INTRODUCTION

TOPIC OF DISCUSSION
SOURCES OF COMPETITIVE ADVANTAGE & VALUE CREATION

Why to think for an advantage?

Must have some advantage for competition It creates more value. Creates more customer base. For the positioning in the market. It helps in any phase of the life cycle. Ultimately it results in relatively high profit.

Cost and Differentiation Advantages

Businesses with a cost advantage are able to create superior customer value with products that have average benefits and below average cost. Businesses with a meaningful differentiation advantage are able to create superior customer value with above average benefits even at above average prices. The above given type of business have different target markets.

Third source of Advantage

Marketing Advantage
Businesses that can create a superior customer value with high levels of market share and brand awareness along with broad product lines and highly effective distribution systems have a market advantage.
They create customer value with high brand credibility, a broad product line offering a variety of choices and excellent product distribution that lowers customers transaction costs and possibly reduces purchase risk.

1.Cost Advantage
1.1.Variable or Unit cost advantage: Volume is a key factor. It can be achieved by three ways:Scale Effect: A larger production reduces unit cost. Scope Effect: A same product be added to different product line.

Scope Effect

 Learning Effect: When a business builds more of the same products, it produces with efficiency through process improvements that are the result of learning. Learning effect works with two assumptions Workers should not be highly skilled. Work should not be simple.

1.Cost Advantage
1.2. Marketing cost advantage: Marketing cost efficiencies derived from product line extensions. It can be achieved by:Marketing cost scope effect. Advertising cost efficiency.

Advertising cost efficiency.

1.Cost Advantage
1.3. Operating cost Advantage : An operating cost advantage is generally outside the control or influence of the marketing function but lower operating expenses relative to competitors contribute to a low cost advantage, like McDonalds has cut construction costs of new restaurants by using standardized building designs.

2. Differentiation Advantage
2.1. Product advantage: Durability Reliability Performance Features Appearance The differentiation advantage gives more customer benefits, save the customer money even the products are sold at higher price

2. Differentiation Advantage
2.2. Service Advantage: Very difficult to create differentiation because of its characteristics Intangibility Heterogeneity Perishability Simultaneous production and consumption.

2. Differentiation Advantage
2.3. Reputation Advantage: One of the resource that is immovable. Brand reputation works as a source of competitive advantage to attract customers. For these companies the stature of their brand names add a dimension of appeal that is an important customer benefit for many less price sensitive more image conscious consumers

3. Marketing Advantage
A business that dominates markets with a relative advantage in sales coverage, distribution or marketing communications and can control market access.

3.Marketing Advantage
3.1. Market share advantage : Market leaders often do not pose a strong differentiation or cost advantage. Their competitive advantage is derived from market dominance. Market leaders have well known trusted brands, many variations in their product lines and very effective distribution systems

3.Marketing Advantage
3.2. Product line advantage: The more products a business has to sell , the more ways it has to attract and satisfy customers. Broad line of products more selling opportunities. Narrow line of products has to be more focused.

3.Marketing Advantage
3.3. Channel Advantage: Markets in which distribution is required for market access have a limited number of distributors. Further the number of top-notch distributors is even fewer. A business that can dominate these distributors can control channels in given market and to some degree control market access.

Why to think for an advantage?

Must have some advantage for competition It creates more value. Creates more customer base. For the positioning in the market. It helps in any phase of the life cycle. Ultimately it results in relatively high profit.