Model 1 Summary Concepts

Model 1 Summary Paper
1
NAGA SRINIVAS GUNTUPALLI
Harrisburg University
MGMT 510 50 B Business Strategy and Management Principles
Dr. Stanley Nwoji
August 2nd, 2021

2
Abstract
This paper talks about summarization of the lessons learned
from the module 1 and the concepts
learned from the lectures. Paper mainly focuses on the
summarization of each lecture on what
has been learned in the class and discussion of all lessons which
are learned. This paper also
utilized the sources from various articles and books and paper
explains how all the sources are
applicable in real lifetime scenarios by brining all real time
facts on paper which is part of a
learning experience from the course. Paper provides in depth
information by referring to recent
sources which belongs from year 2016 to 2020. Paper provides

all the concepts learned from the
module with detailed summary by following all rubrics.
3
Table of Contents
Abstract………………………………………………………………
………………………….2
Introduction…………………………………………………………
…………………………...4
Summary of the topics covered in the
module………………………………………………….5
Concepts learned from each topic in the
module………………………………………………...6

Concepts under
strategy………………………………………………………………
………….6
Concepts under Competitive
Advantage………………………………………………………...7
Concepts under Business
Model………………………………………………………………...9
Concepts under Scenario
Planning……………………………………………………………...
11
Conclusion……………………………………………………………
………………………....13
Reference……………………………………………………………
………….……………….13
4

Introduction
The model 1 summary paper explains about the concepts whi ch
were taught in strategic
leadership which includes the concepts of managing the strategy
making process for competitive
advantage. All the concepts which are covered in this chapter
provides all detailed information
with all facts and providing all real time experiences. Mainly it
provides information on the
applicability of the concepts in the professional lifetime. All the
concepts under this chapter are
derived from the learning objectives with the help of supporting
sources which are referred to
accomplish the deliverable successfully. The concepts learned
from the chapter also adds more
value and weightage to the paper and also provides value to the
author of the sources which are
added.

5
Summary of the topics covered in the module
➢ Strategy: The strategy is a well-defined planning in the
organization. In an organization
strategy is implemented based on allocation of the resources
such as capital, equipment,
and labor in order to support the organizational activities.
Strategy requires good
leadership for strategy execution process, formulation for the
purpose of choosing right
strategies based on the external or internal factors and strategy
implementation to ensure
the strategies are delivered as per the plan.
➢ Competitive Advantage: The competitive advantage is
something refers to the factors
which enable the organization to offer products and service at
low prices than its

competitors. Competitive advantage can be helpful for the
organization to generate more
sales and profits than its competitors in the market.
➢ Business Model: A business model is something which
provides information on how the
organization creates, captures, and delivers the value to the
customers. The business
model is a part of business strategy. Business model is
important both start up based and
well very old well-established organization to sustain in the
competition.
➢ Scenario Planning: Scenario planning all about making
predictions and estimations on
what exactly the future of the organization can be and how the
business environment can
be modified. It is complete process of identification of specific
set of unexpected events
which can impact the organization.

6
c
Concepts under strategy
1. Formulation Phase: The formulation phase is a concept under
strategic management
process where decisions are being made based on the business
scope, values, and
commitments. Strategic thought process plays key role in this
concept.
The formulation phase concept is applicable when the
organization initiates any project
related activities it needs to set-up an organizational objective,
analyze the market
environment, analyzing the performance metrics and selection
of right strategy for
execution in order to have organization’s success.
2. Implementation Phase: Under this concept, the organization
seeks and executes
strategic modification. In this concept the implementation of
various skills, knowledge
and abilities are needed. In this phase how new changes are
implemented by replacing

old existing strategies which a part of change management
process. Clear communication
process is important.
The implementation phase concept is applicable in the real time
scenario where
organization such as Apple, where every year they will be
launching new product into the
market. Before launching the product, the organization already
pre-written document
which will be executed as per the documentation on how exactly
the launching should
happen. Moreover, organization has their own action steps
which has to be taken place at
right time is already decided before as a part of planning.
3. Evaluation Phase: The main objective of this concept is to
make sure the executed
strategy is working out well or not. In the evaluation phase
concept is important how the
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strategic execution can be worked out as an opportunity or

threat and how well the
strategy can sustain the risk by mitigating or accepting it. The
expected results are
compared with the actual results this provides a constructive
feedback on where the
organization need to enhance itself.
The evaluation phase is applicable in the real time scenario
when the organization already
executes certain actions then the organization evaluates the
executed actions in order to
make execution took place exactly as per the plan or not. When
any deviations or the
execution is not done correctly means then the organization
prepares evaluation report
which can be referred as lessons learnt document by the
organization.
4. Functional Strategy and Competitive Strategy: The functional
strategic concept is
something related to the development of distinctive competence
in order to provide an
organization with a competitive advantage whereas competitive
strategic concept is
something related to the impact of external factors which
includes integrative concerns of

the internal factors of the organization.
Concepts of Competitive Advantage.
1. Cost Leadership: This concept is utilized by the organization
where they reduce the
cost of the products to gain a larger profit. The organizations
follow various
marketing strategies to gain recognition and awareness on their
brands among the
customers in the market. Every organization seeks brand
recognition from public. The
reason for using this cost leadership concept is to make sure
organization offers good
quality-based products where sales are done low reasonable
price. The benefits of
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having cost leadership are it enhances market size, enhancement
of business
sustainability, less competition and profit margin growth.

This concept of cost leadership is applicable to the organization
such as Walmart,
Amazon and Marshalls which follow this concept to sustain in
the market. All these
brands created themselves a brand recognition in the market.
2. Comparative Advantage: This concept relates to the
organization which offers
products or services in efficient way than its competitors which
can result can great
profit margin. From customer point of view, customer would
choose who offers the
product or service for low price based on the situation or
scenario.
This concept of comparative advantage is applicable to Walmart
where the
organization does gasoline services. Walmart offers gasoline for
cheap price when
compared to other gasoline companies. So, customer would seek
to fill the gas at
Walmart to save money.
3. Differential Advantage: This concept relates to the
organization which offers unique
products or service which aren’t offered anywhere by any

organization. Having
differentiated unique features and advantages of the offered
products or services can
make the organization stronger. In order to create strong
branded identity, the
companies offer unique feature-based products or services to
the customers so that
customers can be more focused on their organization offered
products and services
only.
This concept of differential advantage is applicable to the
organization such as Apple
and Tesla. As Apple Inc offered operating system named IOS
which is not offered by
any other organization where apple-based features aren’t
offered by other
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organizations. The objective of Apple is to make sure customer
again and again
purchase apple products only. When it comes Tesla which

produces electric cars. The
features which are there in the Tesla’s car would not be
available in the other cars. So,
Tesla has created differential advantage in automobile industry
whereas Apple has
created differential advantage in consumer electronics industry.
Concepts of Business Model
1. Customer Segmentation: The concept of customer
segmentation refers to where
the organization forms groups based on the customer
information which is
provided. The objective of this concept is to ensure how to deal
with customer
based on the attributes of the customer in terms of offerings and
deals. The
customer segmentation is done based on rating and feedbacks
provided by the
customer. More importantly organization should know who
exactly are their
customers and their exact needs which can be fulfilled.
This concept is applicable to the organizations who take
continuous feedbacks

from the customer so that based customer feedback the
organization makes
various offers to protect the customer to sustain in the market.
For example,
subscription offer where if customer feels the subscription fees
is too high and
customer want to unsubscribe then the organization system
offers another
reasonable offer so that customer can stay with them. The
organization intention
is to ensure they don’t loose customers.
2. Revenue Streaming: Revenue streaming is something which
organization
generating amounts from products which are sold. The revenue
generation is
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completely dependent on the types of activities which are
executed by the
organization
This concept of revenue streaming is applicable in transaction-

based revenues
where the organization makes money from one time-based
customer. The
revenues which are generated from the services which are
provided to the
customers based on the time spent and concept is applicable to
recurring revenues
where revenues are generated from the customers based on
monthly, yearly
subscription and licensing fees.
3. Key Activities: Key activities are those deliverables where
organization is mainly
involved only those activities with more focus which helps in
gaining profit and
adding value to the customers. As every organization’s domain
is different, so the
activities completely depend on the type of the organization.
The concept of key activities is applicable to the organization
resources who work
continuously to deliver something which adds value to the
organization. For
instance, there can be a sales manager in an organization, the
key activities

include generate more sales leads by selling the organization
products or services
as per the given target.
4. Cost Structure: The concept of cost structure in the business
model defines how
the costs and expenses that organization spends while business
model operations
are accomplished so that it can help the organization on how to
move forward. In
cost structure the categories include mainly value driven cost
structure and cost
driven cost structure. The value driven cost structure is highly
dependent on what
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value the organization’s product or service can provide to the
customers whereas
cost driven cost structure is something related to reduction of
the costs.
This cost structure concept is applicable to the newly start up
organizations who

do investments such as technology, training, utility, and
equipment which is
needed by the organization. For investment cost is required
which can support the
organizational activities successfully. The value driven cost
structure is applicable
towards organization which adds value to the customers by
providing innovative
features and added advantages in the offered products or
services.
Concepts from Scenario Planning
1. Identification of critical triggers: During the time of any
crisis bases scenario, the
organization require the past historical data. In this concept of
scenario planning the
organization will get an idea on how to access various factors
based on scenario which
may take place. Identification of critical triggers serves as a
route map for solving the
scenario-based issues.
This concept is applicable when organization facing any
financial crisis such as cost

cutting or budgeting issues so the organization can refer to the
historical data information
based on the necessary action steps can be implemented.
2. Development of multiple scenarios: In this concept the proper
planning methodology
plays a vital role. The organization can be framing multiple
scenarios i.e., “what if this
happens”. So, the organization should come up with one good
management plan.
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The concept is applicable to the organization which predicts
multiple risk factors or
issue-based factors which can affect and show impact on the
organization. The
organization has to come up with issue management plan or any
risk management plan as
a part of strategy which can be implemented based on the
scenario occurrence.
3. Building adaptive response strategy: In this concept, every
scenario which is predicted

should have detailed accessible information which can be either
success or failure of the
strategy which is implemented. When the detailed information
is accessible then
organization can help themselves in creating framework which
can be supportive in
making decisions.
The concept is applicable for the organizations when there is
situation where the
organization has to implement one response strategy. For
implementing better response
strategy organization has to follow the risk management
document which involves
strategies which can be executed successfully when any issues
occur.
4. Model with basic scenarios: In this concept, organizational
individuals should form as
groups to frame the scenarios as severities or level of impact.
The level of impact can be
low, medium, and high. In low based scenarios the
organization’s costs and revenues are
challenging. The low based scenario is applicable when the
organization seeks saving

costs during the time of offering quality products or services.
The medium based scenario
is applicable is an assumption where organization’s sales will
increase based on final
actual results. The high based scenario is mainly depending on
product demand and
enhancement of sales due to modifications in the market which
had took place.
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Conclusion
Therefore, the paper has covered all the topics under module 1
which has shared reasonable
information. The information has included various concepts
under each topic. The concepts
applicability has added more value to this paper to ensure how
the organization work in the
industry to deliver the products and services to their customers.
Al the concepts which are in the
paper had provided detailedness to ensure all facts and sources

are covered.
References
(https://www.iedunote.com/strategic-management, 2021)
https://www.optimove.com/resources/learning-center/customer-
segmentation, 2020
(Business Jargons, 2020) from
https://businessjargons.com/strategy-formulation.html
(Corporate Finance Institute, 2021) from
https://corporatefinanceinstitute.com/resources/knowledge/acco
unting/revenue-streams/
(Steven Imke, 2019) from
https://www.business2community.com/strategy/key-activities-
and-
your-business-model-02232678
(Gary Fox, 2021) Cost Structure - How To Minimize Costs And
Maximize Value from
https://www.garyfox.co/cost-structure/
(Rami Ali and David Luther, 2020), Scenario Planning:
Strategy, Steps and Practical Examples |
NetSuite from https://www.netsuite.com

https://www.garyfox.co/cost-structure/
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HW 1 WK 1. - Sweet, Schneier & Wentz. (2015). Construction
Law for Design Professionals, Construction Managers and
Contractors.
1. Chapter 1: Questions 4 and 8
4. What is the purpose of the separation of powers in the U.S.
political system?
8. List three examples of professional associations that publish
standardized documents for construction services.
2. In the court case of Christopher v. Sinyard, what were the
factors that the court noted that lead to the ruling of piercing
the corporate shield and holding the principals per-sonally
liable?
8. What is a Project Labor Agreement (PLA)?

4. What is promissory estoppels and when might it be used in
the construction industry?
9. According to the Restatement (Second) of Contracts, what
are the five factors used in determining whether a particular
breach is material and what is the legal consequence of a
finding the breach was material?
4. Chapter 4: Questions 2, 5, 9, and 10
2. What are the three primary things a court judgment seeks to
do for compensatory damages?
5. If a contractor had an original contract price of $800,000,
had already expended $210,000 in part performance, estimates
that the cost of completion would be $625,000, and has already
received $175,000 in progress payments, how much would that
contractor be entitled to in damages if you were to use the
reasonable cost of completion formula?
9. What is the Single Recovery Rule?
10. What is “economic waste” and what role does it play in
measuring the owner’s damages?
2

NAGA SRINIVAS GUNTUPALLI
Harrisburg University
MGMT 510 50 B Business Strategy and Management Principles
Dr. Stanley Nwoji
August 9th, 2021
Abstract
This paper talks about the summarization of the lessons learned
from the module 2 i.e. business level strategies and concepts
learned from the lectures. Paper mainly focuses from the
learning objectives under business level strategies from the
three chapters covered in the class which are taught by the
professor. Paper mainly covers the detailed overvi ew of
summary of the topics covered in the module. This paper also
utilized the sources from various articles and books and paper
explains how all the sources are applicable in real lifetime
scenarios by brining all real time facts on paper. Paper provides

in depth information by referring to recent sources which
belongs from year 2016 to 2020. Paper provides all the concepts
learned from the module with detailed summary by following all
rubrics by highlighting everything to the point and relevance.
Introduction
The module 2 summary paper explains about all the concepts
learned from the three chapters involved in strategic
management course. The concepts are derived from chapters
namely business-level strategy, the industry environment,
strategy, and technology. All the concepts which are covered in
this chapter provides all detailed information with all facts and
providing all real time experiences. Mainly it provides
information on the applicability of the concepts in the
professional lifetime. All the concepts under this chapter are
derived from the learning objectives with the help of supporting
sources which are referred to accomplish the deliverable
successfully. The concepts learned from the chapter also adds
more value and weightage to the paper and also provides value
to the author of the sources which are added.

· Low-cost and differentiation strategies difference.
· Company executes its business-level strategy through
function-level strategies and organizational arrangements.
· Companies developing strategies to effectively compete.
· The strategies that firms can use to establish their technology
as the standard in a market.
4 Concepts under Low-cost and differentiation strategies
difference.
4 Concepts under Company executes its business-level strategy
through function-level strategies and organizational
arrangements
4 Concepts under Companies developing strategies to
effectively compete.
4 Concepts of strategies that firms can use to establish their
technology as the standard in a market.

Concepts learned from each topic in the module
Chapter 5:
Business-Level Strategy
©2017 Cengage Learning. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Learning objectives
Explain the difference between low-cost and differentiation

strategies.
Articulate how the attainment of a differentiated or low-cost
position can give a company a competitive advantage.
Explain how a company executes its business-level strategy
through function-level strategies and organizational
arrangements.
2
Learning objectives
Describe what is meant by the term value innovation.
Discuss the concept of Blue Ocean Strategy, and explain how
innovation in business-level strategy can change the competitive
game in an industry, giving the innovator a sustained
competitive advantage.
3
scanned, copied or duplicated, or posted to a publicly accessi ble
Business-level strategy
Overall competitive theme of a business.
Way a company positions itself in the marketplace to gain a
competitive advantage.
Different positioning strategies that can be used in different
industry settings.
4

Lowering costs
Enables a company to:
gain a competitive advantage in commodity markets.
undercut rivals on price.
gain market share.
maintain or increase profitability.
5
differentiation
Distinguishing oneself from rivals by offering something that
they find hard to match .
Product differentiation is achieved through:
superior reliability, functions, and features.
better design, branding, point-of-sale service, after sales
service, and support.
Advantages
Allows a company to charge a premium price.
Helps a company to grow overall demand and capture market
share from its rivals.
6

7
8
the differentiation-low cost tradeoff
Efficiency frontier
Shows all the positions a company can adopt with regard to
differentiation and low cost.
Has a convex shape because of diminishing returns.
Multiple positions on the differentiation-low cost continuum are
viable.
Have enough demand to support an offering.
9

the differentiation-low cost tradeoff
To get to the efficiency frontier, a company must:
pursue the right functional-level strategies.
be properly organized.
ensure its business-level strategy, functional-level strategy, and
organizational arrangement align with each other.
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Value innovation
Occurs when innovations push out the efficiency frontier in an
industry, enabling greater value to be offered through superior
differentiation.
At a lower cost than was thought possible.
Enable a company to outperform its rivals for a long period of
time.
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12

Market segmentation
Decision of a company to group customers based on important
differences in their needs to gain a competitive advantage.
Standardization strategy - Producing a standardized product for
the average customer, ignoring different segments.
Segmentation strategy - Producing different offerings for
different segments, serving many segments or the entire market.
Focus strategy - Serving a limited number of segments or just
one segment.
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Comparison of Market segmentation approaches
14
Standardization strategy
Associated with lower costs than a segmented strategy
Segmentation

strategy
Involves customization of product offerings, which drive up
costs as:
Focus
strategy
Attempts to attain economies of scale through high sales volume
achieving economies of scale is difficult.
production and delivery costs tend to be high.
Have a higher cost structure as:
new product features and functions need to be added.
attaining economies of scale is difficult.

business-level strategies
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Give a company specific form of competitive position and
advantage in relation to its rivals
Results in above-average profitability
Generic business-level strategy
Lowering costs in order to lower prices and still make a profit
Broad low-cost strategy
When a company differentiates its product in some way
Broad differentiation strategy
Targeting a certain segment or niche and trying to be the low-
cost player in that niche
Focus low-cost strategy
Business-level strategy, industry, and competitive advantage
16
Low-cost companies
Charge low prices and still make profits

Absorb cost increases from suppliers
Offer deep discount prices for buyers
Differentiated companies
Withstand pricing pressure from powerful buyers and increase
prices without buyer resistance
Absorb price increases from suppliers and pass them to
customers without losing market share
Withstand substitute goods, as a result of brand loyalty
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18

Lowering costs through functional strategy and organization
Achieve economies of scale and learning effects
Adopt lean production and flexible manufacturing technologies
Implement quality improvement methodologies to produce
reliable goods.
Streamline processes
Use information systems to automate business process
19
Lowering costs through functional strategy and organization
Implement just-in-time inventory control systems.
Design products with a focus on reducing costs.
Increase customer retention.
Ensure that the organization’s structure, systems, and culture
reward actions that lead:
higher productivity.
greater efficiency.
20

Differentiation through functional-level strategy and
organization
Customize product offering and marketing mix to different
market segments.
Design product offerings that have a high perceived quality
regarding their:
functions.
features.
performance.
reliability.
Handle and respond to customer queries and problems promptly.
21
Differentiation through functional-level strategy and
organization
Focus marketing efforts on:
brand building.
perceived differentiation from rivals.
Ensure employees act in a manner consistent with the
company’s image.
Create the right organizational structure, controls, incentives,
and culture.
Ensure that the control systems, incentive systems, and culture
align with the strategic thrust.
22

Blue ocean strategy
Successful companies build their competitive advantage by
redefining their product offering through value innovation.
Creating a new market space.
Blue Ocean - Wide open market space where a company can
chart its own course.
23
Blue ocean strategy
To redefine its market and create a new business-level strategy,
a company must:
eliminate factors that rivals take for granted, and reduce costs.
reduce certain factors below industry standards, and lower
costs.
raise certain factors above industry standards, and increase
value.
create factors that rivals do not offer, and increase value.
24

Chapter 6
Business-Level Strategy and the Industry Environment
Learning objectives
Identify the strategies managers can develop to increase
profitability in fragmented industries.
Discuss the special problems that exist in embryonic and growth
industries and how companies can develop strategies to
effectively compete.
2
Learning objectives
Understand competitive dynamics in mature industries and
discuss the strategies managers can develop to increase
profitability even when competition is intense.
Outline the different strategies that companies in declining
industries can use to support their business models and
profitability.
3

fragmented industry
Composed of a large number of small- and medium-sized
companies.
Reasons for fragmentation
Lack of scale economies
Brand loyalty in the industry is primarily local
Low entry barriers due to lack of scale economies and national
brand loyalty
Focus strategy works best for a fragmented industry.
4
Consolidating a fragmented industry through value innovation
Value innovator - Defines value differently than established
companies.
Offers the value at lowered cost through the creation of scale
economies.
Chaining: Obtaining the advantages of cost leadership by
establishing a network of linked merchandising outlets.
Interconnected by information technology that functions as one
large company.
Aids in building a national brand.
5

Franchising: Strategy in which franchisor grants the franchisee
the right to use the franchisor’s name, reputation, and business
model.
In return for a fee and a percentage of the profits.
Advantages
Finances the growth of the system, resulting in rapid expansion.
Franchisees have a strong incentive to ensure that the operations
are run efficiently.
New offerings developed by a franchisee can be used to improve
the performance of the entire system.
6
Disadvantages
Tight control of operations is not possible.
Major portion of the profit go to the franchisee.
When franchisees face a higher cost of capital, it raises system
costs and lowers profitability.
Horizontal mergers - Merging with or acquiring competitors and
combining them into a single large enterprise.
7

STRATEGIES IN EMBRYONIC AND GROWTH INDUSTRIES
Limited customer demand for products of an embryonic industry
is due to:
limited performance and poor quality of the first products.
customer unfamiliarity with the product.
poorly developed distribution channels.
lack of complementary products.
high production costs because of small volumes of production.
8
STRATEGIES IN EMBRYONIC AND GROWTH INDUSTRIES
Industry enters the growth stage when a mass market starts to
develop for its products.
Mass market: One in which large numbers of customers enter
the market.
Occurs when:
Product value increases, due to ongoing technological progress
and development of complementary products.
Production cost decreases, resulting in low prices and high
demand.
9

10
11
market development and customer groups
12
First to purchase and experiment with a product based on new
technology.
Innovators
Understand that the technology may have important future
applications.
Early adopters
Practical and understand the value of new technology.
Early majority
Purchase a new technology only when it is obvious that it has
great utility and is here to stay.
Late majority
Unappreciative of the uses of new technology.
Laggards

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Strategic implications: crossing the chasm
New strategies are required to strengthen a company’s business
model as a market develops.
Customers in each segment have very different needs.
Competitive chasm - Transition between the embryonic market
and mass market.
Failure to do so results in the company going out of business.
15

16
Innovators and early adopters
Technologically sophisticated and willing to tolerate the
limitations of the product.
Reached through specialized distribution channels.
Companies produce small quantities of product that are priced
high.
Early majority
Value ease of use and reliability.
Require mass-market distribution and mass-media advertising
campaigns.
Require large-scale mass production to produce high-quality
product at a low price.
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Factors that accelerate customer demand
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Degree to which a new product is perceived as better at
satisfying customer needs than the product it supersedes.
Relative advantage
Products perceived as complex and difficult to use will diffuse
more slowly than those that are easy to use.
Complexity
Degree to which a new product is perceived as being consistent
with the current needs or existing values of potential adopters.
Compatibility
Factors that accelerate customer demand
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Degree to which potential customers can experiment with a new
product during a hands-on trial basis.
Trialability
Degree to which the results of using and enjoying a new product
can be seen and appreciated by other people.
Observability
Lead adopters in a market who become infected with a product.
Infect other people, making them adopt and use the product.
Viral model of infection

Strategies to Deter Entry In mature industries
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Catering to the needs of all market segments to deter entry by
competitors.
Product proliferation strategy
Charging a price that is lower than that required to maximize
profits in the short run.
Is above the cost structure of potential entrants.
Limit price strategy
Investments that signal an incumbent’s long-term commitment
to a market or a segment of the market.
Strategic commitments
21
Strategies to Manage Rivalry
22
Companies increase or decrease product prices to:
convey their intentions to other companies.
influence the price of an industry’s products.
Price signaling
When one company assumes the responsibility for determining

the pricing strategy that maximizes industry profitability.
Price leadership
Use of product differentiation strategies to deter potential
entrants and manage rivalry within an industry.
Non-price competition
Strategies to Manage Rivalry
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Occurs when a company concentrates on expanding market
share in its existing product markets.
Market penetration
Creation of new or improved products to replace existing
products.
Product development
When a company searches for new market segments to increase
the sale of its existing products.
Market development
Large companies in an industry have a product in each market
segment.
Product proliferation
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Capacity Control
Companies devise strategies to control or benefit from capacity
expansion programs.
Factors causing excess capacity.
New technologies that produce more than the old ones.
New entrants in an industry.
Economic recession that causes global overcapacity.
High growth of and demand in an industry that triggers rapid
expansion.
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25
Capacity Control
Choosing a strategy
Each company individually must try to preempt its rivals.
Companies must collectively coordinate with each to be aware
of the mutual effects of their actions.
26

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Choosing a Strategy
Leadership strategy: When a company develops strategies to
become the dominant player in a declining industry.
Niche strategy: When a company focuses on pockets of demand
that are declining more slowly than the industry as a whole to
maintain profitability.
28
Choosing a Strategy
Harvest strategy: When a company reduces to a minimum the
assets it employs in a business to reduce its cost structure and
extract maximum profits from its investment.
Divestment strategy: When a company decides to exit an
industry by selling off its business assets to another company.
29

30
Chapter 7
Strategy and Technology
Learning objectives
Understand the tendency toward standardization in many high-
technology markets.
Describe the strategies that firms can use to establish their
technology as the standard in a market.
Explain the cost structure of many high-technology firms, and
articulate the strategic implications of this structure.
Explain the nature of technological paradigm shifts and their
implications for enterprise strategy.
2

Learning objectives
Explain the cost structure of many high-technology firms, and
articulate the strategic implications of this structure.
Explain the nature of technological paradigm shifts and their
implications for enterprise strategy.
3
Technical Standards and Format Wars
4
Set of technical specifications that producers adhere to when
making the product, or a component of it.
Technical standards
Battles to control the source of differentiation, and the value
that such differentiation can create for the customer.
Format wars
Common set of features or design characteristics.
Dominant design

5
Benefits of Standards
Guarantees compatibility between products and their
complements.
Reduces confusion in the minds of consumers.
Reduces production costs and risks associated with supplying
complementary products.
Leads to low-cost and differentiation advantages for individual
companies.
Helps raise the level of industry profitability.
6
Establishment of Standards
Standards emerge in an industry when the benefits of
establishing are recognized.
Technical standards are set by cooperation among businesses,
through the medium of an industry association.
When the government sets standards they fall into the public
domain.
Public domain: Any company can freely incorporate the
knowledge and technology upon which the standard is based
into its products.

7
Network Effects, Positive Feedback, and Lockout
Network effects: Network of complementary products as a
primary determinant of the demand for an industry’s product.
Positive feedback loops - Increase in demand for a technology
that triggers an increase in demand for products that support it.
Alternative standards get locked out as consumers are unwilling
to bear the switching costs.
8
9
Strategies for Winning a Format War
Make network effects work in one’s favor and against
competitors.
Build the installed base for the standard as rapidly as possible.

Ensure a supply of complements.
Leverage killer applications.
Killer applications: Applications or uses of a new technology or
product so compelling that customers adopt them in droves,
killing competing formats.
10
Strategies for Winning a Format War
Pursue aggressive pricing and marketing.
Razor and blade strategy: Pricing the product low to stimulate
demand, and pricing complements high.
Cooperate with competitors.
License the format.
11
Costs in High-Technology
Industries
Similar cost economics.
Very high fixed costs and very low marginal costs.
Law of diminishing returns - Marginal costs rise as a company
tries to expand output.
Profitability increases when a company shifts from a cost
structure with increasing marginal costs to higher fixed costs
with lower marginal costs.

12
13
first mover
Firm that pioneers a particular product category or feature by
being first to offer it to the market.
Creation of a revolutionary product results in a monopoly
position.
First-mover advantage - Pioneering new technologies and
products that lead to slowing the rate of imitation.
First-mover disadvantages: Competitive disadvantages
associated with being first.
14
15

16
Advantages
Opportunity to exploit network effects and positive feedback
loops.
Ability to establish brand loyalty and increase sales volume
ahead of rivals.
Ability to create switching costs for customers and accumulate
knowledge.
Disadvantages
Bear significant pioneering costs.
More prone to making mistakes.
Risk of building the wrong resources and capabilities.
Risk of investing in inferior or obsolete technology
16
Strategies for Exploiting First-Mover Advantages
Develop and market the innovation.
Develop and market the innovation jointly with other
companies.
Through a strategic alliance or joint venture.

License the innovation to others and allow them to develop the
market.
17
Factors to consider when selecting a Strategy
Complementary assets
Required to exploit a new innovation and gain a competiti ve
advantage.
Help build brand loyalty and achieve rapid market penetration.
Height of barriers to imitation
Higher the barriers, longer it takes for rivals to imitate.
Give the innovator more time to build an enduring competitive
advantage.
18
Factors to consider when selecting a Strategy
Capable competitors
Companies that can move quickly to imitate the pioneering
company.
Competitors’ capability depends on their research and
development skills and access to complementary assets.
19

scanned, copied or duplicated, or posted to a publicly accessibl e
20
Technological paradigm shift
Shifts in new technologies that:
revolutionize the structure of the industry.
dramatically alter the nature of competition.
require companies to adopt new strategies for survival.
Occur in an industry when:
established technology is approaching or is at its natural limit.
new disruptive technology has entered the marketplace and is
invading the main market.
21
22

23
24
STRATEGIC Implications FOR ESTABLISHED COMPANIES
Being aware of how disruptive technologies can revolutionize
markets is a valuable strategic asset.
Investing in new technologies that may become disruptive
technologies.
Creating an autonomous operating division solely for the
disruptive technology.
25

Strategic Implications for New Entrants
Do not face pressures to continue the existing out-of-date
business model.
Do not have to worry about established:
customer base.
relationships with suppliers and distributors.
Can focus their energies on the opportunities offered by the new
disruptive technology.
Must decide whether to partner with an established company or
go solo.
26

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