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company decides to group customers, based on important differences in their needs or preferences, in order to gain a competitive advantage. ,0. There are three main approaches to ard mar*et segmentation. -irst, a company might choose to ignore differences and ma*e a product targeted at the average or typical customer. .econd, a company can choose to recognize the differences bet een customer groups and ma*e a product targeted to ard most or all of the different mar*et segments. Third, a company might choose to target /ust one or t o mar*et segments. 00. To develop a successful business model, strategic managers have to devise a set of strategies that determine (1) ho to differentiate and price their product, and (!) ho much to segment a mar*et and ho ide a range of products to develop. 1hether these strategies
ill result in a profitable business model no depends on strategic managers# ability to provide customers ith the most value hile *eeping their cost structure viable. 20. The value creation frontier represents the ma'imum amount of value that the products of different companies inside an industry can give customers at any one time by using different business models. $ompanies on the value frontier are those that have the most successful business models in a particular industry. 30. The value creation frontier can be
reached by choosing among four generic competitive strategies: cost leadership, focused cost leadership, differentiation, and focused differentiation. 40. 5 cost-leadership business model is based on lo ering the company#s cost structure so it can ma*e and sell goods or services at a lo er cost than its rivals. 5 cost leader is often a large, national company that targets the average customer. -ocused cost leadership is developing the right strategies to serve /ust one or t o mar*et segments.
100. 5 differentiation business model is based on creating a product that customers perceive as different or distinct in some important ay. -ocused differentiation is providing a differentiated product for /ust one or t o mar*et segments. 110. The middle of the value creation frontier is occupied by broad differentiators, hich have pursued their differentiation strategy in a ay that has also allo ed them to lo er their cost structure over time. 1!0. .trategic-group analysis helps companies in an industry better understand the dynamics of competitive positioning. &n strategic-group analysis, managers identify and chart the business models and business-level strategies their industry rivals are pursuing. Then they can determine hich strategies are successful and unsuccessful and hy a certain business model is or*ing or not. &n turn, this allo s them to either fine-tune or radically alter their business models and strategies to improve their competitive position. 1"0. +any companies, through neglect, ignorance, or error, do not or* to continually improve their business model, do not perform strategic-group analysis, and often fail to identify and respond to changing opportunities and threats. 5s a result, their business-level strategies do not or* together, their business model starts to fail, and their profitability starts to decline. There is no more important tas* than ensuring that one#s company is optimally positioned against its rivals to compete for customers.