Strategic Business Management: Questions and Answers

Topics: Strategic management, Marketing, Business Pages: 8 (1771 words) Published: February 25, 2013
Chapter 6


What is a propitious niche? Provide an example of a firm that has been able to successfully occupy a propitious niche. One that is so well suited to the firm's internal and external environmental that other corporations are unlikely to challenge or dislodge it!

- Once filled, the niche is not worth a potential competitor's time or money to also go after the same niche.
Coca-Cola and McDonald’s


What are Porter's four generic strategies?

Cost Leadership
The cost-leadership strategy is a good option for companies that are able to consistently reduce the costs of doing business. Maintaining low overhead costs and negotiating favorable acquisitions costs with suppliers are key to making this strategy work. You can apply cost leadership in one of two ways. You either generate higher profit margins by charging industry-average prices despite your low cost basis, or you pass the savings onto customers and build market share through high sales volume. Differentiation

A differentiation strategy is a better alternative for a company that doesn't have strong cost advantages or prefers to emphasize strengths in production or resale. The key to this approach is to research customer needs, design and develop quality products or service proceeds to match and effectively market and sell solutions by stressing the differences from competing brands. Product quality, elite service, unique features and environmental responsibility are common ways to separate yourself with a differentiated approach. Cost Focus

In general, the focus strategy is distinct because it is used when you serve a niche target market. The cost-focus approach means you use the principles of a low-cost operation to market affordability to a niche market. In the supermarket category, for instance, German chain Aldi's drives business from

lower- to middle-income buyers by maintaining a very low-cost operation. This enables them to offer low prices to the most budget-conscious grocery shoppers. Differentiation Focus

A differentiated-focus approach means you market a bigger or better solution to a smaller market segment. Local businesses commonly rely on this strategy when competing against larger box retailers. A small electronics retailer, for instance, could promote the best selection of high-tech products or the most knowledgeable service staff as a way to attract business from general-merchandise retailers and discount stores. This strategy offers a way to build strong loyalty since you focus specifically on the needs of a select group of customers.


Discuss the difference between a fragmented and a consolidated industry.

Fragmented industry characterized by regional dispersion and limited, cross-national activity. This sector has a large number of small and medium-sized enterprises , each possessing a small share of the regional market. Government subsidies and import barriers protect the food industry in several countries from the distorting competition of global markets. There are also geographical and cultural barriers that cause imperfect competition. A fragmented environment creates a specific, competitive setting because of the absence of market leaders to shape the working conditions within an industry . This may result in firms not being strategically alert and stringent in the choice of competitive tools. When trade barriers continue to be reduced, successful firms in this environment must be prepared to manage the challenges of the increased competition intensity. They also have to be ready to reap the benefits of availability to more widespread markets. If not, firms in a regional, fragmented industry risk being "stuck in the middle" in the transition process and losing ground to more competitive enterprises in the international market . A commercial structure where a relatively low number of companies control a rather large market share of the overall output or sales...
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