2.10. Key Terms

Chapter 2

Business-level strategy: is the general way that a business organizes its activities to compete against rivals in its product’s industry.(2.4)

Competitive Advantage: A company is said to have competitive advantage when it successfully attracts more customers, earns more profit, or returns more value to its shareholders than rival firms do.(2.4)

Cost Leadership: a strategy where a firm offers customers its product or service at a lower price than its rivals can.(2.5)

Differentiation: a strategy where a company tries to add value to their products and services so they can attract customers who are willing to pay a higher price.(2.5)

Entry Barrier: Are obstacles that make it difficult to enter a given market. (2.7)

Focus Strategy: is a strategy whereby a firm chooses to add value or lower costs for a smaller market. (2.5)

Innovation Strategy: a plan to encourage, mobilize, motivate, and achieve advancements in technology or service by investing in research and development activities to meet previously unmet needs of buyers or meet their needs in a new way.(2.5)

Michael Porter: Wrote the book Competitive Advantage: Creating and Sustaining Superior Performance, identifying two primary factors, Cost Advantage and Differentiation Advantage. Developed the 5 force model and the value chain model. (2.6)

Operational effectiveness: refers to performing the same operational tasks better than rivals perform them.(2.8)

Porter’s 5 Force Model: A framework developed by economist Michael E. Porter to determine the profitability and attractiveness of a market or market segment. Includes Industry Rivalry, Bargaining Power of Buyers, Bargaining Power of Suppliers, Threat of New Entrants and Threat of Substitute Products. (2.7)

Strategic positioning: refers to performing different activities from those of rivals, or the same activities in a different way.(2.8)

Value Chain: A set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. (2.6)

Adapted from Information Systems for Business and Beyond Glossary by Ruth Guthrie licensed under a CC-BY-3.0


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