MOS 4410 - Chapter 5 Textbook Notes.docx

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Management and Organizational Studies
Management and Organizational Studies 4410A/B
Raymond Leduc

Chapter 5 BusinessLevel Strategy Creating and Sustaining Competitive AdvantageCase StudyA firms competitive strategy is about creating value for its customers and having these customers reward the firm for the superior value they receive Soft drink and beverages business is global and cutthroat each single market share point translates to billions of dollar sales Cott supplying Presidents Choice popsurpassed combined sales of Pepsi and Coke products at LoblawsWhat went wrong at CottIts ups and downs reflect the companys strategic choices to align with its commitment to a simple line of core products and efficient operations or its decisions to move toward an ambitious strategy of expansion product differentiation and consulting to mass merchants around the word Strategy formulation the second main aspect of strategic management is about the thought processes and the decisions managers make to address1What business they should be in2How to compete in the businessBusinessLevel strategy is about the particular ways a firm competes in its chosen business2 dominant schools of strategic management1Positioning SchooloViews business strategy and the corresponding role of managers as identifying and striving to occupy the most attractive competitive positions in the marketplace outsidein approachoEmphasizes importance of external analysis and alignment of firms activities to purse position against external forces2Resourcebased schoolotarts with resources within the firm and the uniqueness of those resources insideout approach Types of Competitive Advantage and Sustainability 1Overall Cost LeadershipoCreating a lowcost position relative to a firms peersoFirm must manage the relationships in the entire value chain and be devoted to lowering costs throughout the chainoEfforts of cost leadershipAggressive construction of efficientscale facilitiesVigorous pursuit of cost reductions from experienceTight cost and overhead controlAvoidance of marginal customer accountsCost minimization in all activities in the firms value chain such as rd services sales force and advertisingoTwo important concepts1Economies of scaleDecline in per unit costs that usually come with larger production runs facilities and allocating fixed costs across more units products2 Experience curveoHow a business learns to lower costs as it gains experience with production processesOverall Cost Leadership Improving Competitive Position visvis the Five ForcesoLow cost position enables a firm to achieve above average returns despite strong competitionoProtects firm against rivalry from competitors because lower costs allow a firm to earn returns even if its competitors are eroding profits through intense rivalry oLow cost also protects firms against powerful buyersoLow cost provides more flexibility to cope with demands from powerful suppliers for input cost increases
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