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Bus-A202 Chapter 13
Exam 1
18
Accounting
Undergraduate 2
10/01/2011

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Term
Value Proposition
Definition
the key source of customer value, to its target market. Must be developed by a firm to build and preserve a significant market.
Term
Strategy
Definition
firms approach for creating and sustaining its value proposition.
Term
Determinants of business strategy
Definition
Core competencies and capabilities.
Competitive Landscape.
Sustainability.
Term
Core competency and capability
Definition
the skill set and expertise that characterizes a firm and its employees and advantages the the firm relative to its competitors.
Term
Competitive Landscape.
Definition
Intensity of competition.
Bargaining power of customers.
Bargaining power of suppliers.
Barriers to new entrants.
Threats from substitute devices.
Term
Sustainability
Definition
a difficult strategy to imitate by competitors because of the unique resource capabilities and market power it brings.
Term
Types of business Strategies
Definition
1. Cost Leadership
2. Value Differentiation
Term
Cost Leadership
Definition
strategy to find innovative ways to improve business processes and cut cost.
Term
Value Differentiation
Definition
Focuses on R&D and product innovation activities.
Term
Value Chain
Definition
a set of logically sequenced, value-adding activities that convert input resources into products or services in a manner consistent with the chosen business strategy.
Term
Life Cycle Analysis
Definition
Development
Introduction and Growth
Maturity
Decline

Emphasizes that the objective is to maximize the profitability of a product over its entire life cycle
Term
Development
Definition
No expected revenue from product. Significant expenditure on product. If development goes well investment in capital starts.
Term
Introduction and Growth
Definition
Revenue begins to pick up. Profitability is typically low due to high variable cost and cost of strategies to enter market.
Term
Maturity
Definition
Point where product reaches its targeted market potential and compares well against competing products. Profit generating stage.
Term
Decline
Definition
The final stage, sales and profit decline as firms cut prices to clear inventory. Planning decisions focus on extracting any money from resources.
Term
Target Costing
Definition
A structured approach to cost planning and management. The firm is a price taker and that there is intense competition to acquire, retain , and grow customers. Determines cost by working backwards from the customer value
Term
Allowable Cost
Definition
= Price point - Target Profit Margin
Term
Cost Gap
Definition
the difference between the current cost and the allowable cost
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