Competitive Advantage

G2

Competitive Advantage means

Something that places a company or a person above the competition

The company will be able to apply to strong point

Without being what does not evaluate a property and the ability which the company possesses
Competition company comparison will lead and the strong point which is relative could be grasped.

The strategy which sees from viewpoint of competitive advantage Continuous a competitive advantage reinforcement and competitive advantage endeavors not to disappear

The reason why enterprise Need to have a competitive advantage

Resource/Performance 1. Customer satisfaction and loyalty increase, Increase of profit , Increase of market share bring market performance 2. The product offering which is value in the market competitive advantage offering valuable product and service 3. various size and scope and profitability of company The competitive advantage makes the base will be able to expand the enterprise which is various.

Competitive Advantage Cycle.

Step 1. Source of Competitive Advantage Superior assets Super Capabilities Key Success Factor

Step 2. Barriers to Imitation

higher the barrier to entry to company When the new business opportunity coming from the Market which enters first mover advantage barriers to imitation

Step 3. Value proposal form of competitive advantage Operational Excellence Product Leadership Customer Intimacy
Step 4.Encroachment prevents - competitive advantage New competitive advantage position construction effort encroachment prevents proliferation of competitive advantage Reinvestment of profit asset and capability accumulation resource strengthen of competitive advantage

Capabilities

Value Creation

Cost advantage Or Differentiation advantage

Distinctive Competencies

Resources

A Model of Competitive advantage

Main aspects of five forces analysis

1. the rivalry between existing sellers in the market 2. the potential threat of the entry of new competitors 3. the threat of substitute products becoming available the market 4. the bargaining power of consumer 5. the bargaining power of suppliers

Main aspects of five forces analysis

Competitive advantage strategies

1. Cost Leadership (Low Cost Strategy)

cost Leadership mean that produce goods level of equal more in expensive

2. Differentiation (Differentiation Strategy)

Differentiation is that provide inventive value can improve of perceive valued of consumers toward product (or service) in the market.

3. Focus Cost Leadership / Differentiation:

When competition's range is narrow, in other words when target on specific customer segment will be focused cheap price and differentiation strategy.

Source of Global Competitive Advantage

Source of Global Competitive Advantage

Adapting to Local Market Differences Companies must respond to the inevitable heterogeneity they will encounter in these markets. Differences in language, culture, income levels, customer preferences, and distribution systems.

Offering standard products and services across countries reduces the boundaries of the served market to only those customers whose needs are uniform across countries.

- Tailoring products and services to the preferences of local customers enhances the value delivered to them. - A portion of this increased value should translate into higher price realization for the firm

One of the natural advantages enjoyed by most local competitors stems from their deep understanding of and single-minded responsiveness to the needs of the local market.

Exploiting Economies of Global Scale Building a global presence automatically expands a company's scale of operations, giving it larger revenues and a larger asset base. Potential benefits of economies of scale in various ways: spreading fixed costs, reducing capital and operating costs, pooling purchasing power, and creating critical mass.

Exploiting Economies of Global Scope

Global scope refers to the multiplicity of regions and countries in which a company markets its products and services.

Tapping the Optimal Locations for Activities and resources

A firm that can exploit these intercountry differences better than its competitors has the potential to create significant proprietary advantage

Maximizing Knowledge Transfer Across Locations

(a) Faster product and process innovation. (b) Lower cost innovation.
- A second by-product of not reinventing the wheel is considerable savings in the costs of innovation.

(c) Reduced risk of competitive preemption.

- A global company that demands constant innovations from its subsidiaries, but does not leverage these innovations effectively across subsidiaries, risks becoming a fount of new ideas for competitors.

How a firm can actually create and sustain a competitive advantage in its industry?

Competitive Advantage Definition

Competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver a unique mix of value. -- Michael Porter

Two Basic Types

Both can be more broadly approached or narrow, which results in the third viable competitive strategy

Approach 1 to Competitive advantage: Cost leadership

- A firm sets out to become the low cost producer in its industry.

- Note: a cost leader must achieve parity or at least proximity in the bases of differentiation, even though it relies on cost leadership for its CA.
- Note: if more than one company aim for cost leadership, usually this is disastrous. - Often achieved by economies of scale -Examples of Cost Leadership: Nissan; Tesco; Dell

Approach 1 to Competitive advantage: Cost leadership Steps in Strategic Cost Analysis

STEP1. Identify the appropriate value chain and assign costs and assets to it.
STEP2. Diagnose the cost drivers of each value activity and how they interact.

STEP3. Identify competitor value chains, and determine the relative cost of competitors and the sources of cost differences.
STEP4. Develop a strategy to lower relative cost position through controlling cost drivers or reconfiguring the value chain and/or downstream value.

Competitive advantage model 2: Differentiation

- a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers.
- Note: a differentiator cannot ignore its cost position. In all areas that do not affect its differentiation it should try to decrease cost; in the differentiation area the costs should at least be lower than the price premium it receives from the buyers. - Areas of differentiation can be: product, distribution, sales, marketing, service, image, etc.

Competitive advantage model 2: Differentiation

Steps in Differentiation
1. 1. 1. 1. 1. 1. Determine who the real buyer is Identify the buyers value chain and the firms impact on it Determine ranked buyer purchasing criteria Assess the existing and potential sources of uniqueness in a firms value chain Identify the cost of existing and potential sources of differentiation Choose the configuration of value activities that creates the most valuable differentiation for the buyer relative to cost of differentiating

Competitive advantage 3: Focus

- a firm sets out to be best in a segment or group of segments. - 2 variants: cost focus and differentiation focus.