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Business Strategy and Accounting Basics

Analog semiconductor maker A narrows its focus to a limited market, ICs for high-precision sensors in industrial equipment, and competes by providing products tailored to the detailed requirements of those customers. Among Porter's three generic strategies, which is company A's strategy?

  1. ACost leadership strategy
  2. BDifferentiation strategy
  3. CFocus strategy
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Answer: C. Focus strategy

Porter's generic strategies are three: cost leadership, which targets the whole industry and wins through lower costs; differentiation, which targets the whole industry and wins through the uniqueness of products or services; and focus, which concentrates resources on a specific market (customer group, application, region and so on). Company A has narrowed its target market to a specific application, so its strategy is a focus strategy, and since it competes on uniqueness within that market it is also called differentiation focus. It is used by companies with limited resources to build an advantage without competing head-on with large rivals.

  • A. This strategy targets the whole industry and wins by achieving lower costs than competitors through economies of scale and the like.
  • B. This strategy targets the whole industry and wins through product uniqueness. Company A differs in that it has narrowed its target market.
  • C. Correct. It narrows the target to a specific market and wins within it.
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More Business Strategy and Accounting Basics questions

  1. In Porter's value chain, which is classified as a primary activity?
  2. Which term describes the core technologies or capabilities of a company that bring value to customers and are hard for competitors to imitate?
  3. A semiconductor manufacturer acquired the materials maker that produces the wafers it uses, so that its group now handles everything from material supply to product manufacturing. Which form of integration is this?
  4. Compared with an IDM (integrated device manufacturer), which manufactures in its own fabs, which is a typical characteristic of a fabless company?
  5. The manufacturing cost of a product follows an experience curve in which the cost per unit becomes 80% each time cumulative production doubles (an 80% learning rate). If the cost per unit is ¥1,000 when cumulative production reaches 100,000 units, which is the cost per unit when cumulative production reaches 800,000 units?