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business with a competitive advantage is able to attract more customers than its competitors by having some special factor that no one else possesses. The result: a firm that has profits that exceed the average for its industry.
unique offering that is valued by your customer and is not available from the competition. It is not what you think it is or what you want it to be. It is what your customer believes.
means able to be
competitive advantage is sustainable
others can’t copy it or deliver the same thing, or if the cost or the time to develop a competing solution is very significant.
they can ensure that a company earns excess returns for a longer period of time. By increasing the life of a company, the value of the stock is enhanced.
a competitive advantage is like having a moat around your company that your competitors cannot get across.
businesses are engaged in a never ending search to find new ways to beat their competitors.
competitive advantage exists when the firm is able to deliver:
the same benefits as competitors but at a lower cost (cost advantage), or benefits that exceed those of competing products (differentiation advantage).
Have distinctive capabilities the characteristics of a company which cannot be replicated (reproduced_ by competitors, or can only be replicated with great difficulty It means that you do different things, or that you do things differently from your competition. These distinctive competencies are so valuable to your customer that they will choose your offering instead of the competition's offering.
licenses Strong brands Effective leadership Customer Knowledge Product features Product design Method of delivery
1. Find some way of differentiating
products and services from other offerings.
1. 2. 3. 4. 5.
Unique Difficult to replicate (reproduce) Superior to competition Sustainable Applicable to multiple situations
Cost Quality Service Brand Logistics/Supply
Wexner is the founder of Victoria’s Secret, the chain of fashion stores for women’s lingerie. He knew very well Alfred A. Taubman, a real-estate developer who specialized in large urban shopping malls. How did this give Mr. Wexner a competitive advantage?
Patents Exclusive licenses Strong brands Effective leadership Customer Knowledge Product features Product design Method of delivery
Popular Sources of Competitive Advantage
Cost Quality Service Brand Logistics/Supply Chain
Porter’s Generic Strategies Advantage
Target Scope Low Cost Product Uniqueness
Broad (Industry Wide) Seek competitive advantage in a broad range of market or industry segments
Cost Leadership Strategy
Narrow (Market Segment)
Focus Strategy (low cost)
Focus Strategy (differentiation)
Objective - become the lowest-cost producer in the industry Market segments served - many (perhaps all) in the industry Emphasis - minimizing costs By producing high volumes of standardized products, the firm hopes to take advantage of economies of scale and experience curve effects.
To succeed, firms need: Access to the capital required to make a significant investment in production assets Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process. High level of expertise in manufacturing process engineering. Efficient distribution channels.
companies can you think of that use the Cost Leadership strategy?
Wal-Mart Tesco Nissan Dell Lenovo
Objective: Create a product or service that is perceived throughout its industry as unique. Give customers clear reasons to prefer the product over other, less differentiated products. This uniqueness can be design, brand image, technology, features, dealers, network, or customer service. Market segment served: Broad Price: charge a premium price for the product.
companies can you think of that use the Differentiation strategy?
Dr. Pepper - a different taste Federal Express - superior service Amazon – superior customer knowledge Caterpillar - high spare parts availability Rolex watches, Mercedes cars - a prestige brand 3M Corporation - emphasis on technology leadership and innovation
Also known as a 'niche' strategy. Why focus? An organization can afford neither a wide scope cost leadership nor a wide scope differentiation strategy. Often used by smaller firms. Can be either a cost focus or a differentiation focus. Market segment served: one or a small number of narrow, defined market segments
Family Dollar Stores - targets poor urban American families who cannot drive to Wal-Marts in the suburbs because they do not own a car.
1. What different marketing strategies are HP and 2. 3. 4. 5. 6.
Lenovo using in rural areas than in cities? How must the product be different for rural customers? What are the distribution and logistics problems Lenovo and HP face in selling in rural areas? Describe their distribution networks in rural areas. What is the upside (potential benefit) for HP and Lenovo if they can work out these problems? Which of Porter’s Generic Strategies is HP following? Lenovo?
Costs Minimize Costs of Attaining Logistics Objectives
Order Processing Received Processed Shipped
Transportatio n Rail, Truck, Water, Pipeline, Air, Intermodal
Inventory When to order How much to order Just-in-time
Warehousing Storage Distribution Automated
“Lessons for Chinese Companies as They Go Global” (on www.scribd.com) Answer the study questions on the article.
work on Project 4 – due Week