BS Assigmt June 2019

EPGDM ASSIGNMENT - MGT 411 – BUSINESS STRATEGY – TERM 3.
1. How are the four generic building blocks of competitive advantage related to each
other? ( 10 Marks)
The four generic building blocks of competitive advantage: efficiency, quality, innovation, and
responsiveness to customers. They are firmly elated to each other. Since it reduces waste, the time
spent settling imperfections, and the expense of after deals administration and support, accomplishing
prevalent quality has a key positive effect on potency. Besides, seeing that superior quality is esteemed
by clients builds the company’s customer responsiveness. Correspondingly, the capacity to rapidly
develop inventive new items will build an organization’s capacity to serve its customers interests. Lastly,
it is critical to stay as a primary concern that accomplishing predominant potency, quality, and
advancement are all 50% of accomplishing prevalent customer responsiveness.
2. Discuss how companies can use (a) product differentiation and (b) capacity control to
manage rivalry and increase an industry’s profitability. ( 10 Marks)
A)The virtue of product differentiation as a competitive weapon is that it reduces the risk that
companies will compete for customers on price. Price competition decreases the level of industry
profitability. In many industries, product-differentiation strategies are the principal tools companies use
to deter potential entrants and manage rivalry within their industries. Product differentiation allows
industry rivals to compete for market share by offering products with different or superior features,
such as smaller, more powerful, or more sophisticated computer chips, or by applying different
marketing techniques. Product and market segment dimensions are used to identify four non-price-
competitive strategies based on product differentiation: market penetration, product development,
market development, and product proliferation. Market penetration involves using advertising and
marketing to create a differentiation advantage to increase market share. This also raises barriers to
entry, thus increasing industry profitability and reducing rivalry because companies can forecast their
rivals’ actions. Product development means creating new and improved products to sustain consumer
demand for products. It keeps companies on their toes and lessens the likelihood that a new entrant will
be able to come into the industry with a superior product to seize market share. In this sense, product
development acts like a barrier to entry. At the same time, it builds reputation and brand loyalty.
Market development involves finding new market segments in which to exploit a company’s products or
distinctive competencies. Market development and the development of niche marketing can cause
intense rivalry between firms as new spheres of competition are created. Moreover, market
development may provide a means for competitors to enter the market, for it opens a niche through
which they can enter. Thus market development is probably the most competitive of the four product
differentiation strategies, since it creates the most opportunity for gain or loss in market share.
Product proliferation is an effort to stabilize the uncertainty created by market development. By filling
all the market niches, companies are trying to respond to competitors’ actions in order to stabilize the
industry situation. At the same time, product proliferation also promotes barriers to entry since it makes
it difficult for competitors to enter the market by finding a new niche. It therefore also helps stabilize
competition in the industry.
(b) Capacity control strategies also allow the firm to manage rivalry and promote industry profitability.
Capacity control can be used to deter rivals, since it provides companies with a credible threat that they
will respond to the threat of entry by increasing capacity and driving down price. Inside the industry, the
need is for a strategy that lets firms indirectly coordinate their capacity decisions and avoid the wasteful
excess capacity, which can occur if all firms make the decision to build new plant capacity. Such a
strategy stabilizes competition and industry profitability
3. When is a company likely to choose (a) related diversification and (b) Unrelated
diversification? ( 10 Marks)
When a company has a financial resource that allows free cash flow, such company will usually choose
to diversity and invest in new business venture different from its core industry.
There are two models of diversification. There are (a) related diversification and (b) unrelated
diversification:
The company chooses a related diversification as under:
It typically chooses a related diversification because the products of the both the companies would have
a relationship which commonly creates related utilization.
Apart from this, the following could be the benefits that help the company in choosing diversification
strategy. There are:
 Benefit from transferring competencies

 Having a competency leverage
 Benefit of products building that means providing the consumer with a bundle of products
related to each.
The company’s strategy is to increase profitability throughout the organization and across all business
units and, therefore, only general organizational competencies are applied.

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EPGDM ASSIGNMENT - MGT 411 – BUSINESS STRATEGY – TERM 3.

The company chooses a related diversification as under:

 Benefit from transferring competencies

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