Competitive Advantage

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Competitive Advantage An advantage over competitors gained by offering consumers greater value than the competitors do.

Competitive Advantage means

Something that places a company or a person above the competition

Steps in analyzing competitors

Identifying the Companys competitors

Mkt leaders, Mkt challengers etc.. Jet Airways Vs Kingfisher Spicejet, Indi Go. Assessing competitors objectives, strategies, strengths, weaknesses, and reaction patterns. Selecting which competitors to attack or avoid

Assessing the Competitors objectives

Competitor myopia Current Competitors Latent Competitors Ex: Kodak Vs Fujifilm Encyclopedia Vs Encarta

Questions for the Company

What are competitors objectives?? What does each seek in the marketplace?? Strengths, Weaknesses?? Reactions??

Strategic Group
A Group of firms in an industry following the same or similar strategy in a given Target market. Videocon, Godrej Vis a vis Siemens, Hitachi Home and Life solutions

Where is the difference?

Godrej Frost free refrigerator and microwave compete with Hitachi Home and Life Solutions and Siemens.

Steps in Competitive advantage

1: Identify your competition 2: Analyze strengths and weaknesses 3: Look at opportunities and threats

4: Determine your position.

Identify your competition

Primary competitors Secondary competitors Potential competitors

Analyze strengths and weaknesses

Determine the strengths and weaknesses. price? value? service? convenience? reputation? Focus as much on "perceived" strengths and weaknesses as you do on actual ones. This is because customer perception may actually be more important than reality.

Look at opportunities and threats

Opportunities and threats fall into a wide range of categories. It might be technological developments, regulatory or legal action, economic factors, or even a possible new competitor. For example, a photo developing store needs to know how well its competitors are prepared to deal with the advent of digital photography. Or a company that sells over the Web should analyze how its competitors are prepared to deal with online security issues.

Determine your position

Rank your company in the same categories that you ranked your competitors. This will give you an even clearer picture of where your business fits in the competitive environment. It will also help you determine what areas you need to improve, and what characteristics of your business you should take advantage of to gain more customers.

How to attain the edge??

Achieve product or service quality differentiation. Ex: L'Oreal. Slogan says: I'm worth it Achieve supply or distribution leverage. When Microsoft wrote the DOS operating system, it instantly gained an advantage in the computer industry that has remained virtually impossible to copy. Airlines with landing rights at airport gates, or companies like Kellogg's with lots of shelf clout, have sustainable advantages that provide serious barriers to competitors. A patent, copyright or exclusive contract provides legal protection. As you are customizing your strategy to meet your unique situation, keep in mind that your competitors are not just the obvious ones. McDonald's competes directly with Burger King and Wendy's, but they also compete directly with the grocery stores, especially during the summer barbecue season when people enjoy do-it-yourself burger grilling.

Customer Value Analysis

Determines what benefits target customers value and how they rate the relative value of various competitors offers.

Strategic Sweet point

Competitive Environment

Sweet spot

Companys capabilities

Customers needs

Close Vs Distant competitor

Nike Vs Reebok, Adidas to Bata.

What does it do??

Firms capability for Superior Value delivery Above average rate of return Good Products to Successful Products Superior position relative to competitors

Differentiating with Product

Intel Celeron 4004

Differentiating with different targets

Differentiation through Services

Differentiating through experience

Differentiation with Price

CA through alliance between rivals

Business Today:In top 50 Competitive companies:

Reliance Industries Ranbaxy Sundaram fasteners Arvind Mills Bajaj Auto

Good or Bad Competitor

By rules Break rules

Yahoo! Music sees AOL Music, Amazon .com etc. Yahoo also sees Apples I Tunes Music Store that plays by its own rules at the expense of industry as a whole.

Basic Competitive strategies

Overall Cost leadership Differentiation Focus Operational excellence Customer intimacy Product Leadership

Overall Cost Leadership

Low Price Large Market share Low Production and Distribution costs

 Dell, Big Bazaar, Wal-Mart.

Differentiation
Highly differentiated Product line marketing program. IBM

Focus
Niche mktng Clearer strategy Hindustan motors encountered difficult times since..they could not be: Lowest in cost Highest in Customer Perceived Value No Clearer strategy.

 Competitive advantage grows fundamentally out of the value a firm is able to create for its buyers that exceeds the firms cost of creating. Price lower than the competitor More of benefits than the competitor Superior Value delivery

Competitive strategies
Market Leader Market follower Market challenger Market nicher

Market leaders
GE, Microsoft, HUL,Disney, Future group etc. P&G laundry segment, detergent and shampoo segment. While, it is a Challenger to Unilever, Kimberley clark in same market. Apple ipod Sonys Walkman portable audio devices. Levis Gap, Tommy Hilfiger, DKNY.

Market challengers
Colgate, Ford, P&G in India etc. Amazon was the first established online bookseller. Shortly thereafter, companies like Barnes and Noble started selling books online as well. Barnes and Noble Much more to offer Avis car rentals made a name for itself with the tagline "We're number 2, so we try harder."

 Laddering??

 7UP was positioned as "the un-cola" to change their competitive frame set and gain appeal with the important teen and young adult soft drink audience. This positioning not only successfully moved 7UP out of the mixer frame set and into the much larger softdrink category, but also positioned Coke and Pepsi as the establishment to 7UP's anti-establishment persona. One creative way of developing a differentiating positioning statement is a process called laddering.

Market follower
Panasonic imitates Sony. Soft drinks producer Corrs entered the UK market by developing an acceptable own brand alternative to Coke the market was sufficiently large for some Coke drinkers to accept a different but cheaper Cola drink.

Market nicher
Computer mouse and device maker, Logitech is only a fraction the size of the giant Microsoft. Succeesful niching strategies it dominates the PC mouse market.

The reason of enterprise 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 e nterprise which is various.

Competitive Advantage Cycle.

STEP4. Encroachment STEP3. Value proprsal STEP2. Barrier to Imitation STEP1. Source of Competitive Advantages.

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

Value proposal form of competitive advantage Operational Excellence - Wal-Mart, Big Bazaar Product Leadership Google, Apple Customer Intimacy - Kingfisher Airlines, Taj Group of Hotels Fedex excels both at Operational excellence and Customer Intimacy.

Cost advantage

Competitive Advantage

Differentiation Advantage

A Model of Competitive advantage

Resources

Distinctive Competencies

Cost advantage Or Differentiation advantage

Value Creation

Capabilities

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

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.

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

Differentiation Cost Leadership

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: Nisson; 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.