- Description
BUS 475 Wk 3 – Practice: Developing and Communicating Strategic Objectives
Economic Value Creation
This activity is important because it reviews the concept of economic value creation when measuring competitive advantage. The goal of the activity is to learn how economic value creation helps a firm measure competitive advantage. Familiarize yourself with the text material from economic value creation before completing this exercise.
Complete the activities that follow.
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Economic Value Creation
This activity is important because it reviews the concept of economic value creation when measuring competitive advantage. The goal of the activity is to learn how economic value creation helps a firm measure competitive advantage. Familiarize yourself with the text material from economic value creation before completing this exercise.
Complete the activities that follow.
__________ denotes the dollar amount a consumer would attach to a good or service (that is, willingness to pay).
Multiple Choice
- Economic value created
- Cost
- Profit
- Price
- Value
Total costs include fixed and variable costs. ________________________ costs are independent of consumer demand, whereas __________________ costs change with the level of consumer demand.
Multiple Choice
- Varying; stable
- Solid; variable
- Variable; fixed
________costs capture the value of the _______ alternative use of the resources employed.
Multiple Choice
- Opportunity; worst
- Threat; best
- Opportunity; best
- Opportunity; average
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Business-Level Strategy
Generic business strategies balance cost leadership and differentiation. This activity is important because these are two very different strategies—each with a scope of either focused or broad competition. One of the best methods for honing your understanding of these contrasting strategic positions is to consider some familiar firms and think through where they fit in the business-strategies framework. Each of the firms featured in this activity are discussed in greater detail in chapter 6 of your text.
This goal of this exercise is to identify which firms use which business-level strategies and how they apply in the generic business-strategies framework.
Southwest and Delta both compete in the airline industry, but they follow different business strategies. Delta’s transportation infrastructure is based upon a high-value hub-and-spoke system and offers upscale services to high mileage flyers. Southwest Airlines uses a point-to-point basic system for nationwide air transport. What generic business strategy is Southwest using?
Multiple Choice
broad cost leadership
strategic positioning
focused cost leadership
economies of scope
differentiation
A strategic position is the firm’s profile based on value creation and cost. Effective managers will create a large gap between the ______________ and the cost required to produce it.
Multiple Choice
- broad and focused market segments
- value the firm creates with its product or service
- scope and scale of the business
- integration strategy
- overall market share size
This goal of this exercise is to identify which firms use which business-level strategies and how they apply in the generic business-strategies framework.
The four generic business strategies are generated by comparing the strategic position with the scope of competition. Tesla, an electric car manufacturer, is presented in the text as fitting into which of these categories?
Multiple Choice
integration
focused cost leadership
differentiation
focused differentiation
cost leadership within electric vehicles
This goal of this exercise is to identify which firms use which business-level strategies and how they apply in the generic business-strategies framework.
Timex and Rolex both compete in the wristwatch market, but they follow different business strategies. Rolex creates a high-quality timepiece with unique features that last a lifetime. Timex efficiently produces a watch of acceptable quality. What generic business strategy is Rolex using?
Multiple Choice
economies of scope
differentiation
focused cost leadership
strategic positioning
integration
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Blue Ocean Strategy
This exercise reviews the concept of combining business-level strategies, specifically cost leadership and differentiation, to create a blue ocean strategy. While an appealing position to obtain, the strategy has inherent difficulties that a firm must overcome. This activity reinforces the material in section 6.5 of your text and Learning Objective 6-5 on evaluating values and cost drivers that may allow a firm to pursue a blue ocean strategy. It also covers why it is difficult for firms to succeed with such a strategy (Learning Objective 6-6).
Read the minicase below and complete the activities that follow.
Minicase
The chapter focuses on IKEA to exemplify value innovation in the furniture retailing industry.
What might this same concept of balancing differentiation and low costs look like in the automotive industry? The number of automotive firms that use a highly differentiated business strategy is quite large and probably easy to distinguish. Brands such as Rolls-Royce, Porsche, and Land Rover all focus on providing value-added features for affluent individuals willing to pay more for the products they want.
Low-cost leaders are also pretty easy to identify. Brands such as Kia and Hyundai offer several models that many consumers consider of acceptable quality for the price.
When Chrysler and Daimler merged, the goal was to build a blue ocean strategy by leveraging the differentiation of Mercedes-Benz (Daimler’s brand) with the low-cost manufacturing experience of Chrysler. However, what resulted was a firm that found itself squarely “stuck in the middle” with a higher cost structure and reduced value added than either firm had prior to the merger. Daimler’s subsequent spin-off of Chrysler resulted in a loss of $3 billion.
In recent decades, Toyota would be considered a successful value innovator in the automotive industry. Toyota has been able to use lean manufacturing and other operational efficiencies to drive a lower cost structure than many of its competitors. At the same time, it has generally maintained a differentially superior reputation for reliable high-quality cars with a good set of features that many consumers will purchase.
Now apply these examples to the value and cost trade-offs depicted in the V–C chart, which is a synthesis of Exhibits 6.3 and 6.4 from the book. This figure shows positions of competitive advantage and disadvantage.
A value innovation strategy requires trade-offs between differentiation and low costs. These are two distinct business-level positions that often require very different internal value chain activities. An example of a low-cost activity that may not be appropriate for a differentiator is
Multiple Choice
adding new features to the product in response to customer feedback.
building an ambidextrous organization.
improving the efficiency of customer service to lower costs and improve customer response times.
investing in complementary assets to increase market share of the product.
standardizing the production processes for higher output levels with fewer model changes.
Now apply these examples to the value and cost trade-offs depicted in the V–C chart, which is a synthesis of Exhibits 6.3 and 6.4 from the book. This figure shows positions of competitive advantage and disadvantage.
What key questions does the balanced scorecard address?
Check All That Apply
- How do customers see your company?How do customers see your company?
- What must your company excel at?What must your company excel at?
- Can your company continue to improve and create value?Can your company continue to improve and create value?
- How do we look to our shareholders?How do we look to our shareholders?
Now apply these examples to the value and cost trade-offs depicted in the V–C chart, which is a synthesis of Exhibits 6.3 and 6.4 from the book. This figure shows positions of competitive advantage and disadvantage.
Match each objective to the proper perspective of the Balanced Scorecard:
- Employee training
- Standard operational procedures
- Increased net profit
- Market share
The text provides an example of a firm “stuck in the middle.” JCPenney attempted a change in strategic position under the leadership of CEO Ron Johnson (who was lured away from Apple retailing). Mr. Johnson was fired less than 18 months after his arrival at JCPenney due to a stark drop in sales after implementing some of his planned changes. What is a key lesson to be learned from this example?
Multiple Choice
- Cost-leadership strategy is proven to be superior in retailing.
Strategic changes are more difficult for new CEOs to implement.
Organizational culture is important to consider in strategic changes.
- Retailing is not a good industry for value innovation strategies.
- Changing strategic positioning too quickly is risky.
What is the following business goal missing? Increase sales by selling five more printers each month, selling them at local office supply stores.
Multiple Choice
- Specific objective
- Measurable outcome
- Achievable goal
- Timely constraints
- Realistic goal
Identify the correct components of the SMART goals.
Check All That Apply
- SpecificSpecific
- StaticStatic
- MeasurableMeasurable
- MarginalMarginal
- AdjustableAdjustable
- AchievableAchievable
- RudimentaryRudimentary
- RelevantRelevant
- Time-boundTime-bound
- ThoroughThorough
Which component of SMART is missing from this goal? “I will improve my grade in Science by the end of the semester.”
Multiple Choice
- SpecificIn
- Measurable
- Achievable
- Relevant
- Time-bound