Strategy Formulation & Development Flashcards

According to Porter's Generic Strategies, a firm pursuing a 'differentiation focus' strategy is targeting:

Answer: A narrow market segment with a highly differentiated product or service

Differentiation focus combines a narrow target market (focus) with distinctive attributes that justify premium pricing, creating a defensible position within a specific segment.

When applying the Value Chain Analysis to strategy formulation, 'primary activities' include:

Answer: Inbound logistics, operations, outbound logistics, marketing and sales, and service

Porter's Value Chain identifies five primary activities — inbound logistics, operations, outbound logistics, marketing/sales, and service — directly involved in creating and delivering value.

A strategy that involves two or more companies cooperating to achieve mutual goals while remaining independent is known as:

Answer: A strategic alliance

A strategic alliance is a formal agreement between independent firms to pursue shared objectives by combining resources, capabilities, or technologies without full merger.

Which of the following is an example of an 'emergent strategy' as described by Henry Mintzberg?

Answer: A strategic direction that develops through experimentation and adaptation to market conditions

Emergent strategies arise unplanned from patterns in actual organizational decisions and actions, contrasting with deliberate strategies that follow prescribed plans.

In the context of competitive strategy, 'switching costs' serve as a barrier to entry primarily because:

Answer: They make it expensive or difficult for customers to change from an incumbent's product to a new entrant's offering

High switching costs lock customers into existing relationships, making it difficult for new entrants to attract customers away from established competitors even with superior offerings.

What does 'strategic stretch' refer to in the strategy formulation process?

Answer: Leveraging existing resources and capabilities in new ways to reach ambitious goals beyond current means

Strategic stretch, from Hamel and Prahalad, refers to the creative use and leveraging of current resources to pursue goals that exceed current apparent capacity.

A company's 'sustainable competitive advantage' is best defined as:

Answer: A competitive edge that is difficult for rivals to imitate and can be maintained over time

A sustainable competitive advantage is one that persists over time because it is difficult for competitors to replicate, often rooted in unique resources, capabilities, or market positions.