiving of innovative business models typically involves:

In supplying "lifestyle" products which are designed to meet consumers' social and psychological needs, the key to differentiation advantage is:

Strategic innovation comprises the introduction of novel products or processes that embody new technology

When an industry is subject to externally generated changes, the firms which are most likely to establish a competitive advantage are: