Business Planning and strategy(Porter generic strategy)

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What does the porter model suggest?
4 'generic' business strategies that could be adopted to try gain a competitive advantage
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What did Porter believe you can achieve success or competitive advantage by?
Differentiation or Cost
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What are the 4 strategies involved in Porter's generic strategy?
-Cost leadership
-Cost focus
-Differentiation leadership
-Differentiation Focus
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What is differentiation leadership and cost leadership(MASS)?
These strategies seek competitive advantage in a broad range of market/industry segments
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What is differentiation focus and cost focus (NICHE)?
These strategies are adopted in a narrow market/industry
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What is the objective of a cost leadership strategy?
To become the lowest-cost producer in the industry, in a mass market
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Why is cost leadership strategy good/important?
-Benefit from economies of scale(pass discount onto customers)

-Large profits

-Use JIT/Lean production
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What are 2 examples of businesses that show cost leadership?
-Mc Donalds
-Primark
-Ryanair
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When a business is using the cost leadership strategy, they will need to be the lowest-cost producer.How do they achieve this?(2 points)
-`Lean production methods(JIT)

-Use of bargaining power(management) to negotiate the lowest prices for production inputs
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What is a 'suitable market'?
A market which sells a standard product with little differentiation and their branding is seen as unimportant
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What is the cost focus strategy?
A lower-cost advantage in a niche market
-Product will be 'standardised'
-'Me -too's'
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2 Examples of companies that use the cost focus strategy?
-Ikea
-Rolls royce
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What is differentiation focus strategy aim?(NICHE)
A business aims to differentiate within just one/a small number of target market segments
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What does a business using the differentiation focus strategy need to ensure of?
That customers really do have different needs and wants
-Opportunities to provide customers with products clearly different from competitors
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How do small businesses establish themselves in a niche marketing strategy?
Premium pricing(finding ways to 'add value' for customers)
e.g good customer service/returns
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What are 2 example businesses that use differentiation focus strategy?
-Gucci
-Tesla
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What is differentiation leadership?(MASS)
Business targets much larger markets and aims to achieve competitive advantage through differentiation across the whole industry
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What occurs within the differentiation leadership strategy?
Charging premium pricing
(reflects the 'added value' & higher quality)
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What 3 ways could a business 'differentiate' their product/service?
-Superior product quality

-Branding

-Consistent promotional support
(sponsors/advertising)
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Nike and Mercedes are example businesses's which use differentiation leadership strategy.How do they achieve this ?
-Benefit from economies of scale(high demand)
-Loyal customers
-Premium pricing
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What are 2 criticisms of Porters generic strategy framework?
-Price can sometimes be used to differentiate
-Cost leadership does not sell products itself
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What must a business consider before choosing a strategy ?
Monitoring their business and avoid complacency.Require the business to always remain vigilant regarding the needs of customers.
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Other cards in this set

Card 2

Front

What did Porter believe you can achieve success or competitive advantage by?

Back

Differentiation or Cost

Card 3

Front

What are the 4 strategies involved in Porter's generic strategy?

Back

Preview of the front of card 3

Card 4

Front

What is differentiation leadership and cost leadership(MASS)?

Back

Preview of the front of card 4

Card 5

Front

What is differentiation focus and cost focus (NICHE)?

Back

Preview of the front of card 5
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