Review questions with answers for introduction to business economics, Prove d'esame di Introduzione alle nanotecnologie

Scarica Review questions with answers for introduction to business economics e più Prove d'esame in PDF di Introduzione alle nanotecnologie solo su Docsity! Review questions introduction to business, LUISS, Di Minin. 1. Describe the low cost provider strategy. Provide an example and identify the cost drivers used in the specific case you selected. Cost leadership is a business level strategy meaning that its goal is to strengthen market position, gain competitive advantage.A low-cost provider's strategy to obtain and sustain competitive advantage is based on the lowering of the overall firm’s costs below the ones of its competitors while offering an acceptable value to the consumers. In particular, a firm that aims at becoming a cost leader focuses its resources on the optimisation of its value chain activities to achieve a low-cost position. A cost leader can gain a competitive advantage as long as the economic value it creates is greater than the one of its competitors: this can be achieved by having both lower through costs and differentiation parity - creating the same value as the competitors - or just by having lower costs. One example of cost leadership strategy is IKEA. This company, through the years, has achieved a top cost leader position in the furniture industry by providing customers with low priced pieces of furniture that require a little work. lts strategy has been based on the costs reduction of shipping, manufacturing, storing and assembling. By using flat and compact cardboard packages for almost all the sold goods the company is able, thanks to the cube-square rule, to ship and store very big quantities in smaller spaces than other furniture retail store; moreover boxes also provide an easy to handle inventory. The manufacture costs reduction, on the other hand, are achieved trough economies of scale: these are the advantages of bulk production that allow the firm to spread costs over a greater range of outputs. Finally, IKEA has zero assembling costs since it sells not assembled pieces which will be built by the costumer itself. 2. Describe the low cost provide strategy and the concept of economies of scale. Provide an example. [...] Economies of scale (EOS) are the reduction of unit average costs of production due to the manufacturing and selling of goods in large quantities. This means that when EOS happen the unit costs - the average cost per unit so total costs of production/ total output produced - fall as output increases. However, when a firm overreaches the optimal marginal cost, economies of scale become diseconomies of scale in which unit costs increase as output increase. EOS can be caused by several factors: the spreading of fixed costs over large quantities of outputs, the employment of specialised systems and equipment and the advantage of some specific physical properties of the good. Instead, the causes of diseconomies of scale are goods managing problems, inefficiency of the workers due to overcrowding, demotivation of employees due to lack of communication with higher level hierarchy. [same example] 3. Describe the low cost provide strategy and the concept of learning curve. Provide an example [..] The learning curve is graphical representation of the effect that learning has on labor productivity that was originally observed in the aircraft industry and now is applied to other industries as well. The rationale behind this concept is that the more units produced by a given worker, the less time the same worker needs to produces the same units due to its learning of the process and the consequent increase in efficiency (lower production time and better outcome) in the production. The learning curve is generally given by Y=aX/(logb/log2) with y equal to the average production time per unit, a is the time per unit, x is the cumulative volume of production, b is the learning rate. 4. Describe the broad differentiation strategy. Provide an example and identify the value drivers used in the specific case you selected. The broad differentiation strategy is a business level strategy - a strategy aimed at gaining and sustaining competitive advantage through the allocation of the firm’s resources. Business level strategies allow companies to gain and sustain a strategic position in the market by increasing the economic value created (calculated as value created for customers - production costs in doing so): this can be achieved by offering a higher value for customers than the one created by rivals while keeping costs low or by offering the same product or service to customers at a lower price while still maintaining an adequate value. The first strategy is called differentiation while the second one is referred to as cost leadership. In particular, the main purpose of broad differentiation strategy is to reach a big market: this requires that the difference between the firm’s product/service and the competitors’ one should be easily understandable by a large target. In order to successfully differentiate the products or services the firm offers this one has to provide a product with unique features and/or offer a unique service. Value drivers can be unique characteristics of the products that allow the customer to understand the differences with rivals’ products, a very good sale and after sale customer service, high quality inputs, effective marketing strategies. One example of firms pursuing the broad differentiation strategy is Louboutain: this shoe company broadly differentiated its product by changing one feature of their lines which is the colour of the shoe sole making it red. This strategy proved through the year to have been very successful; in fact, nowadays the red soled shoes are recognised as a symbol of class, richness and became a staple piece in every woman's wardrobe. 5. Describe the focused low cost and the focused differentiation strategies and explain the differences. Identify under which market conditions are more appropriate and provide an example. Focused strategies are aimed at developing, marketing and selling products or services to a specific small niche market (like specific type of consumer or a specific geographical area) within an industry. While focused low cost strategy is targeting a narrow price-sensitive buyer segment so it is based on production costs to offer a lower-priced product; the focused differentiation strategy targets a narrow buyer segment by meeting specific tastes and requirements of niche members. These two focused strategies, in order to be effective, should only be applied when some specific market conditions happen. These are when target market niche is big enough to be profitable and offers growth potential, when it's not very expensive nor very difficult to meet specific needs of the buyers, when the industry has several market niches that allow the firm’s growth, when competitors have little or no interest in that specific market niche so that is easy to gain a big market share. An example of focused differentiation strategy is Freed of London: this was the first firm to produce ballet shoes for people of color, before these ballerinas had to put foundation or other dyes on the shoes to make them match with their skin tone. 6. Explain what diversification strategy is and how it can be implemented. Diversification strategy is a corporate level strategy meaning that it aims at expanding the scope of their operations: expansion of the business trough seeking new markets, offering new products and services and competing in different geographies. Diversification strategy is pursued by firms to increase the competitive presence in several industrial sectors (the variety of products and services it offers or markets and geographic regions in which it competes) by either internally developing, by making agreements such as joint ventures or by acquiring already existing businesses. When pursuing a diversification strategy by developing internally, a firm incurs in disadvantages such as high internal transaction costs, slow to no - in case the developing decision is not communicated correctly - growth, and benefits from it by achieving community learning, increasing employee satisfaction, costing costs of hiring external experts and discipline increasing. A firm that diversifies by acquiring an already existing company benefits from it by easily entering a new industry or market, big brand names’ reputation, access to additional resources and capabilities; on the other hand, disadvantages are high costs of acquisition (especially in the case of a good brand name firm), overestimation of acquired firm’s value, underestimation of integration. A firm can also diversify by making agreements for example joint venture which is the co-owning of a firm with other parties in