Summary: Business Level Strategy

Read the summary and the most important questions on business level strategy

• 1 slides

  This is a preview. There are 8 more flashcards available for chapter 1
  Show more cards here

• What is economic value?

  The difference between perceived customer benefits from a product/service and its full economic cost.

• What drives profitability according to Porter (1979)?

  • Attractive industry + favorable competitive positioning → superior profitability.
    
  • Strategies that shape industry conditions and reduce rivalry.
    

• What is a limitation of Porter’s industry-based view?

  Empirical evidence shows industry factors explain only a small proportion of profit differences across firms.

• According to Barney (1991), what explains competitive advantage better than industry focus?

  Firm-specific resources and capabilities.

• What are Porter’s Five Forces (2008)?

  The model outlines five key competitive forces:
  

  1. Bargaining power of suppliers
  2. Bargaining power of buyers
  3. Threat of new entrants
  4. Threat of substitutes
  5. Rivalry among incumbents

• What determines rivalry intensity?

  Factors influencing the intensity of rivalry include:
  

  1. Concentration of firms in the industry
  2. Level of diversity among competitors
  3. Product differentiation
  4. Excess capacity
  5. Exit barriers
  6. Fixed costs

• What did Rumelt (1991) find about performance variance?

   Firm-level (business unit) factors explain far more performance differences than industry or corporate-level factors.

• What are the three conditions for resources/capabilities to generate profit?

  Essential conditions include:
  

  1. Ability to establish competitive advantage (CA)
  2. Ability to sustain competitive advantage
  3. Ability to appropriate the returns from competitive advantage

• How can a firm sustain CA?

  By relying on resources that are durable, difficult to transfer, and hard to replicate.

• What makes a resource/capability hard to imitate?

  Immobility (geography, complementarity, organizational routines) and complexity (e.g., FedEx logistics, Japanese JIT).