3.2 RANGE OF STRATEGIES THAT CAN CONTRIBUTE TO A BUSINESS COMPETITIVE ADVANTAGE
When a business thrives in gaining competitive advantage, it often sets eyes on a manifold of strategies that aim to em-better its image and its competitive positioning. It focuses on strategies that may help increase its rate of consumers acquisition, retention and satisfaction; strategies of industry and competitors analysis. Moreover, it sets eyes on those strategic process to build strong investments portfolios ( Liquidity) that can help establish longevity and leadership in the market. Competitive advantage inevitably leads to faster, continual exponential growth, increased sales, market share gains and overall business profitability.
Competitive
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Porter 's generic strategies: Michael Porter identifies two types of competitive advantage: Cost and differentiation. He then outlines three primary ways for companies to achieve a sustainable competitive advantage. Cost, differentiation and focus with in a broad or narrow market scope. (Porter, 1987)
Figure 1: Michael Porte 's generic strategies and market scope.
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Additionally, efficient distribution channels, optimal outsourcing and vertical integration, bargaining power to negotiate the lowest price for production inputs as well as high buying capacity all participate in making cost leadership a go-to strategy for high return on investment and profitability. The possible downsides of this strategy can vary from low workers remunerations to exploitation of unskilled workers. The advantages of cost leadership are often threaten by external business environment threats such as higher minimum wages laws. Examples of successful cost leadership organisations: WAL-MART.INC (ASDA), Costco, MCDONALD 'S, IKEA. Cost advantages stem from the fact that a company can quickly reap higher profit margins despite selling products or services at competitors price due to lower production costs. Higher profit margins lead to more price reductions, more investments in products developments, R&D and innovation; and ultimately greater value for
1) Andrew Carnegie used vertical integration, controlling every step in the process of manufacturing a product, dominating the market. Vertical integration is when the company owns all means of distribution from beginning to end, this makes supplies more reliable and improved efficiency. It controlled the quality of the product at all stages of production. Horizontal integration was used by John D. Rockefeller and is an act of joining or consolidating with one’s competitors to create a monopoly. In Ohio in 1870 he organized the Standard Oil Company.
Janmar Coatings, Inc. In-Depth Case Analysis Prepared by: Elliot Thome In partial fulfillment of the requirements of Marketing Management and Policies Submitted February 26th, 2015 Case Synopsis In early January 2005, Ronald Burns, president of Janmar Coatings, Inc., and his senior management executives were faced with the issue of deciding where and how to deploy corporate marketing efforts among the various markets served by the company.
As stated, Carnegie’s personal, primary goal was to take over the entire Steel producing industry, so that he can maximize profits and minimize competition. Vertical integration was when Carnegie’s company bought everything from their suppliers, so that the company itself controls the distribution and selling of materials. Along with this, horizontal integration is when companies that made similar products to those of Carnegie’s, would come together and form one giant corporation. This was a very important concept, as this process not only allowed Carnegie’s company to become the largest maker of steel, but this would teach others great strategies on how to become a successful business leader, leading to a very important economic theory, Social
1. The competitive advantage and basis of General Motors till 1975. Ans: In 1908 General Motors faced a fierce completion from the Ford Motor company when he bought T model in the market and created a mass market for them. T model mainly focused on the middle class segment as a result of which the sell premium car, mainly targeted at wealthy sections of society, produced by GM motors was at stake.
Based on four attributes, first one is Factor endowments that focus on basic factors natural resources, climate, location, demographics second one is advanced factors such as communication infrastructure, sophisticated and skilled labour, research facilities, and technological know-how. Third one will be advanced factors are a product of investment by individuals, companies, and governments. Porter argues that advanced factors are the most significant for competitive advantage. Lastly demand conditions that look at customer need or the demand on which is being produced, companies will have to produce innovative, high quality products early, which lead to competitive advantage. Relating and supporting industries, if suppliers or related industries exist in the home countries that are themselves internationally competitive, this can result in competitive advantage in the new industry, firm strategy, structure, and rivalry.
A firm that utilized cost leadership is Costco. Since Costco is able to purchase in bulk, they can in return pass on the savings to the consumers. With this strategy, they have positioned themselves well according to Porter’s five forces. Rivalry among current competitors: LOW
As we have said before that (Costa) cannot raise the value of the price of products because this is very difficult and may lose consumers in the present of competitors, and the best solution to compete in the possible economic profits can be zero, that Costa (sell) at a lower price, And here the demand will increase and the profit level will. Be good in the expected economic conditions Thus, the short-term cost system can be used during the period of competitive advantage in price or during the decline of profits for companies in the market to zero, and during this period (Costa) will be able to raise the selling rate without any losses by reducing the price to get more consumers. The competitive advantage between companies creates from the
This theory is based on the concept that there are five forces that determine the competitive intensity and attractiveness of a market. Porter 's five forces help to identify where power lies in a business situation. This is useful both in understanding the strength of an organization 's current competitive position, and the strength of a position that an organization may look to move into. Strategic analysts often use Porter’s five forces to understand whether new products or services are potentially profitable. By understanding where power lies, the theory can also be used to identify areas of strength, to improve weaknesses and to avoid mistakes.
Bark & Co. is a company founded by Matt Meeker, Henrik Werdelin and Carly Strife. The company owns several products – the initial and probably best known is ‘BarkBox’. Due to BarkBox’s success, the company Bark & Co. was created, which dedicates to build products that promote health and happiness of dogs everywhere (BarkShop, 2014). It was launched in December 2011 and had reached $25M in revenue by June 2013 with 100,000 subscribers (Fueled, 2013). Like illustrated in Figure 2, Bark & Co. has different businesses: ‘BarkPost’ is a dog content website that has the capability of receiving over 400,000 visitors monthly, ‘BarkCare’ is a dog health mobile application that can be reached 24 hours 7 days a week for vet consultation service (D’Onfro,
Firstly, the Boston Consulting Group (BCG) matrix that concentrate the market position of different products. Secondly, the experience curve and the Profit Impact of Market Strategies model which identified a number of strategic variables. Furthermore, competitive advantages model (Porter, 1985) which focus on five different forces in environment of organization, but suit with only stable market. Generic strategy was developed strategies under this school, especially it can identify position in the market. Advantages: -Provide content in a systematic way to the existing way of looking at strategy -Particularly useful in early stage of strategy development, when date is analyzed -This school emphasis on analysis and calculation can be a very strong support to the strategy development process -This strategy suit with big businesses or organization which have ability for operate effective market research in the environment
Strategies that have been applied by The Walt Disney Company in creating value are: Cost Leadership In the existing market
The value chain equates to the internal activities that a company employs in transforming its inputs to outputs; this helps with the improvement of activities, helping the company to achieve competitive advantage. In the analysis of H&M’s organizational capabilities the value chain analysis would show that with viewing the internal activities; this analysis would show where the company’s competitive advantages as well as disadvantages lies. This analysis would then depict the company’s core competencies. When a company is said to be competing through its cost advantage; it would most likely try to carry out its internal activities at a much lower cost than its competition would want to.
The four building blocks of competitive advantage can be used to help a company become more profitable and stay ahead of their competition. The four factors are superior efficiency, quality, innovation, customer responsiveness. All four building blocks are important to any company. However, I believe that customer responsiveness is the most important because having loyal and happy customers can make or break any company. The four building blocks can help companies grow and become the leader in their industry over their rivals.
In 1985, Harvard Business School Professor Michael Porter published his new book “The Competitive Advantage” which focuses the organisation internal environment. In this book, along with an in depth analysis of the competitive strategies which are Cost leadership, differentiation and Focus, he also concentrates on the firm’s value chain. 1. Cost Leadership: In cost leadership, an organisation aims to become the low cost provider in its industry. Examples are Aldi, Lidl, Ryan Air etc 2.
Mr Price has a wide range of competitors such as H&M, Woolworths and Pick ‘n Pay. A competitive advantage describes how the business has benefits or strengths over its competitors in the market. By having this, the competitors don’t seem as a threat to the company. It’s used